Pepsi 2008 Annual Report Download - page 49

47PepsiCo, Inc. 2008 Annual Report
foods, aluminum used for cans, glass bottles and cardboard. Fuel
and natural gas are also important commodities due to their use
in our plants and in the trucks delivering our products. Some of
these raw materials and supplies are available from a limited
number of suppliers. We are exposed to the market risks arising
from adverse changes in commodity prices, affecting the cost of
our raw materials and energy. The raw materials and energy
which we use for the production of our products are largely com-
modities that are subject to price volatility and uctuations in
availability caused by changes in global supply and demand,
weather conditions, agricultural uncertainty or governmental con-
trols. We purchase these materials and energy mainly in the open
market. If commodity price changes result in unexpected
increases in raw materials and energy costs, we may not be able
to increase our prices to offset these increased costs without suf-
fering reduced volume, revenue and operating income. See also
the discussion under “The global economic crisis has resulted in
unfavorable economic conditions and increased volatility in for-
eign exchange rates and may have an adverse impact on our
business results or nancial condition.”
The global economic crisis has resulted in unfavorable
economic conditions and increased volatility in foreign
exchange rates and may have an adverse impact on our
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The global economic crisis has resulted in unfavorable economic
conditions in many of the countries in which we operate. Our
business or nancial results may be adversely impacted by these
unfavorable economic conditions, including: adverse changes in
interest rates or tax rates; volatile commodity markets; contrac-
tion in the availability of credit in the marketplace potentially
impairing our ability to access the capital markets on terms
commercially acceptable to us, or at all; the effects of govern-
ment initiatives to manage economic conditions; reduced demand
for our products resulting from a slow-down in the general global
economy or a shift in consumer preferences to private label prod-
ucts for economic reasons; or a further decrease in the fair value
of pension assets that could increase future employee benet
costs and/or funding requirements of our pension plans. The
global economic crisis has also resulted in increased foreign
exchange rate volatility. We hold assets and incur liabilities, earn
revenues and pay expenses in a variety of currencies other than
the U.S. dollar. The nancial statements of our foreign subsidiaries
are translated into U.S. dollars. As a result, our protability may
be adversely impacted by an adverse change in foreign currency
exchange rates. In addition, we cannot predict how current or
worsening economic conditions will affect our critical customers,
suppliers and distributors and any negative impact on our critical
customers, suppliers or distributors may also have an adverse
impact on our business results or nancial condition.
If we are not able to build and sustain proper information
technology infrastructure, successfully implement our
ongoing business transformation initiative or outsource
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We depend on information technology as an enabler to improve
the effectiveness of our operations and to interface with our
customers, as well as to maintain nancial accuracy and efciency.
If we do not allocate and effectively manage the resources neces-
sary to build and sustain the proper technology infrastructure, we
could be subject to transaction errors, processing inefciencies,
the loss of customers, business disruptions, or the loss of or
damage to intellectual property through security breach.
We have embarked on a multi-year business transformation
initiative that includes the delivery of an SAP enterprise resource
planning application, as well as the migration to common business
processes across our operations. There can be no certainty that
these programs will deliver the expected benets. The failure to
deliver our goals may impact our ability to (1) process transactions
accurately and efciently and (2) remain in step with the changing
needs of the trade, which could result in the loss of customers. In
addition, the failure to either deliver the application on time, or
anticipate the necessary readiness and training needs, could lead
to business disruption and loss of customers and revenue.
In addition, we have outsourced certain information technology
support services and administrative functions, such as payroll
processing and benet plan administration, to third-party service
providers and may outsource other functions in the future to
achieve cost savings and efciencies. If the service providers
that we outsource these functions to do not perform effectively,
we may not be able to achieve the expected cost savings and
may have to incur additional costs to correct errors made by
such service providers. Depending on the function involved, such
errors may also lead to business disruption, processing inefcien-
cies or the loss of or damage to intellectual property through
security breach, or harm employee morale.
Our information systems could also be penetrated by outside
parties intent on extracting information, corrupting information or
disrupting business processes. Such unauthorized access could
disrupt our business and could result in the loss of assets.