Pepsi 2007 Annual Report Download - page 9

Q: In November 2007, PepsiCo announced a new
organizational structure. What drove this decision, and
how will the restructuring impact financial results?
A: Given our robust growth in recent years, we felt it was
time to manage the company as three units instead of two
— both to allow us to sustain our growth rate and also to
develop global senior leadership talent for PepsiCo’s future.
We therefore created three operating business units: PepsiCo
Americas Foods (PAF), PepsiCo Americas Beverages (PAB), and
PepsiCo International (PI).
We are confident this organizational structure will help us
deliver strong top-line performance and profit growth for the
following reasons:
• Each sector has significant scale and growth potential,
operates across multiple geographies, and is comprised of
both developed and developing markets;
• This facilitates our ability to leverage both capabilities and
innovation between our international and North American
businesses;
• With each sector being of significant scale, more executives
will have the opportunity to run large operating businesses
and gain global operating experience; and
• It enables us to extend the competitive advantages of our
very successful Power of One initiatives by making them
increasingly global.
Finally, investors will receive more granular international
performance data, as we will report volume, revenue and
operating profit for six PepsiCo segments, versus four in the
previous structure. Results under the new structure for 2005,
2006, and 2007 can be found on our company website
www.pepsico.com, under the “Investors” tab.
Q: How is PepsiCo reacting to the changing global
economy, particularly the slowing U.S. economy?
A: It is likely the world economies outside the emerging
countries will slow in 2008 — although our businesses have
generally proved pretty resilient in past economic downturns.
It’s also clear that inflation in commodity costs has acceler-
ated, particularly as it relates to grains and energy. We will
be utilizing all of the tools at our disposal to address rising
inflation. From a productivity standpoint, we’re accelerating
efforts across the entire business system: product formula-
tions, ingredient sourcing, trade efficiencies, manufacturing,
go-to-market and administrative expenses. In addition,
we will be looking to gain effective pricing, both through
innovative new products as well as through a judicious
combination of mix management, product weight-outs,
and absolute pricing. As always, our decisions are grounded
in the consumer, customer and competitive environments in
each market.
Underlying these efforts are the important structural
advantages we have across the world. Our brands have
highly loyal and engaged consumers; they are affordable
treats and healthy eats; and the strength of our go-to-market
systems makes them readily available to consumers.
And as a team, we remain committed to managing for
the long term, executing with excellence and consistently
delivering our annual targets.
A Perspective from Our Chairman and CEO
The questions below reflect those often asked by our shareholders about key areas of our businesses.
The answers come from our Chairman and CEO, Indra Nooyi.
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