Pepsi 2011 Annual Report Download - page 29

Customer Warehouse
Some of our products are delivered from our manufacturing plants
and warehouses to customer warehouses and retail stores. These
less costly systems generally work best for products that are less
fragile and perishable, have lower turnover, and are less likely to be
impulse purchases.
Foodservice and Vending
Our foodservice and vending sales force distributes snacks, foods
and beverages to third- party foodservice and vending distribu-
torsand operators. Our foodservice and vending sales force also
distributes certain beverages through our independent bottlers.
This distribution system supplies our products to restaurants,
businesses, schools, stadiums and similar locations.
Our Competition
Our businesses operate in highly competitive markets. Our bever-
age, snack and food brands compete against global, regional, local
and private label manufacturers and other value competitors.
In U.S. measured channels, our chief beverage competitor, The
Coca- Cola Company, has a larger share of carbonated soft drinks
(CSD) consumption, while we have a larger share of liquid refresh-
ment beverages consumption. In addition, The Coca- Cola Company
has a signicant CSD share advantage in many markets outside the
United States.
Our snack and food brands hold signicant leadership positions
in the snack and food industry worldwide.
Our beverage, snack and food brands compete on the basis
of price, quality, product variety and distribution. Success in this
competitive environment is dependent on eective promotion of
existing products, the introduction of new products and the eec-
tiveness of our advertising campaigns, marketing programs, product
packaging, pricing, increased eciency in production techniques
and brand and trademark development and protection. We believe
that the strength of our brands, innovation and marketing, coupled
with the quality of our products and exibility of our distribution
network, allows us to compete eectively.
Other Relationships
Certain members of our Board of Directors also serve on the
boardsof certain vendors and customers. Those Board members
donot participate in our vendor selection and negotiations nor in
our customer negotiations. Our transactions with these vendors and
customers are in the normal course of business and are consistent
with terms negotiated with other vendors and customers. In addi-
tion, certain of our employees serve on the boards of Pepsi Bottling
Ventures LLC and other aliated companies of PepsiCo and do not
receive incremental compensation for their Board services.
Our Business Risks
Forward- Looking Statements
This Annual Report contains statements reecting our views about our
future performance that constitute “forward- looking statements” within
the meaning of the Private Securities Litigation Reform Act of 1995 (the
“Reform Act”). Statements that constitute forward- looking statements
within the meaning of the Reform Act are generally identied through
the inclusion of words such as “believe,” “expect,” “intend,” “estimate,”
“project,” “anticipate,” “will” and variations of such words and other
similar expressions. All statements addressing our future operating per-
formance, and statements addressing events and developments that we
expect or anticipate will occur in the future, are forward- looking state-
ments within the meaning of the Reform Act. These forward- looking
statements are based on currently available information, operating
plans and projections about future events and trends. They inherently
involve risks and uncertainties that could cause actual results to dier
materially from those predicted in any such forward- looking state-
ments. Investors are cautioned not to place undue reliance on any such
forward- looking statements, which speak only as of the date they are
made. We undertake no obligation to update any forward- looking
statement, whether as a result of new information, future events or
otherwise. The discussion of risks below and elsewhere in this report is by
no means all inclusive but is designed to highlight what we believe are
important factors to consider when evaluating our future performance.
Demand for our products may be adversely affected by changes in
consumer preferences and tastes or if we are unable to innovate or
market our products effectively.
We are a consumer products company operating in highly competi-
tive categories and rely on continued demand for our products. To
generate revenues and prots, we must sell products that appeal
to our customers and to consumers. Any signicant changes in con-
sumer preferences or any inability on our part to anticipate or react
to such changes could result in reduced demand for our products
and erosion of our competitive and nancial position. Our success
depends on: our ability to anticipate and respond to shifts in con-
sumer trends, including increased demand for products that meet
the needs of consumers who are increasingly concerned with health
and wellness; our product quality; our ability to extend our portfolio
of convenient foods in growing markets; our ability to develop new
products that are responsive to consumer preferences, including
our “fun- for-you”, “good- for-you” and “better- for-you” products; and
our ability to respond to competitive product and pricing pressures.
For example, our growth rate may be adversely aected if we are
unable to maintain or grow our current share of the liquid refresh-
ment beverage market in North America, or our current share of the
snack market globally, or if demand for our products does not grow
in emerging and developing markets.
In general, changes in product category consumption or con-
sumer demographics could result in reduced demand for our
products. Consumer preferences may shift due to a variety of
factors, including the aging of the general population; consumer
concerns regarding the health eects of ingredients such as sodium,
Management’s Discussion and Analysis
PepsiCo, Inc.  Annual Report
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