Pepsi 2013 Annual Report Download - page 54

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AMEA also makes, markets, sells and distributes beverage concentrates, fountain syrups and finished goods
under various beverage brands including Pepsi, Mirinda, 7UP, Mountain Dew, Aquafina and Tropicana. These
branded products are sold to authorized bottlers, independent distributors and retailers. However, in certain
markets, AMEA operates its own bottling plants and distribution facilities. AMEA also, either independently
or in conjunction with third parties, makes, markets and sells ready-to-drink tea products through an
international joint venture with Unilever (under the Lipton brand name). Further, we license the Tropicana
brand for use in China on co-branded juice products to a strategic alliance with Tingyi which is reflected in
our reported volume. AMEA reports two measures of volume (see Europe above).
See Note 15 to our consolidated financial statements for additional information about our transaction with
Tingyi in 2012.
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.
Since we do not sell directly to the consumer, we rely on and provide financial incentives to our customers
to assist in the distribution and promotion of our products. For our independent distributors and retailers,
these incentives include volume-based rebates, product placement fees, promotions and displays. For our
independent bottlers, these incentives are referred to as bottler funding and are negotiated annually with each
bottler to support a variety of trade and consumer programs, such as consumer incentives, advertising support,
new product support, and vending and cooler equipment placement. Consumer incentives include coupons,
pricing discounts and promotions, and other promotional offers. Advertising support is directed at advertising
programs and supporting independent bottler media. New product support includes targeted consumer and
retailer incentives and direct marketplace support, such as point-of-purchase materials, product placement
fees, media and advertising. Vending and cooler equipment placement programs support the acquisition and
placement of vending machines and cooler equipment. The nature and type of programs vary annually.
Retail consolidation and the current economic environment continue to increase the importance of major
customers. In 2013, sales to Wal-Mart (including Sam’s) represented approximately 11% of our total net
revenue. Our top five retail customers represented approximately 30% of our 2013 North American 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.
Our Distribution Network
Our products are brought to market through DSD, customer warehouse and distributor networks. The
distribution system used depends on customer needs, product characteristics and local trade practices.
Direct-Store-Delivery
We, our independent bottlers and our distributors operate DSD systems that deliver snacks and beverages
directly to retail stores where the products are merchandised by our employees or our bottlers. DSD enables
us to merchandise with maximum visibility and appeal. DSD is especially well-suited to products that are
restocked often and respond to in-store promotion and merchandising.