Pepsi 2007 Annual Report Download - page 49

Results of Operations — Consolidated Review
In the discussions of net
revenue and operating profit
below, effective net pricing
reflects the year-over-year
impact of discrete pricing
actions, sales incentive
activities and mix resulting
from selling varying products
in different package sizes and
in different countries.
Servings
Since our divisions each use different mea-
sures of physical unit volume (i.e., kilos,
gallons, pounds and case sales), a com-
mon servings metric is necessary to refl ect
our consolidated physical unit volume.
Our divisions’ physical volume measures
are converted into servings based on U.S.
Food and Drug Administration guidelines
for single-serving sizes of our products.
In 2007, total servings increased over
4% compared to 2006, as servings for
beverages worldwide grew 4% and serv-
ings for snacks worldwide grew 6%. All
of our divisions positively contributed to
the total servings growth. In 2006, total
servings increased 5.5% compared to
2005, as servings for beverages world-
wide grew over 6% and servings for
snacks worldwide grew 5%.
2007
Net revenue increased 12% primarily
refl ecting favorable effective net pricing
and volume growth. Effective net pricing
contributed 4 percentage points and the
volume gains contributed 3 percentage
points to net revenue growth. The impact
of acquisitions contributed 3 percentage
points and foreign currency contributed
2 percentage points to net revenue growth.
Total operating profi t increased 10%
and margin decreased 0.3 percentage
points. The operating profi t performance
refl ects leverage from the revenue
growth, offset by increased cost of sales,
largely due to higher raw material costs.
The impact of foreign currency contrib-
uted 2 percentage points to operating
profi t growth. There was no net impact of
acquisitions and divestitures on operating
profi t growth.
2006
Net revenue increased 8% primarily
refl ecting higher volume and positive
effective net pricing across all divisions.
The volume gains and the effective net
pricing each contributed 3 percentage
points to net revenue growth. Acquisitions
contributed 1 percentage point and
foreign exchange contributed almost
1 percentage point to net revenue
growth. The absence of the prior year’s
additional week reduced net revenue
growth by over 1 percentage point and
reduced volume growth by almost
1 percentage point.
Total operating profi t increased 9% and
margin increased 0.1 percentage points.
The operating profi t gains refl ect the net
revenue growth, partially offset by the
impact of higher raw material and energy
costs across all divisions. The absence of
the prior year’s additional week reduced
operating profi t growth by over 1 percent-
age point.
Corporate Unallocated Expenses
Corporate unallocated expenses include
the costs of our corporate headquarters,
centrally managed initiatives, such as our
ongoing business transformation initiative
in North America, unallocated insurance
and benefi t programs, foreign exchange
transaction gains and losses, and certain
commodity derivative gains and losses,
as well as profi t-in-inventory elimination
adjustments for our noncontrolled bot-
tling affi liates and certain other items.
In 2007, corporate unallocated
expenses increased 2% primarily refl ect-
ing $35 million of increased research and
development costs, partially offset by
lower pension costs of $18 million. Gains
Net Revenue and Operating Profi t
Change
2007 2006 2005 2007 2006
Total net revenue . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $39,474 $35,137 $32,562 12% 8%
Operating profit
FLNA . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $2,845 $2,615 $2,529 9% 3%
PBNA
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2,188 2,055 2,037 6% 1%
PI
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2,322 2,016 1,661 15% 21%
QFNA . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 568 554 537 2.5% 3%
Corporate unallocated. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (753) (738) (780) 2% (5)%
Total operating profit . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $7,170 $6,502 $5,984 10% 9%
Total operating profit margin . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 18.2% 18.5% 18.4% (0.3) 0.1
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