Pepsi 2011 Annual Report Download - page 34

aect our business and operations. See also “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.” and “Disruption of our supply chain could have
an adverse impact on our business, nancial 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ll cur-
rent leadership positions, including our Chief Executive Ocer, 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 benet 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 suffer.
Many of our employees are covered by collective bargaining agree-
ments. 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, or to complete divestitures,
could have an adverse impact on our business, financial condition
andresults of operations.
We regularly evaluate potential acquisitions, joint ventures and
divestitures. Potential issues associated with these activities could
include, among other things, our ability to realize the full extent of
the benets or cost savings that we expect to realize as a result of
the completion of an acquisition or the formation of a joint venture
within the anticipated time frame, or at all; receipt of necessary
consents, clearances and approvals in connection with an acquisi-
tion or joint venture; and diversion of management’s attention
from base strategies and objectives. In 2011, we acquired Wimm-
Bill-Dann Foods OJSC (WBD), a Russian company. We continue to
assess WBD’s business practices, policies and procedures as well as
its compliance with our Worldwide Code of Conduct and applicable
laws and, as described under Management’s Report on Internal
Control Over Financial Reporting, we are in the process of integrat-
ing WBD into our overall internal control over nancial reporting
processes. With respect to acquisitions, including but not limited to
the acquisition of WBD, the following also pose potential risks: our
ability to successfully combine our businesses with the business of
the acquired company, including integrating the manufacturing,
distribution, sales and administrative support activities and informa-
tion technology systems among our Company and the acquired
company and successfully operating in new categories; motivating,
recruiting and retaining executives and key employees; conform-
ing standards, controls (including internal control over nancial
reporting), procedures and policies, business cultures and compen-
sation structures among our Company and the acquired company;
consolidating and streamlining corporate and administrative infra-
structures; consolidating sales and marketing operations; retaining
existing customers and attracting new customers; identifying and
eliminating redundant and underperforming operations and assets;
coordinating geographically dispersed organizations; and managing
tax costs or ineciencies associated with integrating our opera-
tions following completion of the acquisitions. With respect to joint
ventures, we share ownership and management responsibility of
a company with one or more parties who may or may not have the
same goals, strategies, priorities or resources as we do and joint ven-
tures are intended to be operated for the benet of all co- owners,
rather than for our exclusive benet. In addition, acquisitions and
joint ventures outside of the United States increase our exposure to
risks associated with operations outside of the United States, includ-
ing uctuations in exchange rates and compliance with laws and
regulations outside the United States. With respect to divestitures,
we may not be able to complete proposed divestitures on terms
commercially favorable to us. If an acquisition or joint venture is not
successfully completed or integrated into our existing operations, or
if a divestiture is not successfully completed, our business, nancial
condition and results of operations could be adversely impacted.
Failure to successfully implement our global operating model could
have an adverse impact on our business, financial condition and results
of operations.
We recently created the Global Beverages Group and the Global
Snacks Group, both of which are focused on innovation, research
and development, brand management and best- practice sharing
around the world, as well as collaborating with our Global Nutrition
Group to grow our nutrition portfolio. If we are unable to success-
fully implement our global operating model, including retention
of key employees, our business, nancial condition and results of
operations could be adversely impacted.
Failure to realize anticipated benefits from our productivity plan could
have an adverse impact on our business, financial condition and results
of operations.
We are implementing a strategic plan that we believe will position
our business for future success and growth, to allow us to achieve
a lower cost structure and operate eciently in the highly com-
petitive food, snack and beverage industries. In order to capitalize
on our cost reduction eorts, it will be necessary to make certain
investments in our business, which may be limited due to capital
constraints. In addition, it is critical that we have the appropriate
personnel in place to continue to lead and execute our plan. Our
Management’s Discussion and Analysis
PepsiCo, Inc.  Annual Report
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