PepsiCo Americas Foods: Investing for Growth

PepsiCo Americas Foods:
Investing for Growth
Barclay’s Back to School
Brian Cornell
CEO, PepsiCo Americas Foods
September 2012 Confidential

Safe Harbor Statement & Non-GAAP Information
Safe Harbor Statement
• Statements in this communication that are "forward-looking statements,” including PepsiCo’s 2012 guidance, are based on currently available
information, operating plans and projections about future events and trends. Terminology such as “believe,” “expect,” “intend,” “estimate,”
“project,” “anticipate,” “will” or similar statements or variations of such terms are intended to identify forward-looking statements, although not
all forward-looking statements contain such terms. Forward-looking statements inherently involve risks and uncertainties that could cause
actual results to differ materially from those predicted in such forward-looking statements. Such risks and uncertainties include, but are not
limited to: changes in demand for PepsiCo’s products, as a result of changes in consumer preferences and tastes or otherwise; PepsiCo’s
ability to compete effectively; unfavorable economic conditions in the countries in which PepsiCo operates; damage to PepsiCo’s reputation;
PepsiCo’s ability to grow its business in developing and emerging markets or unstable political conditions, civil unrest or other developments
and risks in the countries where PepsiCo operates; trade consolidation or the loss of any key customer; changes in the legal and regulatory
environment; PepsiCo’s ability to build and sustain proper information technology infrastructure, successfully implement its ongoing business
transformation initiative or outsource certain functions effectively; fluctuations in foreign exchange rates; increased costs, disruption of supply
or shortages of raw materials and other supplies; disruption of PepsiCo’s supply chain; climate change, or legal, regulatory or market
measures to address climate change; PepsiCo’s ability to hire or retain key employees or a highly skilled and diverse workforce; failure to
successfully renew collective bargaining agreements or strikes or work stoppages; failure to successfully complete or integrate acquisitions
and joint ventures into PepsiCo’s existing operations; failure to successfully implement PepsiCo’s global operating model; failure to realize
anticipated benefits from our productivity plan; any downgrade of our credit ratings; and any infringement of or challenge to PepsiCo’s
intellectual property rights.
• For additional information on these and other factors that could cause PepsiCo’s actual results to materially differ from those set forth herein,
please see PepsiCo’s filings with the SEC, including its most recent annual report on Form 10-K and subsequent reports on Forms 10-Q and
8-K. Investors are cautioned not to place undue reliance on any such forward-looking statements, which speak only as of the date they are
made. PepsiCo undertakes no obligation to update any forward-looking statements, whether as a result of new information, future events or
otherwise.
Non-GAAP Information
• Please refer to the “Investors” section of PepsiCo’s web site at www.pepsico.com under the heading “Investor Presentations” to find disclosure
and a reconciliation of any non-GAAP financial measures contained herein.
2

PepsiCo America Foods (PAF) is an Advantaged Business
Revenue
Operating Profit
LAF
31%
LAF
20%
Quaker
11%
FLNA
58%
Quaker
15%
FLNA
65%
2011FY
3-Year CAGR 1
CapEx % of NR
$23 Billion $5.5 Billion
5% 7%
4%
Billion Dollar Brands
1. Represents core constant currency non-GAAP financial measures that exclude certain items. Please refer to “Reconciliation of GAAP and Non-GAAP Information” in the “Investors”
section of PepsiCo’s website at www.pepsico.com
Source: Billion Dollar Brands based on FY2011 global retail sales
3

We Remain Focused on 5 Key Priorities
Brand
Building
Innovation
Execution
Productivity
Cash
Returns
1
2
3
4
5
4

Frito-Lay North America Competes in an Attractive,
Growing Category
Attractive Category Growth
Emerging Trends
Create New Opportunity
Salty Snack Dollar Growth
+5%
+6%
Baby Boomers
+2%
Multicultural
2010
2011
2012 H1
Value Oriented
Source: IRI 6

Leadership Positions Across the Category…
Branded Salty Snacks by Price Tier
(Retail Sales, H1 2012)
Value Mainstream Premium
FL share #1 #1 #1
Share of TTL Salty
11% 82%
7%
41%
74%
33%
FL % chg +3% +3% +18%
RMS 4.8 14.4 4.7
Source: IRI based on PEP definition. % change is versus prior year.
7

…Led by a Strong Portfolio of Brands in Each Segment
Value
Mainstream
Premium
8

Attractive Growth in Premium Supported by Growth
Ventures Model
Accelerating Frito-Lay Premium
Premium $ Sales Growth
18%
4%
10%
2010 2011 2012 1H
Source: IRI 9

Accelerating Investments in Our Mainstream Brands…
10

…with Positive Early Results
Positive 2012 H1 Brand Building Results
Top of Mind Awareness
2012 H1
+9%
+38%
+12%
Source: Itrac. Percentage change is year over year. 11

Innovating Across the Portfolio…
Value
Mainstream
Premium
12

…and Across Channels
Doritos Locos Tacos
Leveraging Beverages
A PepsiCo Great Partnership
YUM/ Pepsi Heritage
Custom Beverage Foundation
Consumer Driven
Synergistic Brands
National Launch March 8th
Day 1…1MM+ units
Today…200MM and counting
14

Execution Remains Strong, Especially in C-Stores
PepsiCo is the Leading C&G Supplier
#1
C&G
Supplier
#1
Contributor to
C&G Growth
Source: IRI Dollar Sales Excluding Tobacco
16

Comprehensive Productivity Agenda
Manufacturing
Automation
Supply Chain
Advantage
Fleet Sustainability
17

Frito-Lay North America
Annual Net Revenue
1
$13.1Bn
2
3-Year NR CAGR 3.5%
1
Operating Margin 28%
1) 2011 Core
2) 2008-2011 Core Constant Currency CAGR
The above represent non-GAAP financial measures that exclude certain items. Please refer to “Reconciliation of GAAP and Non-GAAP Information” in the “Investors”
section of PepsiCo’s website at www.pepsico.com
18

Quaker a Key Health & Wellness Trademark
®
Quaker Brand
• 135 year brand history,
rooted in health & wellness
• Quaker is one of the largest
and the most trusted Health
& Wellness brands
Source: Largest - IRI . Most Trusted - Millward Brown
20

Growing Share in Hot Cereals, and Realizing Returns
on Innovation and Market Investments
Growing Share in
Hot Cereal
Investments Yielding Returns
Hot Cereal
Q2 2012 Year over Year Sales Growth
7%
12%
• Real Medleys propelling
growth in hot cereal
category
• Driving share for
Quaker hots
Category
Source: IRI 21

Snack Bars are Responding to Investment
in Innovation and Merchandising
Solid Innovation
performance
Activating in-store
Merchandising
Positive early results
Investment for Back to School
22

Globally Driving Impressive Growth
Mexico:
Fruit Bars
International
5-yr CAGR
+7.3%
UK:
Oat So Simple
China:
Instant & Savory Congee
Brazil:
BFY Cookies
Source: 2005-2010 Retail Sales per Euromonitor
23

Quaker North America
Annual Net Revenue
1
$2.6Bn
2
3-Year NR CAGR -1.5%
1
Operating Margin 31%
1) 2011 Core 2) 2008-2011 Core Constant Currency CAGR
The above represent non-GAAP financial measures that exclude certain items. Please refer to “Reconciliation of GAAP and Non-GAAP
Information” in the “Investors” section of PepsiCo’s website at www.pepsico.com
24

Mexico is the Cornerstone for
PepsiCo’s Latin American Foods
GDP
Positive Macroeconomic
Tailwinds
• $1,744 Bn
GDP CAGR ‘12-15
• 5.2%
Population
• 113MM (20% of LatAm)
PepsiCo Mexico Foods
Mexico Foods
Dollar Share
74%
Salty Snacks
Workforce Growth ’10-’20
• +25MM
52%
Biscuits
Sources: GDP – International Monetary Fund, 2012; Population - CONAPO ; Share - Nielsen H1 2012
26

In Salty, Driving Growth Through
Brand Building and Innovation
Brand Building
Innovation
…#1 Favorite Brand
Doritos
Inferno
…#1 and #2
Favorite
Commercials
Ruffles
Megacrunch
…360
Activation
Receta
Crujiente
Sources: Favorite Brand - Brand Health Tracking, Commercial Rankings - IBOPE AGB Mexico 27

In Biscuits, Supporting Strong
Brands and Driving Innovation
Brand Building
Innovation
Voted best new
product in 2012
…Most
Trusted Brand
…Favorite
Biscuit Brand
CHOKIS*
…and #3 Favorite
Commercial
Galletas
Avena
*Reformulation
Source: Most trusted – Reader’s Digest; Favorite Biscuit – Millward Brown;
Commercial Ranking – IBOPE AGB Mexico; Best New Product – KENA Publimetro Mejor Nuevo Producto 29

In-store Merchandising Execution
Leading to Greater In-market Presence
Rack Investments
POS Investments
Platinum Clients (DTS A)
30

Latin America Foods
Annual Net Revenue
1
$7.2Bn
2
3-Year NR CAGR 10%
1
Operating Margin 16%
1) 2011 Core 2) 2008-2011 Core Constant Currency CAGR
The above represent non-GAAP financial measures that exclude certain items. Please refer to “Reconciliation of GAAP and Non-GAAP Information” in the
“Investors” section of PepsiCo’s website at www.pepsico.com
31

Sports Activation Across Businesses
Leverage our NFL
partnership nationally
Locally relevant POS
Ads and signage reinforce
“party” equity
32

Leveraging Cross Category Presence
Co-Incidence of Purchase
PEP Share of Salty
Purchases with a CSD
PEP Share of CSD
Purchases with Salty Snack
+2pt
Advantage
Improvement vs.
Prior Year
63
+1pt
Advantage
Improvement vs.
Prior Year
35
59
32
Other
PEP
Other
PEP
When CSD Is
When Salty Is
Source: IRI Household Panel, 12 Months Ending June 3, 2012
33

PAF is an Important Part of PEP Portfolio
• Consistent, strong topline growth
• Attractive returns, efficient capital investment
• Benefits from cross-category presence
• Focused on brand building, innovation, execution, productivity
and cash returns

Q&A
35