Pepsi 2005 Annual Report Download - page 31

29
Demand for our products may be
adversely affected by changes in
consumer preferences and tastes.
We are a consumer products company
operating in highly competitive markets
and rely on continued demand for our
products. To generate revenues and profits,
we must sell products that appeal to our
customers and to consumers. Any signifi-
cant changes in consumer preferences and
our inability to anticipate and react to such
changes could result in reduced demand for
our products and erosion of our competitive
and financial position. Our success
depends on our ability to respond to
consumer trends, such as consumer health
concerns about obesity, product attributes
and ingredients. In addition, changes in
product category consumption and
consumer demographics could result in
reduced demand for our products.
Consumer preferences may shift due to a
variety of factors, including the aging of
the general population, changes in social
trends, changes in travel, vacation or
leisure activity patterns or a downturn in
economic conditions, which may reduce
consumers’ willingness to purchase
premium branded products. Our continued
success is also dependent on our product
innovation, including maintaining a robust
pipeline of new products, and the effec-
tiveness of our advertising campaigns and
marketing programs. There can be no
assurance as to our continued ability to
develop and launch successful new prod-
ucts or variants of existing products, or to
effectively execute advertising campaigns
and marketing programs. In addition, both
the launch and ongoing success of new
products and advertising campaigns are
inherently uncertain, especially as to their
appeal to consumers.
Any damage to our reputation could have an
adverse effect on our business, financial condi-
tion and results of operations.
Maintaining a good reputation globally is
critical to selling our branded products. If
we fail to maintain high standards for
product quality, safety and integrity, our
reputation could be jeopardized. Adverse
publicity about these types of concerns,
whether or not valid, may reduce demand
for our products or cause production and
delivery disruptions. If any of our products
becomes unfit for consumption, mis-
branded or causes injury, we may have to
engage in a product recall and/or be
subject to liability. A widespread product
recall or a significant product liability
judgment could cause our products to be
unavailable for a period of time, which
could further reduce consumer demand
and brand equity. Failure to maintain high
ethical, social and environmental standards
for all of our operations and activities
could also jeopardize our reputation.
Damage to our reputation or loss of
consumer confidence in our products for
any of these reasons could have a material
adverse effect on our business, financial
condition and results of operations, as well
as require additional resources to rebuild
our reputation.
If we are not able to build and sustain proper
information technology infrastructure, our
business could suffer.
We depend on information technology as
an enabler to operating efficiently and
interfacing with customers, as well as
maintaining financial accuracy and
efficiency. If we do not allocate, and
effectively manage, the resources necessary
to build and sustain the proper technology
infrastructure, we could be subject to
transaction errors, processing inefficiencies,
the loss of customers, business disruptions,
or the loss of or damage to intellectual
property through security breach.
We have embarked on a multiyear
Business Process Transformation (BPT) ini-
tiative that includes the delivery of an SAP
enterprise resource planning application,
as well as the migration to common busi-
ness processes across our North American
operations. There can be no certainty that
We are subject to risks in the normal course of business due to adverse
developments with respect to:
• product demand,
• our reputation,
• information technology,
• supply chain,
• retail consolidation and the loss of major customers,
• global economic and environmental conditions,
• the regulatory environment,
• workforce retention,
• raw materials and energy,
• competition, and
• market risks.
Our success depends on our
ability to respond to
consumer trends, such as
consumer health concerns
about obesity, product
attributes and ingredients.
Maintaining a good reputation
globally is critical to selling
our branded products.
Our Business Risks