Pepsi 2013 Annual Report Download - page 24

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snack food joint ventures and beverage bottling appointments. In addition, we license the use of our trademarks
on merchandise that is sold at retail for the primary purpose of enhancing brand awareness.
We either own or have licenses to use a number of patents which relate to some of our products, their
packaging, the processes for their production and the design and operation of various equipment used in our
businesses. Some of these patents are licensed to others.
Seasonality
Our businesses are affected by seasonal variations. For instance, our beverage sales are higher during the
warmer months and certain food and dairy sales are higher in the cooler months. Weekly beverage and snack
sales are generally highest in the third quarter due to seasonal and holiday-related patterns, and generally
lowest in the first quarter. However, taken as a whole, seasonality does not have a material impact on our
consolidated financial results.
Our Customers
Our primary customers include wholesale and other distributors, foodservice customers, grocery stores, drug
stores, convenience stores, discount/dollar stores, mass merchandisers, membership stores and authorized
independent bottlers. We normally grant our independent bottlers exclusive contracts to sell and manufacture
certain beverage products bearing our trademarks within a specific geographic area. These arrangements
provide us with the right to charge our independent bottlers for concentrate, finished goods and Aquafina
royalties and specify the manufacturing process required for product quality. We also grant distribution rights
to our independent bottlers for certain beverage products bearing our trademarks for specified geographic
areas.
In 2013, sales to Wal-Mart Stores, Inc. (Wal-Mart), including Sam’s Club (Sam’s), represented approximately
11% of our total net revenue. Our top five retail customers represented approximately 30% of our 2013 North
American (United States and Canada) net revenue, with Wal-Mart (including Sam’s) representing
approximately 17%. These percentages include concentrate sales to our independent bottlers which were
used in finished goods sold by them to these retailers.
See “Our Customers” contained in “Item 7. Management’s Discussion and Analysis of Financial Condition
and Results of Operations” and Note 8 to our consolidated financial statements for more information on our
customers, including our independent bottlers.
Our Competition
Our businesses operate in highly competitive markets. Our beverage, snack and food brands compete against
global, regional, local and private label manufacturers and other value competitors. In many countries in
which we do business, The Coca-Cola Company is our primary beverage competitor. Other food and beverage
competitors include, but are not limited to, ConAgra Foods, Inc., DPSG, Kellogg Company, Kraft Foods
Group, Inc., International, Inc., Monster Beverage Corporation, Nestlé S.A., Red Bull GmbH and
Snyder’s-Lance, Inc. In many markets, we also compete against numerous regional and local companies.
Many of our snack and food brands hold significant leadership positions in the snack and food industry
worldwide. However, The Coca-Cola Company has significant carbonated soft drink (CSD) share advantage
in many markets outside the United States.
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 effective promotion of existing products,
introduction of new products and the effectiveness of our advertising campaigns, marketing programs, product
packaging, pricing, increased efficiency in production techniques, new vending and dispensing equipment