Pepsi 2012 Annual Report Download - page 38

Our discussion and analysis is an integral part of our consoli-
dated financial statements and is provided as an addition to,
and should be read in connection with, our consolidated finan-
cial statements and the accompanying notes. Definitions of
key terms can be found in the glossary beginning on page108.
Tabular dollars are presented in millions, except per share
amounts. All per share amounts reflect common per share
amounts, assume dilution unless otherwise noted, and are
based on unrounded amounts. Percentage changes are based
on unrounded amounts.
Our Business
Executive Overview
We are a leading global food and beverage company with
brands that are respected household names throughout the
world. Through our operations, authorized bottlers, contract
manufacturers and other partners, we make, market, sell and
distribute a wide variety of convenient and enjoyable foods
and beverages, serving customers and consumers in more
than 200 countries and territories.
Our management monitors a variety of key indicators to
evaluate our business results and financial condition. These
indicators include market share, volume, net revenue, oper-
ating profit, management operating cash flow, earnings per
share and return on invested capital.
During 2012 we undertook a number of significant initia-
tives that we believe will position us for future success. These
initiatives included increasing investment in our iconic global
brands; stepping up our innovation program and launching
new products like Pepsi Next; and implementing a multi-year
productivity program that resulted in over $1 billion in savings
last year alone. We successfully completed these initiatives
while returning $6.5 billion to shareholders through repur-
chases and dividends during 2012.
As we look to 2013 and beyond, we are focused on position-
ing our Company for long-term advantage and growth while
continuing to deliver strong and consistent financial results.
Our business strategies are designed to address key chal-
lenges facing our industry, including increasing consumer and
government focus on health and wellness, demographic shifts
and retail trade consolidation, and macroeconomic uncer-
tainty and commodity price volatility. We believe that many
of these challenges create new opportunities for growth for
our Company. For example, we expect that the acceleration
of the convenience trend will drive continued growth in the
demand for convenient foods and beverages worldwide. In
addition, the favorable outlook in emerging and developing
markets creates opportunities for growth in all of our products
in those markets. We believe that there are also potential new
categories of expansion for us in the global food and beverage
marketplace, such as Good-for-You and premium priced prod-
ucts, products for aging populations and value offerings. In
order to address these challenges and capitalize on these
opportunities, we plan to do the following:
Reinforce our existing value drivers.
We will continue to refocus our efforts on key global brands
and categories in our most important developed markets to
drive profitable growth. We believe that concentrating our
insights, marketing and innovation resources behind our most
significant brands in key markets will enable us to reinforce
our existing competitive advantages resulting from our go-to-
market systems and strong brands, particularly with respect
to snacks, and continue to grow demand and market share.
Migrate our portfolio towards attractive high growth
categories and markets.
We plan to build on our existing efforts in the Good-for-You
space to continue to grow our nutrition business by growing
our most admired existing nutrition brands, including Quaker,
Tropicana and Gatorade. Our efforts to capitalize on the grow-
ing consumer demand for convenient nutrition are global.
We are also working to unlock opportunities in new product
categories through our dairy business in Russia and our Müller
Quaker Dairy joint venture in the United States, our Sabra dips
joint venture and our Stacy’s baked grain snack business.
We believe emerging and developing markets represent
another very attractive high growth space for PepsiCo.
Economic growth in these markets is lifting consumer income
levels and driving urban lifestyles, which is in turn increas-
ing demand for convenient foods and beverages. We expect
to continue to invest aggressively for advantaged growth in
emerging and developing markets, such as through tuck-in
acquisitions like Mabel cookies in Brazil and through strate-
gic partnerships to improve scale and performance such as
our partnership with Tingyi (Cayman Islands) Holding Corp.
(Tingyi) in China.
Accelerate the benets of “Power of One.”
We are focused on continuing to drive cost savings and other
productivity enhancements derived from our complemen-
tary food and beverage portfolio, which benefit both our top
and bottom line. For example, we realize significant benefits
from our cost scale across our portfolio. We also capture
productivity benefits by applying a common set of best-in-
class processes, technologies and best practices across our
businesses around the globe. In addition, the complementary
nature of our categories allows us to drive commercial activi-
ties across food and beverage to accelerate our growth within
particular markets.
Management’s Discussion and Analysis
2012 PEPSICO ANNUAL REPORT36