Pepsi 2014 Annual Report Download - page 25

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Our Distribution Network
Our products are brought to market through direct-store-delivery (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 beverages, foods and
snacks directly to retail stores where the products are merchandised by our employees or our independent
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.
Customer Warehouse
Some of our products are delivered from our manufacturing plants and warehouses to customer warehouses
and retail stores. These less costly systems generally work best for products that are less fragile and perishable,
and have lower turnover.
Distributor Networks
We distribute many of our products through third-party distributors. Third-party distributors are particularly
effective when greater distribution reach can be achieved by including a wide range of products on the
delivery vehicles. For example, our foodservice and vending business distributes beverages, foods and snacks
to restaurants, businesses, schools and stadiums through third-party foodservice and vending distributors and
operators.
Ingredients and Other Supplies
The principal ingredients we use in our beverage, food and snack products are apple, orange and pineapple
juice and other juice concentrates, aspartame, corn, corn sweeteners, flavorings, flour, grapefruit and other
fruits, oats, oranges, potatoes, raw milk, rice, seasonings, sucralose, sugar, vegetable and essential oils, and
wheat. We also use water in the manufacturing of our products. Our key packaging materials include plastic
resins, including polyethylene terephthalate (PET) and polypropylene resins used for plastic beverage bottles
and film packaging used for snack foods, aluminum used for cans, glass bottles, closures, cardboard and
paperboard cartons. Fuel and natural gas are also important commodities for us due to their use in our facilities
and in the trucks delivering our products. We employ specialists to secure adequate supplies of many of these
items and have not experienced any significant continuous shortages. Many of these ingredients, raw materials
and commodities are purchased in the open market. The prices we pay for such items are subject to fluctuation,
and we manage this risk through the use of fixed-price contracts and purchase orders, pricing agreements
and derivative instruments, including swaps and futures. In addition, risk to our supply of certain raw materials
is mitigated through purchases from multiple geographies and suppliers. When prices increase, we may or
may not pass on such increases to our customers. See Note 10 to our consolidated financial statements for
additional information on how we manage our exposure to commodity costs. See also “Item 1A. Risk Factors
– Our business, financial condition or results of operations may be adversely affected by increased costs,
disruption of supply or shortages of raw materials or other supplies.”
Our Brands and Intellectual Property Rights
We own numerous valuable trademarks which are essential to our worldwide businesses, including Agusha,
Amp Energy, Aquafina, Aquafina Flavorsplash, Aunt Jemima, Cap’n Crunch, Cheetos, Chester’s, Chipsy,
Chudo, Cracker Jack, Crunchy, Diet Mountain Dew, Diet Mug, Diet Pepsi, Diet 7UP, Diet Sierra Mist, Domik
v Derevne, Doritos, Duyvis, Elma Chips, Emperador, Frito-Lay, Fritos, Fruktovy Sad, Frustyle, G Series,
G2, Gatorade, Grandma’s, Imunele, Izze, Kurkure, Lay’s, Life, Lubimy, Manzanita Sol, Marias Gamesa,
Matutano, Mirinda, Miss Vickie’s, Mother’s, Mountain Dew, Mountain Dew Code Red, Mountain Dew
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