Pepsi 2009 Annual Report Download - page 51

39PepsiCo, Inc. 2009 Annual Report
If we are unable to hire or retain key employees or a
highly skilled and diverse workforce, it could have a
negative impact on our business.
Our continued growth requires us to hire, retain and develop
our leadership bench and a highly skilled and diverse workforce.
We compete to hire new employees and then must train them
and develop their skills and competencies. Any unplanned turnover
or our failure to develop an adequate succession plan to backfill
current leadership positions or to hire and retain a diverse work-
force could deplete our institutional knowledge base and erode our
competitive advantage. Furthermore, if any of our key employees
or key employees of either PBG or PAS depart because of issues
relating to the PBG Merger and the PAS Merger (as defined in
“Acquisition of Common Stock of PBG and PAS”) such as the
uncertainty, difficulty of integration or a desire not to remain with
the post-merger entity, our ongoing business could be harmed.
In addition, our operating results could be adversely affected by
increased costs due to increased competition for employees,
higher employee turnover or increased employee benefit costs.
Our performance could be adversely affected as a result
of unstable political conditions, civil unrest or other
developments and risks in the countries where we operate
or if we are unable to grow our business in developing and
emerging markets.
Our operations outside of the United States contribute significantly
to our revenue and profitability. Unstable political conditions,
civil unrest or other developments and risks in the countries where
we operate could also have an adverse impact on our business
results or financial condition. Factors that could adversely affect
our business results in these countries include: import and export
restrictions; foreign ownership restrictions; nationalization of our
assets; regulations on the repatriation of funds which from time
to time result in significant cash balances in countries such as
Venezuela; and currency hyperinflation or devaluation. In addition,
disruption in these markets due to political instability or civil unrest
could result in a decline in consumer purchasing power, thereby
reducing demand for our products.
We believe that our businesses in developing and emerging
markets present an important future growth opportunity for us.
If we are unable to expand our businesses in emerging and develop-
ing markets for any of the reasons described above, as a result of
increased competition in these countries from multinationals or
local competitors, or for any other reason, our growth rate could
be adversely affected. See also “Our performance could suffer if
we are unable to compete effectively.”
Changes in the legal and regulatory environment could
limit our business activities, increase our operating costs,
reduce demand for our products or result in litigation.
The conduct of our businesses, and the production, distribution,
sale, advertising, labeling, safety, transportation and use of many of
our products, are subject to various laws and regulations adminis-
tered by federal, state and local governmental agencies in the United
States, as well as to foreign laws and regulations administered by
government entities and agencies in markets in which we operate.
These laws and regulations may change, sometimes dramatically,
as a result of political, economic or social events. Such regulatory
environment changes may include changes in: food and drug
laws; laws related to advertising and deceptive marketing practices;
accounting standards; taxation requirements, including taxes
specifically targeting the consumption of our products; competition
laws; and environmental laws, including laws relating to the regulation
of water rights and treatment. Changes in laws, regulations or
governmental policy and the related interpretations may alter the
environment in which we do business and, therefore, may impact
our results or increase our costs or liabilities.
Governmental entities or agencies in jurisdictions where we
operate may also impose new labeling, product or production
requirements, or other restrictions. For example, studies are under-
way by various regulatory authorities and others to assess the
effect on humans due to acrylamide in the diet. Acrylamide is a
chemical compound naturally formed in a wide variety of foods
when they are cooked (whether commercially or at home),
including french fries, potato chips, cereal, bread and coffee. It is
believed that acrylamide may cause cancer in laboratory animals
when consumed in significant amounts. If consumer concerns
about acrylamide increase as a result of these studies, other new
scientific evidence, or for any other reason, whether or not valid,
demand for our products could decline and we could be subject
to lawsuits or new regulations that could affect sales of our
products, any of which could have an adverse effect on our
business, financial condition or results of operations.
We are also subject to Proposition 65 in California, a law which
requires that a specific warning appear on any product sold in
California that contains a substance listed by that State as having
been found to cause cancer or birth defects. If we were required
to add warning labels to any of our products or place warnings
in certain locations where our products are sold, sales of those
products could suffer not only in those locations but elsewhere.
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