Transcript - PepsiCo

FEBRUARY 23, 2012 / 3:30PM, PEP - PepsiCo at Consumer Analyst Group of New York Conferencethat many markets around the world, notably our fast growth markets like Russia, India, China and Turkey, our brand equity is improving year overyear. And when you have brand equity improving, it allows us to price through commodity costs that we have seen this past year.Now going forward, we want to continue to build on the success of these brands and we will increase our global A&M spending on snacks in 2012by over the %. And, of course, I will focus that investment against the biggest brands that matter the most, Lay's, Doritos's, Cheetos and Sun ships.Consistent with brand building we are also stepping up our innovation in 2012. I will give you just a few examples and I don't want to steal TomGreco's thunder, but on Lay's we will borrow from the success we had with the Walker's brand in the UK and Dubai's of flavor is now in over 20countries around the world.We will be rolling back into the U.S. leader this year. Doritos in the U.S. = we will be introducing our two biggest oldestand most intense products to date behind the launch of the Doritos Jack and the Doritos Dinamitas. Just a word of caution, before you go to lunchtoday, these are literally edible sticks of dynamite, so be careful and just so often people ask me or you ever going to do thanks other than just hot?Yes. We are borrowing from the success we have had in Europe behind Cheetos are we have moved Cheetos to play which is traditionally a saltysnack brand but it shows the strength of the brand that we can extend beyond salty two other occasions and we have introduced Cheetos Sweetos,that has done extremely well in European markets.Now to be fair, we have had a few markets around the world were in 2011 although globally we gained value share, there are a few markets wherewe didn't. Notably, here in the United States. We will be addressing the two segments within salty snacks and macro snacks that gave us someconcern and that is the premium segment and the value segment. All of [inaudible] potato chips and smart foods select are rolling into the U.S. aswe speak. And all the markets around the world are addressing the value segment, learning from the acquisition that we had from Lucky in Braziland the [Lahar] business we had in India and Tom Greco will talk about a great tasting, low-priced, unflavored tortilla chip called [Tacaros] that wewe're going to launch this year.Now beyond just the traditional salty snack Rams, we fairly quietly built a $425 million grain snack business. And in fact, grain snacks are one ofthe fastest growth platforms globally that we have and we fully expect it to grow double digits again this year in 2012. Grain snacks allow us tofind new occasions beyond traditional snacking and enter into many mills and grain snacks allow us to serve additional cohorts like many of us inthis room, aging baby boomers.Now as you know, we are able to penetrate markets with our innovation, with speed and granularity, leveraging multiple go to market systems,the most famous of which is our direct store delivery systems around the world. And in fast growth markets like Russia and Brazil, we do co-minglesnacks and beverages together on the same assets. And that enables greater reach and lower cost. And in all markets developing and emergingwe are able to leverage the back office so that we have the lowest possible cost structure and we leverage best practices like revenue management.You know, and finally, something that I am personally passionate about is that given the fact that we are seed-to-shelf in macro snacks around theworld, that to me is an endless opportunity for productivity and we are constantly looking to raise the hurdle rate in terms of productivity levelsthat we are looking for. And in 2012 we have ramped up our productivity levels to the point that it is largely enabling us to afford that increasedA&M investment that we're making.So I think when you take this together, I hope you feel that we are continued well positioned to continue our leadership in macro snacks andnotably, savory snacks.The market is large and growing.We are the undisputed share leader.We have a proven history of brand building, innovation,execution and a relentless focus on productivity. And combined we know that we can continue to grow volume and revenue and our expectationis to continue to grow value share globally.Now importantly, we have spent the past decade building our snack businesses around the world. And in 2011 our international revenues passedthe revenues of Frito-Lay North America. And that is not to take anything away from Frito-Lay North America, because I would argue that Frito-LayAmerica had an outstanding 2011.We grew volume 1%, we grew revenues 4%, and we grew profits 7%. And importantly during the course of theyear as we sequentially priced each quarter to cover fully our commodity costs and the inflation in our total business, we maintained that 1%volume growth. And I think when you benchmark to volume growth of Frito-Lay versus most other food and beverage companies, you will findout that that is industry-leading. It's food and beverage overall decline 1.5% in the fourth quarter.THOMSON REUTERS STREETEVENTS | www.streetevents.com | Contact Us3©2012 Thomson Reuters. All rights reserved. Republication or redistribution of Thomson Reuters content, including by framing or similar means, is prohibited withoutthe prior written consent of Thomson Reuters. 'Thomson Reuters' and the Thomson Reuters logo are registered trademarks of Thomson Reuters and its affiliatedcompanies.