Pepsi 2013 Annual Report Download - page 8

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6
PEPSICO
We should anticipate geopolitical and social instability
to be the norm, not the exception. Income inequality, com-
petition for natural resources, and geopolitical tensions
and conflict will continue to pose risks to doing business
in many countries around the world. Doing business in this
environment requires continued investment to keep our
people safe and protect our supply chain against potential
threats. Fortunately, PepsiCo’s local teams have an intimate
understanding of how to do business in each community
in which we operate, allowing them to adapt to changing
circumstances. For example, in Egypt, amid political unrest,
PepsiCo associates ensured operations were not disrupted
and looked for opportunities to expand the business even
in a challenging period.
Extreme weather patterns are expected to persist,
forcing companies to deal with commodity scarcity and
volatility. Warmer temperatures, erratic rainfall patterns,
new pests, floods and wildfires all threaten the produc-
tivity and availability of agricultural inputs. Our size and
scale allow us to manage our commodity supply cost and
inflation risks through our centralized strategic platforms
and our multiple sourcing pipelines. But managing through
these fluctuations requires additional investment and con-
tingency planning. For example, our R&D team is working
on developing multiple formulations of various products
to be able to cope with changes in raw material availability
and price, while delivering on taste and quality.
This “new normal” will require continued focus and invest-
ment, and we are confident we have the ingredients for
success: geographic diversity; a complementary, related
and diverse product portfolio; an efficient and effective
operating model; an experienced, top-notch management
team; and a culture and ethics that are second to none.
Better Together:
The Benefi ts of the
PepsiCo Portfolio
PepsiCo’s portfolio competes in two focused, related
categories: foods and beverages. Both categories have
attractive global growth prospects of 5% or more, and
our convenient foods and beverages businesses are fairly
evenly balanced, with about half of our 2013 revenue
coming from each. More importantly, our categories and
products are highly complementary, sharing the same
customers, consumers and occasions. It is the “related
diversity” of the PepsiCo portfolio that we believe gives
usan advantaged position over the competition.
The Power of PepsiCo’s Portfolio to Enable the Next
Waveof Growth. Foods and beverages are consumed
together, and PepsiCo’s portfolio offers delicious and
convenient food and beverage options for a wide range
of occasions from morning to evening. For example, our
consumers might wake up to a breakfast of Quaker Real
Medleys and Trop50, enjoy a Pepsi MAX and SunChips with
lunch, unwind with Stacy’s pita chips, Sabra hummus and a
Lipton beverage, and host a party with an array of Frito-Lay
and Pepsi products. No matter the consumer or the occa-
sion, we seek to provide a food or beverage solution.
With joint consumer insights, R&D and innovation across
foods and beverages, we have capabilities that give us
a leg up on the competition when it comes to knowing
and developing what consumers want to eat and drink
throughout the day. There are overlapping “demand
moments” or “need states” that could be satisfied by a food
or a beverage. Our capabilities position us to develop the
best solutions, be it a food or beverage, or even something
in-between, tomeet the needs of our consumers.
Our portfolio allows us to capture coincident eating
anddrinking occasions using joint marketing and selling.
When consumers reach for a Frito-Lay snack, we want them
to pair it with a refreshing Pepsi beverage or any of our
other diverse beverage offerings. Our scale and relationship
with our retailers allow us to create in-store destinations
to influence consumer shopping patterns and decisions to
increase this coincidence of purchase. For example, during
the 4th of July holiday season this past year in the U.S., the
PepsiCo’s top 12 executives
collectively have nearly
200 years of experience in
the Consumer Packaged
Goods industry.