Pepsi 2010 Annual Report Download - page 49

Management’s Discussion and Analysis
48 PepsiCo, Inc. 2010 Annual Report
Our discussion and analysis is an integral part of our consolidated
financial statements and is provided as an addition to, and should
be read in connection with, our consolidated financial statements
and the accompanying notes. Definitions of key terms can be found
in the glossary on page109. Tabular dollars are presented inmil-
lions, except per share amounts. All per share amounts reflect
common per share amounts, assume dilution unless noted, and are
based on unrounded amounts. Percentage changes are based on
unrounded amounts.
Our Business
Executive Overview
We are a leading global food, snack and beverage company. Our
brands — which include Quaker Oats, Tropicana, Gatorade,
Lay’s and Pepsi — are household names that stand for quality
throughout the world. As a global company, we also have strong
regional brands such as Walkers, Gamesa and Sabritas. Either
independently or through contract manufacturers, we make,
market and sell a variety of convenient, enjoyable and whole-
some foods and beverages in over 200countries. Our portfolio
includes oat, rice and grain-based foods, as well as carbonated
and non-carbonated beverages. Our largest operations are in
North America (UnitedStates and Canada), Mexico, Russia and
the UnitedKingdom. Additional information concerning our
divisions and geographic areas is presented in Note1.
We are united by our unique commitment to Performance with
Purpose, which means delivering sustainable growth by invest-
ing in a healthier future for people and our planet. Our goal is to
continue to build a balanced portfolio of enjoyable and whole-
some foods and beverages, find innovative ways to reduce the use
of energy, water and packaging and provide a great workplace
for our associates. Additionally, we are committed to respect-
ing, supporting and investing in the local communities where
we operate by hiring local people, creating products designed for
local tastes and partnering with local farmers, governments and
community groups. We make this commitment because we are a
responsible company and a healthier future for all people and our
planet means a more successful future for PepsiCo.
In recognition of our continuing sustainability eorts, we were
again included on the Dow Jones Sustainability North America
Index and the Dow Jones Sustainability World Index in
September 2010. These indices are compiled annually.
Our management monitors a variety of key indicators to evalu-
ate our business results and financial conditions. These indica-
tors include market share, volume, net revenue, operating profit,
management operating cash flow, earnings per share and return
on invested capital.
Strategies to Drive Our Growth into the Future
We remain focused on growing our business with the objectives
of improving our financial results and increasing returns for our
shareholders. We continue to focus on delivering strong finan-
cial performance in both the near term and the long term, while
making global investments in key regions and targeted product
categories to drive sustainable growth. We have identified six key
challenges and related strategic business imperatives that we
believe will enable us to drive growth into the future:
Build and extend our macro snack portfolio
Our first imperative is to build and extend our macro snack port-
folio. Building and extending our profitable macro snack business
is important to our future. PepsiCo is the largest player in the
macro snack category, and we believe there is still room for
growth. Our goal in the macro snack business is to grow our core
salty snack brands that are loved and respected around the world,
while expanding into adjacent categories like crackers, bread
bites and baked snacks. We will work to continue to grow our
portfolio from Fun-for-You to Better-for-You products — while
adding many Good-for-You products that are designed to meet
growing global demand for wholesome and convenient nutrition.
We will also strive to create new flavors in tune with local tastes,
which reflect local culture and traditions. We believe that by
doing so, we will position ourselves to gain share, while continu-
ing to grow the top and bottom line in our macro snack business.
Sustainably and profitably grow our beverage
businessworldwide
Our second imperative is to sustainably and profitably grow our
beverage business worldwide. The U.S. liquid refreshment bever-
age category and challenging economic conditions facing consum-
ers continue to place pressure on our beverage business worldwide.
In the face of this pressure, we continue to take action to ensure
sustainable profitable growth in our beverage business worldwide.
In 2010, we revitalized both the Gatorade brand and the no-calorie
carbonated category by promoting Pepsi Max. Our focus in 2011
will be on taking our North American beverage business and
growing it sustainably for the future, while continuing to invest in
emerging and developing markets — including the vital China and
India markets.
Unleash the power of the Power of One to provide better value
for ourcustomers
Our third imperative is to unleash the power of the Power of One
to provide better value for customers. We must maintain mutually
beneficial relationships with our customers to eectively com-
pete. We are a leader in two extraordinary consumer categories
that have special relevance to our customers across the globe. Our
snacks and beverages are both high-velocity categories; both gen-
erate retail trac; both are profitable; and both deliver strong cash
flow. Studies show that 85 percent of the time, when a person eats
a snack, he or she also reaches for a beverage. To realize the value
of Power of One in 2010, we successfully completed our bottling
acquisitions, which enabled us to better service our customers.
We also continued, with a critical mass of SAP implementations,
to standardize processes, improve organizational alignment and
benchmark performance. In 2011, we are re-focusing our eorts
with a systematic approach to unlock the Power of One across
the entire value chain. We believe the opportunities in the U.S., in
particular, are vast. We will work to make Power of One changes