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Performancewith PurposeCreating a Better Tomorrowfor Future GenerationsPepsiCo Corporate Citizenship Report 2008

As one of the world’s largest food and beverage companies, we recognize our responsibility to help make a positivecontribution in a world that continues to experience unprecedented economic, environmental, and social challenges.In this overview, we share our progress in addressing these challenges, identify where we believe we can have the most impact,and acknowledge our opportunities for continued improvement. We will continue to develop, improve, and report metrics to measureour global performance. While this process will take time, we believe that it will help us both embed sustainability goals more fullyinto our operations and achieve demonstrable progress.Our approach to sustainability remains grounded in our Performance with Purpose mission: a balance of achieving continuedfinancial success while leaving a positive imprint on society. Specifically, we have defined three areas of influence: human, environmental,and talent sustainability.Human SustainabilityNourishing our consumers throughthe products we offer — from treats tohealthy eats — and through our effortsto encourage more active lifestyles.Environmental SustainabilityProtecting our natural resources andoperating in a way that minimizes ourenvironmental footprint.Talent SustainabilityInvolving and empowering people,helping them to realize their potential,renew themselves and achieve success.This report provides a review of all three areas and offers a more in-depth look at our company’s efforts with respect to water,climate change and agriculture.We believe that the power of our global workforce, coupled with our operational capabilities and international reach, provideour company with a unique opportunity to have a positive impact on society. Our employees are committed to living PepsiCo’ssustainability vision, which is to continuously improve the world in which we operate, creating a better tomorrow for thisgeneration, as well as future generations.This report covers the 2008 fiscal year.Additional expanded content for each area of sustainabilitycan be found online at www.pepsico.com/sustainabilityreport.Cover image: A member of our agriculture team practices water conservation techniques on the ZhanJiang potato farm inthe Guangxi region of China. Today, agriculture accounts for more than 70% of water consumed globally, and this can beas high as 90% in developing countries. In China, our team grows potatoes in desert conditions through the installation ofpivot and drip irrigation systems. These systems have reduced our agricultural water consumption by up to 50% in China.Our agronomists also have taught more than 5,000 local farmers and university students advanced techniques ofsustainable agriculture to yield better crops, protect the environment and help support the economic development of localfarming communities.

Dear Fellow Stakeholders,Every day, PepsiCo earns its license to operate in the thousandsof communities we serve.As one of the world’s largest food and beverage companies,we have some distinct responsibilities. We have a responsibilityto support economic development, to improve our environmentalfootprint and to help work toward solutions to issuessuch as obesity and undernourishment. This report, calledPerformance with Purpose: Creating a Better Tomorrow forFuture Generations, captures the progress we have madethus far, and provides a map of where we intend to go.Performance with Purpose is fundamental to our overallsuccess. There’s no question that these are challengingtimes. Like many companies, we’re facing headwinds suchas rising costs, an uncertain economic outlook and shiftingcurrency exchange rates. While we can’t control macroeconomictrends, we must adapt to the near-term challengesto deliver on our long-term growth plans.But this cannot be an excuse to reduce our commitment toresponsible business. Indeed, financial performance can andmust go hand in hand with sustainability. Our performance andour purpose are not separate — each is knitted inextricablywith the other. That relationship can be seen in the three areasthat together comprise Performance with Purpose: Human,Environmental and Talent sustainability. These focus areaswill guide the way we do business. They will continue to beshaped in dialogue with key stakeholders. In this way, weintend to maintain our long-term commitment to the overallsustainability of our company.Human SustainabilityThe world today faces many public health challenges and,as a responsible company, we recognize our part in helpingto improve the well-being of populations in both developedand developing countries.Our aim is to nourish consumers by developing productsthat satisfy the consumer’s changing preferences and thatdeliver exceptional taste and convenience. Increasingly, ourproduct portfolio makes it more enjoyable to lead a healthylife. We’re changing because our consumer is changingand because the health of the world’s growing populationdemands it.To meet this demand, we’ve appointed new leaders to ourglobal R&D team, including world-renowned clinical scientists.We have increased our R&D investment and dramaticallyexpanded our capabilities. We have accelerated our innovationpipeline, acquired companies to extend our offerings of morenutritious products and actively cultivated partnerships toguide our work. We will use our influence to drive positivechange in the food industry.Environmental SustainabilityAs a responsible company, we seek to continually driveenvironmental sustainability by abiding by applicable lawsand regulations and, in certain instances where we believethe requirements may not be sufficiently advanced, weapply higher standards.Recently, Bureau Veritas issued independent verification ofour environmental data. We will continue to audit our performance,share our progress and actively lead and engagein private-public partnerships to spur action and solutionsto address the world’s environmental issues.But we want to go further than that. We have focused ourenvironmental sustainability efforts on the areas where,because of our expertise, we can have the most impact:water, climate change, agriculture and packaging. We areworking hard to minimize our water footprint and improvepublic access to clean water through alliances with nonprofitgroups such as The Earth Institute and Water.org. We areintent on mitigating climate change and continuing ourefforts to reduce greenhouse gas emissions. After more thana decade of action, we continue to form partnershipswith key stakeholders such as the Carbon Trust to provideus with additional insights, expertise and knowledge.Talent SustainabilityBy valuing our employees, we are ensuring that PepsiCois the kind of company where talented people of all backgroundswant to work.We recognize our responsibility to take care of our employeesand their families, especially during this global economicdownturn. We remain committed to providing opportunitiesfor our associates to acquire new skills, grow professionallyand share in our company’s success. Our dedication toworkplace safety is unwavering, and we offer health carebenefits and wellness programs that enable our employeesto live healthier lives.We foster an inclusive workplace by increasing female andminority representation in management ranks, creatingrewarding opportunities for people with disabilities andrecognizing our employees for their contributions.We are extending our human rights standards throughoutour operations and encourage our suppliers andagricultural partners to uphold our commitment tosustainable development.ConclusionI believe our Performance with Purpose mission definesour roles and responsibilities very clearly. It motivates our198,000 employees to be leaders in social responsibilityand helps each of us create a better tomorrow for futuregenerations. We look forward to sharing our progress andI look forward to your feedback. I encourage you to shareyour comments on our corporate citizenship report atPerformanceWithPurpose@pepsico.com.Indra K. NooyiChairman and Chief Executive Officer

HUMAn SUSTAInAbIlITyWe Recognize Our Responsibilityto Provide Balanced NutritionMEHMOOD KHAn, MD, Chief Scientific OfficerAs one of the world’s largest food and beveragecompanies, we believe it is our responsibility to understandthe diet and nutrition needs of populations aroundthe globe.More than ever, consumers want products that are safe,affordable, great-tasting and healthy. They are increasinglylooking closely at the nutritional content of the productsthey consume and purchase for their families, such as saltcontent and saturated fat, because they want to eat welland improve their overall health. They want options thatoffer nutritional benefits to meet the differing needs ofvarious life stages, from childhood through late adulthood.Consumers are also managing specific health conditions,such as diabetes and high cholesterol, and expect onpackhealth claims to be grounded in credible science.Understanding these health needs and attitudes is vital toour business, but the global market is even more dynamicand complex.Today, more than one billion adults are overweight orobese while at the same time, more than one billion adultsand children are undernourished — in both developing anddeveloped countries. Often these overweight and undernourishedindividuals live side by side in the same cities andcommunities, a paradox that has never been observed tothis scale in the history of mankind. The projected rise ofglobal obesity and global hunger presents a tremendouschallenge to the health and viability of individuals andcommunities.We’re mindful of the way the world is changing. How wechoose to respond to these societal challenges is criticalto the future of our business and to our planet. This is whywe are changing the way we innovate at PepsiCo.In 2008, we expanded our global research and developmentcapability to address these challenges. Our networkof senior leaders includes world-renowned clinical scientistsand experts in science, technology, nutrition, foodscience and safety, public health, epidemiology, productdevelopment, behavioral medicine and health policy.These experts give PepsiCo a unique understanding ofindividual human physiology and the nutrition needsof populations. These global R&D teams are developingproducts rooted in rigorous, science-based nutritionstandards and produced to the highest standards of quality,with the promise of satisfying a diverse global palette.The hub of this work is eight regional research centers, eachfocused on leveraging nutrition science and knowledge todevelop convenient foods and beverages that can improveoverall diets and positively impact health. Three centers arelocated in the United States: Valhalla, N.Y.; Plano, Tex.;and Barrington, Ill. Other centers are in Leicester, UnitedKingdom; Monterrey and Mexico City, Mexico; Shanghai,China; and New Delhi, India; with “satellite” centers inThailand, Brazil and Australia. In addition, we’re broadeningour open innovation efforts through new research partnershipswith leading institutions, including: Yale University,Dresden University, Westfälische Wilhelms-UniversitätMünster, and several universities in India.4 PepsiCo Corporate Citizenship Report 2008

We’re introducing products with more whole grains, fiber,fruits and vegetables, and are reformulating some ofour existing products by reducing trans fats to negligiblelevels while also reducing total fat, saturated fat, salt andadded sugar. We’re dedicated to ensuring the integrity ofour health claims, all of which are reviewed by qualifiednutrition and regulatory experts following strict proceduresand standards.Members of the Walkers R&D team focus on science-based nutritionstandards as they develop food and beverage products at the state-of-theartBeaumont Park research and development facility in Leicester, U.K.We’re helping consumers make smart choices more easilyby providing easy-to-understand nutrition labeling.We also understand the importance of being a responsiblemarketer. PepsiCo believes that industry-wide voluntaryaction continues to be the best way to address ourresponsibilities. We endorse the International Council ofBeverages Associations’ guidelines on marketing tochildren — a landmark industry initiative which does notpermit marketing or advertising of beverages, other thanwater, fruit juice and dairy-based beverages, to childrenunder 12 years old.We are committed to helping reduce the terrible burdenof hunger everywhere we do business. PepsiCo has effortsunder way to help support the United Nations’ MillenniumDevelopment Goals, including the goal to eradicateextreme poverty and hunger by 2015. In addition tofunding, we are providing experts who offer counsel inmany areas—from product development to buildingdistribution networks—in such countries as India, SouthAfrica and Nigeria. In addition, we’ll have the opportunityto leverage any new discoveries to create affordableproducts for low-income consumers in developed countriesaround the world.We know the importance of establishing partnershipswith key stakeholders to help make a positive contributionto the world’s nutrition needs. Our leaders contributeto initiatives led by the World Health Organization (WHO),the National Institutes of Health, Global Alliance forImproved Nutrition, the Pan American Health Organizationand the Alliance for a Healthier Generation. For example,we are among the nine leading food and beverage companiesto commit to the goals of the “Global Commitmentto Action on the Global Strategy on Diet, Physical Activityand Health” and to report on our progress, annually,at the World Health Assembly. We intend to continuemeasuring and reporting on our progress so that ourconsumers and other industry leaders can share in thelessons we’re learning.We’ve acquireda stake inJSC Lebedyansky,the world’ssixth largest juicemanufacturer.Across our global portfolio, we are offering consumerssmaller portion sizes. In fact, in the United Kingdom,a greater proportion of our sales come from smallerportion sizes. Over 80% of Walkers Crisps sales are from25 gram bags purchased in multipacks; 2% of sales arefrom 50 gram bags. Our goal is to continue to developproducts that are affordable and accessible. We do notcharge a premium for our zero sugar/zero calorie varieties,for instance.Every serving ofSunBites contains morethan one-third of thesuggested daily amountof whole grains.At PepsiCo, we’re privileged to use the lessons gainedfrom our global vantage point not only to improveour business, but to contribute to our common goal offinding solutions to some of the world’s most persistentsocial challenges.PepsiCo Corporate Citizenship Report 2008 5

HUMAn SUSTAInAbIlITyWe Are Committed to Making Products thatHelp Consumers Live Active, Healthy LivesTransforming Our PortfolioAt PepsiCo, our aim is to continually develop products thatsatisfy consumers’ changing preferences, deliver exceptionaltaste and offer greater nutritional benefits. Increasingly, ourportfolio of foods and beverages are part of a diet that is moreenjoyable and supports a healthy lifestyle. We’re changingbecause consumers are changing and because the healthof the world’s growing population demands it. Healthiereating is good for the well-being of our consumers andis good for business.Innovating new ProductsAs a leading innovator in the food and beverage sector, ourpipeline of products offers a diverse array of locally relevanttastes and enhanced nutritional benefits. Here are someexamples:• In Mexico, our Gamesa-Quaker business expanded its lineof portion-controlled, oat-based cookies and snacks.• In India, we’re making snacks with an ingredient veryfamiliar to the local diet — lentils.• In Brazil, we expanded our offerings of baked snacks; andwe’ve introduced low-fat bread snacks in Chile, PuertoRico, Spain, Turkey, Saudi Arabia and Russia.• PepsiCo and the Whole Earth Sweetener Companyintroduced a zero-calorie, all-natural sweetener derivedfrom the stevia plant. It’s called PureVia and it wasintroduced in Peru in a new, nutritionally enhancedPepsiCo beverage called “SoBe Life.”Enabling a Healthy DietOur commitment to improving our portfolio’s role in a dietincludes reinforcing the basic rules of a healthy diet. Thisrequires making changes that improve the nutrition contentof each product. As a result, we continue to make everycalorie count by reformulating some of our existing products6 PepsiCo Corporate Citizenship Report 2008by reducing trans fats to negligible levels, adding wholegrains, and reducing added sugars. For example:• In India, we’re using rice bran oil instead of palm oil,reducing saturated fats by 40%.• In the United States, Tropicana Pure Premium Orange Juicehas two servings of fruit in every 8-ounce serving andoffers a juice variety with added calcium and Vitamin D.• In the United Kingdom and Europe, we’ve introducedWalkers Baked and Baked Lay’s with 70% less totalfat than regular crisps.• In 2008, PepsiCo was the largest seller of nuts and seedsoutside the United States.Expanding through Strategic AcquisitionsAs our business grows globally, key acquisitions have helpedus expand our offering of products with improved nutritionalprofiles. The focus on more nutritious offerings started withthe acquisition of Tropicana in 1998 and the 2001 mergerwith Quaker Oats, including Gatorade. More recently, PepsiCohas acquired or purchased a major stake in: JSC Lebedyansky,Russia’s leading branded juice company and the world’s sixthlargestjuice manufacturer; Sandora, a leading juice companyin Ukraine; Naked Juice, a premium juice company in theUnited States; Spritz International Inc., the leading maker ofsunflower and pumpkin seeds in Canada; and V Water inthe United Kingdom.Promoting Active, Healthy lifestylesWe support programs that use simple steps to encouragepeople to get active:• In Latin America, Vive Saludable Escuelas is a proveninitiative that teaches children how to add physical activityto their daily lives. A physical education routine, designedby Mexico’s Sports Commission, is being used by teachersin participating schools. To date, the program has touchedmore than one million children in 4,000 schools.• In India, our Get Active program reaches 70,000 studentsin 120 schools and promotes an active lifestyle throughan energy balance curriculum.• In the U.S., we continue to work with the YMCA, the largestprovider of fitness programs, to support Activate America,a public health initiative that helps make healthy livinga reality for millions of Americans.Helping Consumers Make better Choiceswith nutrition labelingWe care about the health of consumers. We want them toenjoy our products and we want to help make healthfulfood choices the easier choice.A key way we do this is through our own nutrition labeling.In the U.S., we were the first in the industry to introduce asymbol that makes it easier for consumers to identify whichof our products contribute to a healthier lifestyle. OurSmart Spot symbol — the symbol of Smart Choices MadeEasy — is a simple labeling system that explains why eachproduct is a smart choice.PepsiCo is also a founding member of the U.S. KeystoneFood and Nutrition Roundtable, a multi-stakeholder groupthat seeks to drive improvements in the American diet.The Keystone Roundtable is a consensus forum of industry,academia, the public health community and government,working collaboratively to create an easy-to-understand anduniform front-of-pack nutrition labeling program to helpconsumers make healthier choices among all packaged foodand beverages products in the U.S.In Europe, we introduced front-of-pack nutritional labelingacross our brands in partnership with other food and beveragecompanies. The labels help consumers understand thepercentage of the “Guideline Daily Amount” (GDA) of calories,sugars, saturates, fat and salt contained in a portion offood or drink.

Engaging in Responsible Marketingand AdvertisingWe understand the importance of being a responsiblemarketer. We believe that industry-wide voluntary actioncontinues to be the best way to address our responsibilities.We announced our full support of the International Councilof Beverages Associations’ guidelines on marketing tochildren — a landmark initiative supported by industry. Theguidelines permit no marketing or advertising of beverages,other than water, fruit juice and dairy-based beverages, tochildren under 12 years old. These guidelines were fullyimplemented on a global basis by January 2009. We were afounding member of a voluntary U.S. food and beverageindustry initiative that redefined how the industry marketsproducts to children under 12. Today, 100% of our advertisingto children is devoted exclusively to products that meetdefined nutrition criteria or provide a functional benefit.We have committed to similar guidelines in Canada, theEuropean Union, Mexico, Thailand, South Africa, Australiaand New Zealand.We’ve introducedBaked Walkers andBaked Lay’s with70%less total fat than regularcrisps, in the UnitedKingdom and Europe.We’ve introduced a lineof more healthful snacksin Mexico includingStila bars, made withoats and real fruit.Partnering for ChangeWe proactively lead and engage in private-public partnershipswith key external experts and stakeholders in theglobal health policy and science/nutrition communities tohelp improve diets and deliver substantial improvements inour products. Our leaders actively participate in globalhealth policy initiatives including those led by the WorldHealth Organization, the National Institutes of Health,Wellcome Trust, the Pan American Health Organization andthe Alliance for a Healthier Generation, among others.We are among nine leading food and beverage companiesto sign the “Global Commitment to Action on the GlobalStrategy on Diet, Physical Activity and Health,” a commitmentaddressed to the World Health Organization. Weagreed to five key global commitments to action that willtake place over the next five years. We will report our progressin delivering these goals at the annual World HealthAssembly meeting.We’ve introducedlow-fat bread snacksin Chile, Puerto Rico,Spain, Turkey, SaudiArabia and Russia.Sabra hummus provides ahealthier snack with zerotrans fat and zerocholesterol per serving.In the United States,Tropicana orange juicevarieties include addedcalcium and vitamin D.Old Fashioned QuakerOats is made with100%natural whole grainoats and can helpreduce cholesterol.PepsiCo Corporate Citizenship Report 2008 7

EnVIROnMEnTAl SUSTAInAbIlITyWe Recognize Our Responsibility toMinimize Our Environmental FootprintlESlIE STARR KEATInG,Senior Vice President, Frito-Lay OperationsEvery day, we rely on the earth’s natural resources to run ourbusinesses. Water is essential for all foods and our ability toenjoy them — from growing and washing to processing andcooking. It is the primary ingredient in our beverages.Fuels, electricity and, increasingly, other forms of energy areindispensable to making, moving and selling our products.As a company that is expanding across many developed andemerging markets, we are committed to minimizing theimpact our business has on the environment with methodsthat are socially responsible, scientifically based andeconomically sound.Our environmental sustainability efforts are primarily focusedon water, climate change, agriculture and packaging — areasthat are critical to our business and where we can make thebiggest impact. We continuously improve our environmentalprograms and explore inventive solutions to the world’schallenges, in particular water scarcity and climate change. Welook for ways to bring to scale the good ideas being implementedacross our global business and to share this experiencewith our peers and supply chain. The following pages spotlightinitiatives taking place around the world — in Mexico, India,the U.K. and the U.S. — and illustrate how we approach ourcommitment to sustainability.Our ability to improve the effectiveness of our environmentalsustainability initiatives has been strengthened by the creationof common, enterprise-wide metrics. This is helping us tobetter understand and track our comprehensive environmentalfootprint and to be more transparent in our reporting.Our goal is to reduce water consumption by 20%, electricityconsumption by 20%, and fuel consumption by 25%per unit of production by 2015 as compared to our 2006consumption. We’ve made notable progress in all three areas.For the first time ever, Bureau Veritas issued a verification ofour environmental data and we are reporting our results on thetotal business, rather than by operating division as in the past.Reduce waterconsumption by20%Reduce electricityconsumption by20%Reduce fuelconsumption by25%We are also keen to address other areas of opportunities,including gathering consolidated bottler data and continuingto embed our global sustainability strategies and goals withinall our businesses for greater consistency.PepsiCo’s sustainability efforts are guided by a dedicatedEnvironmental Sustainability Leadership Team supportedby an Environmental Council. Sustainability teams at ourmanufacturing facilities around the globe are at the front lineof our efforts. Employee volunteer “Green Teams” operateat many U.S.-based businesses, including Quaker, Tropicana,Gatorade and Frito-Lay. An Environmental ManagementSystem framework, an Environmental Policy and external8 PepsiCo Corporate Citizenship Report 2008

audits support our efforts, ensuring that we are continuallyreaching for more ambitious goals.WATER EFFICIENCY IMPROVEMENTin %BeveragesFoods20079.202008 13.6as compared to 2006 base yearELECTRIC EFFICIENCY IMPROVEMENTin %Beverages20073.702008 3.80as compared to 2006 base year3.90Foods1.002.70FUEL EFFICIENCY IMPROVEMENTin %BeveragesFoods200710.42.802008 13.65.20as compared to 2006 base year8.20In addition to our own efforts, we consistently rely onpartnerships that help us address the world’s environmentalchallenges. These relationships with a range of externalstakeholders provide us with additional insights, expertiseand knowledge on multiple aspects of sustainability. We willcontinue to actively lead and engage in key private-publicpartnerships to spur collaborative action and solutions thataddress the urgency of these issues.Water: At PepsiCo, we are committed to minimizing ourwater use through greater efficiency across our operationsand to ensuring that we source our water in ways that donot cause damage to local communities and ecosystems.Working closely with our suppliers, we are finding new waysto further reduce their water usage and to help avoid waterconflict with local communities.PepsiCo also collaborates with corporate peers to ensure thatwe are doing more, collectively, to reduce our impact on theenvironment. In 2008, Indra Nooyi, our chairman and chiefexecutive officer, joined select global leaders as a signatoryto the United Nations CEO Water Mandate and we areactively involved in supporting all elements of the mandate.Through the work of The PepsiCo Foundation, we continueto invest in sustainable water resource managementmethods, which positively impact both quantity and qualityof water supply. Since 2005, the Foundation and PepsiCoCorporate Contributions have committed more than$15 million to organizations working to bring safe waterto developing countries.Climate Change: We are working hard to reduce our useof energy and transform our businesses by replacing ourexisting use of oil, gas and fossil fuels in manufacturing withrenewable energy sources.We are actively moving towards having all our new facilitiesmeet the U.S. Green Building Council’s (USGBC) Leadershipin Energy and Environmental Design (LEED) standards — oneof the world’s most rigorous standards for green building.In an industry-leading move, we introduced our SustainableEngineering Guidelines (SEG) based on LEED standards.These guidelines ensure our buildings are constructed toenvironmentally sustainable standards and apply to all newconstruction as well as major remodels of existing buildingsglobally, where practical.By consistently making our manufacturing operations moreenvironmentally responsible, we are also making themmore economically efficient through our water and energyconservation processes and teams. For example, the Frito-Layplant in Modesto, Calif., installed a solar energy generatingsystem that powers the daily production of thousandsof bags of SunChips multigrain snacks. In Casa Grande, Ariz.,our teams are working toward the goal of taking the Frito-Layplant there off the power grid, or nearly so, and runningit almost entirely on renewable fuels and recycled water.Agriculture: Guided by our Global Sustainable AgriculturePolicy, PepsiCo is working across the agricultural supplychain to ensure our practices are efficient and sustainable.Continuous benchmarking against our industry peersensures we are adopting best practices — including watersavings techniques, waste reuse, soil protection and chemicaluse — throughout the diverse aspects of our business.One of the most exciting developments in our environmentalsustainability efforts has been on the packaging front. In 2008,we introduced a new half-liter bottle for our Aquafinaflavored waters, Lipton Iced Teas, and Tropicana juice drinks.The new bottle contains 20% less plastic than the previousbottle and its label is 10% smaller than before. These innovationsare taking nearly 6 million kilograms of packaging out ofthe system each year and reducing greenhouse gas emissionsby 18,000 metric tons annually. That’s equivalent to taking3,350 cars off the road annually.Our goal is to design and develop packaging systems that areenvironmentally responsible throughout their entire life cycle.We want to inspire consumers who are seeking ways to livemore environmentally sustainable lives by promoting recycling.In addition, we want to partner with leading organizations topromote sustainable packaging and recycling practices. Mostrecently, we have launched a global sustainable packagingpolicy and formed a Sustainable Packaging Council to furtherour efforts in this area.PepsiCo’s commitment to environmental sustainability — a keyplank of our Performance with Purpose mission — is part ofhow we do business every day. The steps we’ve taken tominimize our impact and institute more robust, enterprisewideprocesses to better track, manage and understand ourenvironmental footprint are helping us to do better eachday. With the expert knowledge, world-class skills andbreakthrough technology that empower our environmentalteams across the globe, I’m confident that this will lead tocontinuous progress.PepsiCo Corporate Citizenship Report 2008 9

EnVIROnMEnTAl SUSTAInAbIlITyRice is India’s largest graincrop, and uses thebulk of fresh water usedin Indian agriculture.In 2008,direct seeding wasextended to more than1,000 acresin five states andsaved close to1 billionliters of waterWater use inmanufacturing wasreduced by over55%and in the last three yearswe saved more than2.5billion liters of water10 PepsiCo Corporate Citizenship Report 2008PepsiCo workers in Punjab, India, tend to rice fi elds that were planted using the directseeding method, a unique and highly water-effi cient approach to rice cultivation.

WaterPioneering Initiatives to AchievePositive Water BalanceWater is required to make our products so that wemaintain the highest of quality standards for consumers —and water is required to ensure a clean and safe workplacefor our employees and our suppliers. In turn,efficient use of water across our operations is nothingshort of imperative. We are committed to minimizingour global water use through greater efficiency, innovativeprocesses and new technologies.In 2008, we conserved more than 7.5 billion liters of wateras a result of gains in water efficiency from the 2006baseline. And while using water responsibly is a toppriority, we also believe in our ability to help address thebroader challenge of water scarcity and to help avoidwater conflicts in local communities.In India, all industry accounts for about 6% of total wateruse. Within that 6%, the soft drinks and bottled waterindustry accounts for about four-hundredths of 1%.In comparison, agriculture accounts for over 80% of totalfresh water use in the country. To have significant impacton total water conservation, farming must use watermore efficiently. We believe we can play an importantrole in providing solutions.In 2003, our India team embarked on an ambitious journeyto achieve positive water balance — giving back as muchas we take. Through a comprehensive program to conserveand optimize water usage, we have pioneered majorinitiatives by partnering with farmers, working withnumerous rural communities and establishing privatepublicpartnerships with Punjab Agriculture Universityand The Energy Resources Institute (TERI). We havecarried out a variety of innovative reuse and recyclinginitiatives within our own operations; raised farmproductivity, which increased farmers’ incomes; andimproved the quality of life in many communities. Theseinitiatives, among others, will help us make significantprogress toward positive water balance in 2009.In the last five years, our India manufacturing team hasreduced water use by more than 55% and in the lastthree years, we have saved more than 2.5 billion liters ofwater through conservation efforts. We have also preventeddepletion of groundwater aquifers by constructingrainwater harvesting systems in most of our plants.One of the most effective initiatives is our work withfarmers to reduce water intensity in rice cultivationthrough a method called direct seeding. Our India teamhas become a leading proponent of direct seedingof rice (versus transplanting seedlings from nurseries topaddies that are then flooded). While direct seedingof rice is done in some countries, it is not widely practicedin India.In India, PepsiCo has been experimenting with directseeding for four years — testing methods to improve yieldand reduce weed growth and even developing a tractormounteddirect seeding machine, adjustable for seedvariety, planting depth and plant-to-plant spacing.After carrying out initial direct seeding trials at our ownmodel farms, pilot tests have been run in farmers’ fields toconfirm the results. In 2008, direct seeding was extendedto more than 1,000 acres in five states and the initiativesaved close to 1 billion liters of water. In addition tosaving water, it also reduced costs by 1,400 rupees peracre for farmers.Direct seeding will go a long way in enabling our Indiateam to achieve positive water balance for our beveragebusiness by 2009. More important, it has the potentialto dramatically reduce water usage in a country wherewater is an increasingly precious commodity.This single initiative is an example of both climate changemitigation and adaptation. We are mitigating ourimpact on climate change by using significantly lessresources, and helping our farm communities adaptto the changing environment.In India, PepsiCo has been experimenting with direct seeding, one ofthe most effective ways to reduce water use in rice cultivation. Shown hereis a direct seeding machine, adjustable for seed variety, planting depthand plant-to-plant spacing.PepsiCo Corporate Citizenship Report 2008 11

EnVIROnMEnTAl SUSTAInAbIlITyAgricultureDistributionUse and Disposal0.62kg0.37kg0.05kgIncluding processing andpackaging, the carbonfootprint for a 64-ouncecarton of Tropicana PurePremium Orange Juice1.7kgof CO₂e12 PepsiCo Corporate Citizenship Report 2008Tropicana is calculating the amount of greenhouse gases produced duringthe manufacturing and use of its Tropicana Pure Premium orange juice.

Climate ChangeUnderstanding Our Brands’ Carbon FootprintClimate change may adversely affect the raw materialsand other supplies we use to make our products, includingwater and various crops from potato, oats and corn tooranges and apples.Throughout our business, an important part of ourgreenhouse gas (GHG) emissions results from the energyused in our manufacturing and related processes. We arereducing our emissions through more efficient use of nonrenewablefuels and increased use of renewable energy.We also partner with nongovernmental organizations toexamine how our business impacts climate change andhow we can change the way we work to further reduceour footprint.GHG EMISSIONS*in million metric tons200620072008Total PepsiCo Beverages3.56 0.723.713.760.770.84GHG EFFICIENCY IMPROVEMENT*in %Beverages20072008 3.00as compared to 2006 base year5.50FoodsFoods2.842.932.922.10* The 2008 GHG data presented in the charts above has gone throughthird-party verifi cation and represents nearly 85% of total Scope 1emissions for PepsiCo. This data is comparable to the 2006 and 2007data reported for trending. Scope 1 emissions include the following forcompany-owned operations:• Fuel combusted during manufacturing, calculated by standardemissions factors according to each fuel• Fuel combusted for building heat• Emissions from fl eet vehicles, based on vehicle type, fuel typeand volume of fuel used• Fugitive emissions from refrigeration units at manufacturingsites based on leak rates and refrigerant purchases4.50In 2003, we began working with the Carbon Trust, anindependent, not-for-profit company set up by the U.K.government to help businesses address the growing threatof global climate change and to pioneer carbon footprintingmethodology and standards. The Carbon Trustbelieves that in order to effectively reduce a company’scarbon footprint, they must first know how to accuratelymeasure it.Since 2000, Walkershas reduced itsenergy use per packby one-third andreduced water use by42%We began the work with our leading crisp brand inthe U.K., Walkers Crisps. Following months of intenseresearch, Walkers became the first consumer brand topilot the original method for assessing product carbonfootprints and the first major food brand to display acarbon footprint/reduction label on its packs. Since 2000,Walkers has reduced its energy use per pack by one-thirdand its water use by 42%, and it is committed to reducingthe carbon footprint of its products even further.The collaborative work continued and most recently,Tropicana Pure Premium Orange Juice became the firstconsumer brand in North America to be independentlycertified by the Carbon Trust. The process included workingwith an academic research partner, the Earth Institute atColumbia University, to determine the mapping process.The Carbon Trust then conducted a review of scientificlife cycle data and certified the carbon footprint of astandard 64-ounce carton by:• Mapping the product life cycle — from growing andsqueezing oranges and getting the container on theshelves, to finally disposing or recycling the packaging.• Looking at the energy consumption directly involved ineach of these life cycle stages and converting this intoequivalent carbon dioxide emissions (CO₂e).• Adding the equivalent carbon dioxide emissions (CO₂e)from each stage to estimate the total product greenhousegas footprint of the product.Using this process, the estimated carbon footprint for a64-ounce carton was determined to be 1.7 kilograms.The Carbon Trust has certified the footprint, givingPepsiCo a verifiable benchmark against which the companycan measure GHG reduction progress going forward.In coming years, additional products, including Pepsi,Diet Pepsi, Aquafina and Gatorade, will be assessed.Today, more than 10 products that represent a truemarket basket of our consumer offerings are currentlybeing evaluated for a carbon footprint.This science-based information is helping our businessestarget operational improvements and achieve theirenergy efficiency goals, while striving for even moreambitious, yet realistic, targets.Uncovering information about where and why carbonis generated in the manufacturing, distribution anddisposal of products will also help drive collaborationwith partners and suppliers on carbon reduction initiativesand elevate consumer awareness.PepsiCo Corporate Citizenship Report 2008 13

EnVIROnMEnTAl SUSTAInAbIlITySabritas’ participation inthe Educampo programhas helped drive:300%increase in income80%improvement inland productivity37,000hours of educationSabritas’ participationto date has helped more than300 low-incomecorn producersreceive funding, technicalsupport and trainingresulting in an estimated9,300tons of corn production across2,000hectares14 PepsiCo Corporate Citizenship Report 2008Sabritas, our snack business in Mexico, is contributing to the overall development oflow-income farming communities by providing technical and business training to farmers,transferring relevant technology to the communities and initiating farming contracts.

AgricultureSupporting the Long-Term Successof Our FarmersAs a food and beverage company, agriculture is perhapsthe largest element of our eco-footprint, so we workhard to continually improve our agricultural processes.This year, we developed and published our GlobalSustainable Agriculture Policy, which demonstrates ourapproach to sustainable development across our entireagriculture supply chain, including water savings, wastereuse, soil protection and chemical use.Our Policy addresses six broad objectives within theagriculture supply chain:• Water Management• Soil Conservation and Preservation• Agrochemical Management• Energy Management• Farm Economics and Land Management• Social and Community ImprovementIn Mexico, our snack food business Sabritas activelyparticipates in a program that contributes to the overalldevelopment of low-income farming families in cornproducingcommunities. In partnership with the MexicanFoundation for Rural Development (FUNDAR), Sabritascontributes to technical and business training for farmers,transfers relevant technology to the communities andinitiates farming contracts. Sabritas and FUNDAR intendto incrementally bring about cultural change in thesecommunities that will lead to the creation of small,sustainable agribusinesses.At the onset, the program began in the state of Jalisco,located near Sabritas’ facility in Guadalajara, and nowspans six municipalities in Mexico. Sabritas pledged 9.1million pesos to fund several initiatives, including:• The organization of corn producers to use their collectivebargaining power to better negotiate competitivecontract prices for corn crops• The launch of a social education program focused ontraining farmers• The purchase of contracts with corn producers• The increased use of technology to produce higher yieldsSabritas’ participation to date has helped more than300 low-income corn producers receive funding, technicalsupport and training, which has resulted in an estimated9,300 tons of corn production across 2,000 hectares.The three-year program is expected to provide farmerswith resources for a 300% increase in income, an80% improvement in land productivity, and 37,000 hoursof education.Throughout the program, Sabritas works toward animproved understanding of the farmers’ needs to becomeindependent business partners. The program also benefitsour business. Strengthening the capabilities of oursuppliers located near our manufacturing facilities meanssaving warehouse and transportation costs as well.We know that engagement with rural farming communitiesand private-public partners is integral to deliveringthe positive social, environmental and economic impactsof this program.By contributing to the overall development of low-incomefarming communities, Sabritas is helping reduce povertywhile improving productivity, profitability and sustainabilityof small-scale farming.PepsiCo invests in innovative farming practices and education toimprove the welfare of the communities that support our agriculturalsupply chain.Sabritas works toward an improved understanding of its farmers’ needsto become independent business partners.PepsiCo Corporate Citizenship Report 2008 15

TAlEnT SUSTAInAbIlITyWe Recognize Our Responsibilityto Take Care of Our EmployeeslESlIE TEICHGRAEbER, Vice President, PepsiCo UniversityNow more than ever, we are sharpening our focus on thedevelopment of our employees. To build on our currentmarketplace success, we are committed to providingcomprehensive learning opportunities to develop allemployees to their fullest potential. Not only do we wantto provide learning experiences, coaching and training,we also want to ensure that PepsiCo is among the topdestinations for the world’s best talent.With a long-standing history of delivering leadershipexcellence supported by our proven development tools,we took additional steps to drive the transfer of bestpractices, skills, knowledge and technology across thebusinesses.In 2008, we launched PepsiCo University, which offers ablended approach to learning through both classroomactivities and online tools. Designed for employees atall levels of our organization, the expansive courseworkhelps them develop the knowledge and skills needed todrive innovation and growth for the future. PepsiCoUniversity is available in the U.S., U.K., Mexico, Brazil,Russia, and European Union countries, among others.Through a close working relationship with PepsiCo’soperating groups, attention is given to leveraging bestpractice curriculums residing in the business units andscaling these programs enterprise-wide. We also offere-learning performance support tools addressing a widerange of functional topics along with business andmanagement skill building. The overall curriculum iscentered on building people skills, managerial skills andgeneral business skills. One of the most successful coursesis the leadership advancement transition program thatprepares employees for the three key leadership milestones:the move from individual contributor to manager,from manager to leader, and from leader to senior leader.PepsiCo University will be launched in China, India andthe Middle East by late 2009.50%people results50%business resultsTo demonstrate our commitmentto values and manager quality,we shifted our annual performancereview system to equally balancebusiness and people results.In an industry-leading move that demonstrates our commitmentto our values and manager quality, we shiftedto an equal weighting of 50% Business and 50% Peopleresults in our annual performance review system. Thissystem includes mid-year and year-end career discussionsbetween employees and their managers. Individual“people performance” objectives include measures relatingto the Performance with Purpose sustainability planks(Human, Environmental, Talent) as well as improved operatingefficiencies, customer and employee satisfaction,16 PepsiCo Corporate Citizenship Report 2008

and the management and development of people. Thereare specific courses offered through PepsiCo Universitythat provide tools for people development. This changehas had a significant impact on employee perceptions ofPepsiCo as an organization focused on People results.To attract and retain the world’s best talent, we mustcontinue to build on the legacy of our learning culture toprepare and develop our diverse workforce for the future.GREG HEASlIP, Vice President, Global BenefitsOur employee wellness program, called HealthRoads,recognizes that good health and well-being is a journey,not a destination. HealthRoads successfully motivatesand enables employees to lead healthy lives by seekingpreventive care, making behavioral changes to reducehealth risks, and working one-on-one with a healthcoach to manage an existing condition.HealthRoads is comprehensive in scope. Its primary focusis diet, exercise and nutrition. However, it enablesemployees around the globe to address a wide variety ofpotential health risks, including stress, tobacco use, sleepdeprivation, diabetes, asthma, high cholesterol and highblood pressure. In addition, HealthRoads uses multiplemodes (online resources, print materials, one-on-onecoaching) to maximize its accessibility, reach and effectivenesswith our employees.HealthRoads is currently available in 21 countries, includingthe U.S., Australia and Canada. Moving forward, we’rerolling out the program in additional countries, includingMexico, the European Union and the Middle East, by 2012.One of our primary challenges is engaging employeesfrom diverse cultures, in which attitudes differ widelywith respect to weight, diet and one-on-one healthcoaching. We’re working on alternative approaches toengage our diverse population. The confidentiality andprivacy of personal health information are also globalconcerns for our employees. Senior management hasacknowledged these concerns and there is strict rigor inprotecting the confidentiality of employees’ personal data.HealthRoads, PepsiCo’s employee wellness program, motivatesand enables employees to lead active, healthy lives.Now in the fifth year of our HealthRoads journey, wehave accomplished key milestones to ensure sustainabilityand support of this initiative:• Senior management support: Our leadership teamchampions employee wellness around the globe.Their continuing support sets the stage for grassrootsacceptance and engagement.• Worksite wellness: A key to sustaining a wellness cultureis to make it relevant at the local level. HealthRoadsis tailored to meet each participating site’s needs byinvolving local employees in the design and executionof ongoing wellness activities in that particular location,within a consistent framework.• Strong incentive program: Although good health is itsown reward, incentives motivate and engage employeesin the right behaviors.• Tracking and measurement: We understand the valueof data. For the past four years, we’ve been measuringthe reduction or elimination of health risks among ouremployees and the financial return on our wellnessinvestment. Data and results are reported on anaggregate basis, not an individual basis.HealthRoads is slowing the rate of increase in PepsiCo’smedical costs and is positively impacting the health of ouremployees and their families. In the U.S., about two-thirdsof our employees and their spouses/partners have registeredfor HealthRoads and 93% of them have completedthe personal health assessment. More than 80% of individualswho completed a health assessment also agreedto participate in a wellness coaching program. More than31,000 participants reduced or eliminated a health risk asa result of engaging in a wellness program. Since 2006,we have identified a return on investment of $3.4:1 to$5.0:1, depending on whether incentives are included.93%completedhealth assessment80%participatingin programsIn the U.S., about two-thirdsof our associates and theirspouses/partners have registeredfor HealthRoads and 93% ofthem have completed the personalhealth assessment. More than80% of those individuals alsoagreed to participate in a wellnesscoaching program.HealthRoads is a catalyst for changing behaviors. It providesthe resources, tools and incentives that enable ouremployees to lead healthier lives. We believe HealthRoadsfosters a culture of well-being that can contribute towarda sustainable business.PepsiCo Corporate Citizenship Report 2008 17

WORLD HEADQUARTERSPurchase, New York, USABUSINESS UNIT HEADQUARTERSPEPSICO AMERICAS FOODS (PAF)Frito-Lay North America (FLNA) — Plano, Texas, USAQuaker Foods North America (QFNA) — Chicago, Illinois, USASouth America Foods (SAF) — São Paulo, BrazilSabritas — Mexico City, MexicoGamesa — Monterrey, MexicoPEPSICO AMERICAS BEvERAGE (PAB)Pepsi-Cola North America Beverages (PCNAB) —Purchase, New York, USAGatorade — Chicago, Illinois, USATropicana — Chicago, Illinois, USAPEPSICO INTERNATIONAL (PI)Europe — Geneva, SwitzerlandAsia, Middle East and Africa (AMEA) —Dubai, United Arab EmiratesAbout PepsiCoPepsiCo offers the world’s largest portfolio of billion-dollar foodand beverage brands, including 18 different product lines that eachgenerate more than $1 billion in annual retail sales. Our mainbusinesses — Frito-Lay, Quaker, Pepsi-Cola, Tropicana and Gatorade —also make hundreds of other nourishing, tasty foods and drinks thatbring joy to our consumers in over 200 countries. With more than$43 billion in 2008 revenues, PepsiCo employs 198,000 people whoare united by our unique commitment to sustainable growth, calledPerformance with Purpose. By dedicating ourselves to offering abroad array of choices for healthy, convenient and fun nourishment,reducing our environmental impact, and fostering a diverse andinclusive workplace culture, PepsiCo balances strong financialreturns with giving back to our communities worldwide.This report is printed on Mohawk Options 100% post-consumer content. Mohawk FinePapers purchases enough Green-e certified renewable energy certificates (RECs) to match100% of the electricity used in their operations. The paper is certified by Green Sealand by SmartWood for FSC standards that promote environmentally appropriate, sociallybeneficial and economically viable management of the world’s forests.