Pepsi 2015 Annual Report Download - page 23

Table of Contents
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Sabra and Starbucks. Trademarks remain valid so long as they are used properly for identification purposes,
and we emphasize correct use of our trademarks. We have authorized, through licensing arrangements, the
use of many of our trademarks in such contexts as snack food joint ventures and beverage bottling
appointments. In addition, we license the use of our trademarks on merchandise that is sold at retail, which
enhances brand awareness.
We either own or have licenses to use a number of patents which relate to certain 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 has not had a material impact on our
consolidated financial results.
Our Customers
Our customers include wholesale and other distributors, foodservice customers, grocery stores, drug stores,
convenience stores, discount/dollar stores, mass merchandisers, membership stores, e-commerce retailers
and authorized independent bottlers, among others. 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.
We rely on and provide financial incentives to our customers to assist in the distribution and promotion of
our products to the consumer. 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.
Changes to the retail landscape, including increased consolidation of retail ownership, and the current
economic environment continue to increase the importance of major customers. In 2015, sales to Wal-Mart
Stores, Inc. (Wal-Mart), including Sam’s Club (Sam’s), represented approximately 13% of our total net
revenue. Our top five retail customers represented approximately 32% of our 2015 net revenue in North
America, with Wal-Mart (including Sam’s) representing approximately 18%. These percentages include
concentrate sales to our independent bottlers, which were used in finished goods sold by them to these
retailers.
See Note 8 to our consolidated financial statements for more information on our customers, including our
independent bottlers.