Pepsi 2010 Annual Report Download - page 56

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that do not qualify for hedge accounting treatment can result in
increased volatility in our net earnings in any given period due
to changes in the spot prices of the underlying commodities. See
also “Unfavorable economic conditions in the countries in which
we operate may have an adverse impact on our business results
or financial condition.”, “Market Risks” and Note 1 to our consoli-
dated financial statements.
Disruption of our supply chain could have an adverse impact
on our business, financial condition and results of operations.
Our ability and that of our suppliers, business partners, including
our independent bottlers, contract manufacturers, independent
distributors and retailers, to make, move and sell products is
critical to our success. Damage or disruption to our or their man-
ufacturing or distribution capabilities due to adverse weather
conditions, government action, natural disaster, fire, terrorism,
the outbreak or escalation of armed hostilities, pandemic, strikes
and other labor disputes or other reasons beyond our or their
control, could impair our ability to manufacture or sell our prod-
ucts. Failure to take adequate steps to mitigate the likelihood or
potential impact of such events, or to eectively manage such
events if they occur, could adversely aect our business, financial
condition and results of operations, as well as require additional
resources to restore our supply chain.
Climate change, or legal, regulatory or market measures to
address climate change, may negatively aect our business
andoperations.
There is growing concern that carbon dioxide and other green-
house gases in the atmosphere may have an adverse impact on
global temperatures, weather patterns and the frequency and
severity of extreme weather and natural disasters. In the event
that such climate change has a negative eect on agricultural
productivity, we may be subject to decreased availability or less
favorable pricing for certain commodities that are necessary for
our products, such as sugar cane, corn, wheat, rice, oats, pota-
toes and various fruits. We may also be subjected to decreased
availability or less favorable pricing for water as a result of such
change, which could impact our manufacturing and distribution
operations. In addition, natural disasters and extreme weather
conditions may disrupt the productivity of our facilities or the
operation of our supply chain. The increasing concern over cli-
mate change also may result in more regional, federal and/or
global legal and regulatory requirements to reduce or mitigate
the eects of greenhouse gases. In the event that such regula-
tion is enacted and is more aggressive than the sustainability
measures that we are currently undertaking to monitor our
emissions and improve our energy eciency, we may experience
significant increases in our costs of operation and delivery. In
particular, increasing regulation of fuel emissions could substan-
tially increase the distribution and supply chain costs associated
with our products. As a result, climate change could negatively
aect our business and operations. See also “Disruption of our
supply chain could have an adverse impact on our business,
financial condition and results of operations.”
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 back-
fill current leadership positions or to hire and retain a diverse
workforce could deplete our institutional knowledge base and
erode our competitive advantage. In addition, our operating
results could be adversely aected by increased costs due to
increased competition for employees, higher employee turnover
or increased employee benefit costs.
A portion of our workforce belongs to unions. Failure to
successfully renew collective bargaining agreements, or
strikes or work stoppages could cause our business to suer.
Many of our employees are covered by collective bargaining
agreements. These agreements expire on various dates. Strikes
or work stoppages and interruptions could occur if we are unable
to renew these agreements on satisfactory terms, which could
adversely impact our operating results. The terms and conditions
of existing or renegotiated agreements could also increase our
costs or otherwise aect our ability to fully implement future
operational changes to enhance our eciency.
Failure to successfully complete or integrate acquisitions
and joint ventures into our existing operations could have
an adverse impact on our business, financial condition and
results of operations.
In 2010, we acquired PBG and PAS and we recently acquired
approximately 77% of WBD. We also regularly evaluate opportu-
nities for strategic growth through tuck-in acquisitions and joint
ventures. Potential issues associated with these and other acqui-
sitions and joint ventures could include, among other things, our
ability to realize the full extent of the benefits or cost savings that
we expect to realize as a result of the completion of the acquisi-
tion or the formation of the joint venture within the anticipated
time frame, or at all; receipt of necessary consents, clearances
and approvals in connection with the acquisition or joint ven-
ture; diversion of management’s attention from base strategies
and objectives; and, with respect to acquisitions, our ability to
successfully combine our businesses with the business of the
acquired company in a manner that permits cost savings to be
realized, including integrating the manufacturing, dis tribution,
sales and administrative support activities and information
technology systems among our company and the acquired
company, motivating, recruiting and retaining executives and
key employees, conforming standards, controls, procedures
and policies, business cultures and compensation structures
among our company and the acquired company, consolidating
and streamlining corporate and administrative infrastructures,
consolidating sales and marketing operations, retaining existing