Pepsi 2006 Annual Report Download - page 7

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Questions & Answers
Our Chairman and President & Chief Executive Officer Perspective
The questions below reflect key questions shareholders often ask about our businesses,
and are followed by joint responses from our Chairman, Steve Reinemund, and our
President and Chief Executive Officer, Indra Nooyi.
Q: PepsiCo’s product categories and
their impact on health continues to
capture media, consumer and regulatory
focus. How is PepsiCo’s portfolio faring
in this environment?
A: As the transformation of PepsiCo’s
portfolio continues, we’re able to add more
choices for consumers to meet their needs
for products that can contribute to healthier
lifestyles, and we’re proud of each and every
choice we offer.
Our efforts are galvanized by three
imperatives: continue making our fun-for-
you products more nutritious, develop new
products that address the needs of the entire
food pyramid, and try to ensure consumers
never have to trade off nutrition and taste.
The range of product choices we offer
grows each year, as we develop or acquire
new products or platforms that range from
indulgent to good-for-you. At the same time,
we’re improving the nutritional profiles of our
larger, core brands. For example, changing
cooking oils to sunflower oil for both Lay’s
and Ruffles potato chips at FLNA and
Walkers crisps in the United Kingdom
reduces the saturated fat in these products
without sacrificing taste. And we’re working
on developing new sweeteners and adding
more nutritious ingredients to our products
— such as fiber to foods and beverages and
omega-3 fatty acids to juices.
Our portfolio of more nutritious choices is
working well in this environment, evidenced
by over two-thirds of our North America top
line growth in 2006 being driven by products
that are PepsiCo Smart Spot eligible —
meaning they meet authoritative nutritional
statements developed by the National
Academy of Sciences or the U.S. Food and
Drug Administration.
Q: What, specifically, is PepsiCo doing
to address regulatory pressures relating
to health concerns across the globe?
A: On the regulatory and policy side, we’re
firm believers in engaging a range of public
and private experts to come to workable
solutions on such things as how and where
our products are sold and marketed. We’re
actively engaged with policy and thought
leaders, as well as food and beverage industry
leaders, to reach decisions on steps we can
take to support consumers in their quest for
healthier lifestyles. This includes insights
from PepsiCo’s Blue Ribbon Advisory Board, a
group of leading health and wellness experts
and third-party advisors from across the
globe, as well as our Ethnic Advisory Boards
who have provided insights relating to multi-
cultural consumers.
Most recently, PepsiCo’s work in the
United States with the Clinton Foundation,
the American Heart Association and the
beverage industry, are examples of working
proactively to set policies that put the right
kinds of products in the right locations — in
this case, schools. We’re working in our
international markets in much the same way.
An advantaged portfolio of good- and
better-for-you products — products that are
Smart Spot eligible — has provided, and will
continue to provide, growth opportunities at
what we call the intersection of business and
public interests.
Q: How are you approaching innovation
as a means to growth?
A: Innovation demands that we constantly
look around the next corner to ensure we’re
providing products that our consumers and
retail customers want. We have a relentless
focus on innovation, as new products
consistently deliver 15% to 20% of our total
growth. In 2006 alone, our North American
businesses introduced new products that
totaled greater than $1 billion in retail sales.
More strategically said, we’re focused on
game-changing innovation. Clearly, we need
to keep our existing big brands fresh while
developing products and venturing into
new categories.
Through a disciplined approach to innova-
tion, we’ve developed a very strong pipeline
for 2007 and beyond, including new products
like Flat Earth vegetable and fruit crisps from
Frito-Lay, and new beverage entries such as
Izze, a sparkling beverage made with 70%
fruit juice, and Naked Juice, a line of all
natural juices and juice smoothies, acquired
in January 2007. And we’ll expand on our
successes, such as introducing Baked Walkers
crisps in the United Kingdom.
As the lifeblood of any successful consumer
products company, we expect innovation
will continue to be a key tool for growth at
PepsiCo going forward.
#2
Carbonated
Soft Drinks
#1
Sports Drink
#1
PET Water
Brand
(non-jug)
#1
Chilled Juices
& Juice
Drinks
#1
Enhanced
Water
Brand
#1
Ready-to-
Drink
Coffee
#1
Ready-to-
Drink
Tea
U.S. Category Leaders
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