F           I          N           A         N          C          I         A        L               H          I        ...
up $112 million from last year’s results.     Ensuring continuing cold drink growth        icant investments in them.We al...
position, and we are focused on doing
just that. In the single-serve juice drink
category, Pepsi’s FruitWorks is coming
on...
We are...




                       Clear
       Consistent

                         The   year 2000
                   ...
G        R        O       W        T       H          I      N              O       U       R              S   E        G ...
We are...


    SWIFT
    SMOOTH
    SYSTEMATIC




                 The   launch of
                 Sierra Mist , Pepsi’...
G        R       O        W        T        H          I      N             O       U      R               S   E        G ...
We are...




    Mountain Dew
    is the top-selling
    20-ounce beverage
    in convenience
    outlets. It’s also
    ...
G        R        O      W        T       H          I      N              O      U       R             S   E         G   ...
satisfying
     We are...




                          consumer-savvy


                          reliable




     For t...
G        R       O       W        T       H          I      N              O       U         R            S   E        G  ...
We are...




                 A   “new and
                 improved” Pepsi
                 Challenge, con-
            ...
G     R     O    W     I    N     G         O    U   R       M     A     R    K     E    T     P    L   A   C   E        P...
We are...
                 The Pepsi Center,
                 home to the Col-
                 orado Avalanche
          ...
G     R    O     W      I   N    G         O     U   R       M     A     R    K     E    T     P       L   A   C   E      ...
We are...

                                                                                                 Th  rough more...
G     R     O    W      I   N     G         O     U   R       M     A      R    K    E    T    P     L    A     C   E     ...
We are...




                                 efficient




           The    installation
           of a high-speed
    ...
R       E       I      N       V      E       S    T      I      N       G               F       O        R        G      ...
We are...




               Progressive


     Youthful
     Cool


      The establishment
      of school partner-
    ...
R        E          I       N      V      E        S   T     I      N        G             F       O       R        G     ...
In
     We are...       addition to
                 careful attention to
                 beverage category
             ...
pepsi bottling ar2000
pepsi bottling ar2000
pepsi bottling ar2000
pepsi bottling ar2000
pepsi bottling ar2000
pepsi bottling ar2000
pepsi bottling ar2000
pepsi bottling ar2000
pepsi bottling ar2000
pepsi bottling ar2000
pepsi bottling ar2000
pepsi bottling ar2000
pepsi bottling ar2000
pepsi bottling ar2000
pepsi bottling ar2000
pepsi bottling ar2000
pepsi bottling ar2000
pepsi bottling ar2000
pepsi bottling ar2000
pepsi bottling ar2000
pepsi bottling ar2000
pepsi bottling ar2000
pepsi bottling ar2000
pepsi bottling ar2000
pepsi bottling ar2000
pepsi bottling ar2000
pepsi bottling ar2000
pepsi bottling ar2000
pepsi bottling ar2000
pepsi bottling ar2000
pepsi bottling ar2000
pepsi bottling ar2000
pepsi bottling ar2000
pepsi bottling ar2000
pepsi bottling ar2000
pepsi bottling ar2000
pepsi bottling ar2000
pepsi bottling ar2000
pepsi bottling ar2000
pepsi bottling ar2000
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  1. 1. F I N A N C I A L H I G H L I G H T S (1) 2000 1999 1998 $ in millions, except per share data $7,982 Net Revenues $7,505 $7,041 $ 590 Operating Income (2) $ 396 $ 277 $1,061 EBITDA(2) $ 901 $ 721 $ 1.53 EPS(2)(3) $ 0.71 $ 0.17 $ 273 Operating Free Cash Flow(4) $ 161 $ 125 7.6% Return On Invested Capital 6.0% 5.0% (1)Our 2000 results were impacted by a change in estimated useful lives of certain categories of assets and the inclusion of an extra week in our fiscal year.The favorable impact from the change in asset lives increased EPS by $0.26,and the extra week in fiscal year 2000 increased EPS by $0.05. (2)Excludes the impact of unusual impairment and other charges and credits. (3)Fiscal years 1999 and 1998 reflect the initial public offering of 100 million shares of common stock on March 31,1999, as if the shares were outstanding during the entire periods presented. (4)Operating Free Cash Flow is defined as net cash provided by operations less net cash used for investments, excluding cash used for acquisitions of bottlers. L E T T E R T O S H A R E H O L D E R S consistency. Our stock grew more than Earnings Before Interest,Taxes,Depre- Dear Fellow Shareholder, 140 percent in 2000, and was one of the ciation and Amortization (EBITDA) elling soda is an exciting proposition. top performers on the New York Stock grew 18 percent for the year, led by That excitement can come from the Exchange. In a sea of ‘new economy’ solid net revenue per case growth of launch of a new brand, as you feel quick companies, it was refreshing to note 6 percent in the United States and success and the glimmer of a promising that in 2000, our internal mantra of continued strong international per- future. Sometimes the rush of adrenaline “We Sell Soda” translated externally formance.We generated $273 million comes from bringing new focus to an to “We Deliver Returns.” in operating free cash flow for the year, established brand. Or when you provide great service, become more productive or develop new capability. Satisfaction also comes from delivering on what you promised. The year 2000 at The Pepsi Bottling Group was a memorable one for all these reasons. In this, our second year as a public company, we continued to build on the strong foundation we established in 1999.This year’s story is about profitability, our people and their capability, and most importantly, it’s all about growth. We once again delivered outstanding results, and the market rewarded our 1
  2. 2. up $112 million from last year’s results. Ensuring continuing cold drink growth icant investments in them.We also gave We more than doubled our earnings per remained a key area of emphasis. In our front-line supervisors the tools and share for the year to $1.53, and our return 2000, we added more than 140,000 the skills they needed to lead their teams. on invested capital continued its move cold drink equipment placements in We launched one standardized method upward, finishing the year at 7.6 percent. the U.S. and Canada. of selling and ensured it was understood This was 1.6 points higher than 1999, and used effectively by our sales force. On a constant territory basis, our pricing achieving our weighted average cost of And we went back to school this year, increases, cold drink growth and strong capital well ahead of our original plans. recruiting many talented new employees international volume growth of 7 per- off college campuses to make sure PBG’s cent resulted in worldwide volume leaders of tomorrow are learning our growth of 1 percent and healthy net business today. revenue growth of more than 4 percent. We expect that the increasing volume As remarkable as this year’s results were, momentum we established in the fourth I feel that the future holds even more quarter will continue to pick up steam promise. Our category, liquid refresh- in 2001. ment beverages, is expected to grow at a 4 percent rate, which in comparison Another important lever impacting to other packaged goods, is very healthy. our overall results is controlling cost. No other company is in a better In 2000, we did this, all while achieving position to capitalize on that trajectory. new records in product quality and So our biggest challenge is to ensure consumer satisfaction.We improved the we get at least our fair share of that number of cases we produce per hour category growth. with the introduction of several new high-speed bottle lines.We were able We have all the necessary elements to to hold transportation costs per case in succeed,beginning with our brands. In the U.S. flat, despite fuel increases, by 2000, we brought new excitement to increasing the payload our vehicles carry. Brand Pepsi by re-launching the Pepsi A key driver behind these results was These are just two examples of what Challenge across our system, which we continuing our progress in improving occurs in some of the 400 locations will continue in 2001. In flavors, we the take-home economics of our busi- across our system, as our teams look for increased the activity and visibility of ness.Two-thirds of our business comes new ways to increase their productivity, Mountain Dew, Mug Root Beer, from sales in this segment. Plain and extend the life of our assets and reduce Orange Slice,Wild Cherry Pepsi and simple, we must get the pricing element costs.Those important efforts are Lipton Brisk.We launched a new of this equation right in order to achieve continuing in 2001. lemon-lime, Sierra Mist. And, in the success.The only way to do that was non-carbonated segment of our business, to increase our pricing in our largest The capability of our organization grew our powerhouse brand, Aquafina, has take-home channel, supermarkets, in a by leaps and bounds in 2000.We have a already become the number one player way that provides good value for our front-line workforce of smart,dedicated, in the water category. There is a big consumers and a profitable return for hardworking people and we made signif- opportunity to take advantage of this our investors.We began this effort in lead and move into a commanding 1999 and continued it in 2000, raising U.S. net price per case by about 5 percent. 2
  3. 3. position, and we are focused on doing just that. In the single-serve juice drink category, Pepsi’s FruitWorks is coming on strong. With the switch to Dole juices at the beginning of 2001, we see significant growth possibilities for both juices and juice drinks.We also hold almost a 90 market share in the ready-to-drink coffee market, with our Frappuccino product from Starbucks. Beyond our brand portfolio, we are blessed with many other assets. Our strong culture is framed by a simple mission statement that emphasizes the importance of winning each day, in every market and with every customer. We are improving the business with new tools and technology that add to our efficiency and productivity. Our and dedication of our front line, and rest of our strong team of senior leaders, partnership with PepsiCo grows stronger ends with our senior management our talented employees and me, ready each day. We depend on each other team and Board of Directors, whose to guide PBG’s continuing success, and and we work together to enhance our experience and will to win are an yours. As you turn the pages of this year’s mutual progress. I believe our proven unbeatable combination. annual report, I hope you’ll feel the ability to execute in the marketplace confidence that I feel about The Pepsi is second to none. Our capability to Because of the health of this business Bottling Group.We are growing – and succeed begins with the commitment and all we’ve accomplished, it’s time to all signs point to unlimited prospects for pave the way for a new generation of the future. leadership for PBG. In January of 2001, with the full support of our Board of Directors, I announced that we intend to elect John Cahill, our President and Craig Weatherup Chief Operating Officer, as PBG’s new Chairman & Chief Executive Officer Chief Executive Officer later this year. I will continue on as Chairman,with John as my partner, just as he has been since the launch of our company. John has the intelligence, the experience and the discipline to continue moving this business forward. He stands, with the 3
  4. 4. We are... Clear Consistent The year 2000 marked the begin- ning of PBG’s push to make Aquafina the leading water in the take-home segment. Efforts included the strate- gic placement of Aquafina displays near likely pairings with produce, prepared salads and health foods. Unstoppable 4
  5. 5. G R O W T H I N O U R S E G M E N T S The year 2000 was undoubtedly one of W ith two-thirds of our volume sold larly strong fronts to foster growth strong financial growth for PBG, as take-home product – that is, product in the U.S. take-home segment: the result of improvements in the basic sold for future consumption – the bottled water and flavor carbonated economics of our business. But the year cornerstone of our business is in soft drinks (CSDs). wasalso marked by substantial progress foodstores,supermarkets and mass- A water-tight strategy in our marketplace execution, presence merchandise outlets.These markets are and distribution, marketing and selling ca- dynamic, drawing household shoppers PBG sales in 2000 confirmed what pability, and customer service. who are more convenience-driven and industry research has told us: today’s health-conscious than ever, and who consumers show a growing We have demonstrated that we are face an increasing number of beverage preference for non- U.S. consumption consistent, confident, determined, options every time they shop.The good carbonated soft of bottled water is projected to increase focused, progressive, consumer-savvy... news is that the PBG lineup offers a drinks.They are by 10 gallons per person by 2010. and so much more. Going forward, these beverage to suit nearly every soft drink more likely than ever are the qualities that will enable PBG to need and preference. to select juices and juice continue adding great value drinks, ready-to-drink teas and coffees, to the brands we carry. They are Even better news is that among the and bottled water – to consume on the the attributes that will ensure our numerous types of beverages we offer, run and at home. And by far, the fastest future growth. in 2000, PBG moved on two particu- growing non-carbonated category in the U.S. is water, The placement which has grown of thousands of Aquafina end- cap on average almost displays – many of which were 11 percent centered around an Aquafina cooler annually over the – helped build brand presence past three years, for our water in supermarkets and nearly five times mass -merchandise outlets. the rate of the overall liquid refreshment beverage industry in the same time period. With Aquafina already the leading bottled water brand in the cold drink segment of our business, a top priority for PBG in 2000 was to build greater brand presence for Aquafina in take- home outlets. non-cola carbonated soft drinks a moderate-sized general Take-home: products sold for at-home or future Flavor CSD: Mass merchandiser: that are fruit-flavored, such as cherry, orange, merchandiser carrying health and beauty items consumption. 5 lemon-lime and root beer. and a limited grocery selection, often at dis- counted prices.
  6. 6. We are... SWIFT SMOOTH SYSTEMATIC The launch of Sierra Mist , Pepsi’s new lemon -lime product, gives PBG a strong player in the lemon-lime segment – which is the largest of the CSD flavors. The Sierra Mist launch was swift and complete – a virtual “overnight” blitz in more than two- thirds of PBG’s U.S. markets. 6
  7. 7. G R O W T H I N O U R S E G M E N T S Lisa “Water, water One of the biggest opportunities in the Rice, Merchandiser, everywhere” CSD category is in the largest flavor Norfolk, VA. Lisa is responsible will continue to segment,lemon-lime. Lemon-lime has for merchandising five major large be our direction been responsible for almost 15 percent format accounts – for 2001.And of CSD growth over the last four years, in which she has grown volume we’re confident and is expected to grow substantially substantially. Because of her that in PBG over the next five. efforts, her ac- counts contain markets,the more occasion- based merchandis- brand that will We are now positioned to capitalize on ing racks than in any of the other be everywhere lemon-lime volume growth with the stores in the Norfolk market. will be Aquafina. addition in 2000 of the More than new Sierra Mist brand We made the brand more visible 1,000,000 A lemon-lime debut to our product cases of Sierra Mist and available by placing thousands of were sold in the first While non-carbonated beverage growth portfolio, in the end-cap displays and incremental week of the launch. is climbing, carbonated soft drinks markets where we do not free-standing “Cool Blue” racks remain the largest overall beverage cate- bottle 7Up. The opportunity for throughout our large format outlets – gory, comprising more than 80 percent Sierra Mist is particularly strong in our where consumers are likely to purchase of the total liquid refreshment beverage take-home segment, where the potential water, on store perimeters and near industry. CSDs are a household staple volume payoff for lemon-lime growth produce and health products.We in the U. S. ,h ave continued to grow is substantial. established beverage aisle standards to over the past several years, and still increase Aquafina’s presence in the make up more than 70 percent of In a triumphant distribution and water section, adding a 24-ounce take-home beverage volume. merchandising feat that only a multi-pack to the shelves. And we captured thirsty Over the shoppers by in- past two years, PBG has made stalling thousands its take- home beverages readily of Aquafina available and more convenient to checklane purchase, through the placement merchandisers of displays and racks on the and dedicated store perimeter, and strategic Aquafina vending merchandising to create visible machines. “meal solutions” for consumers. Our focus on the take-home segment yielded almost 30 percent growth for Aquafina in just our U.S. foodstore accounts. refers to accounts that are large Checklane merchandiser (CLM): cold equipment End-cap display: a prominent display of soft Large format: chain foodstores, mass merchandisers, chain designed for use in supermarket and foodstore drink products at the end of an aisle. 7 drug stores, club stores and military bases. checkout lanes.
  8. 8. We are... Mountain Dew is the top-selling 20-ounce beverage in convenience outlets. It’s also one of the most popular beverages on the slopes. PBG’s Grand Junction,Colorado Market Unit, which serves some of the top ski resorts in the U.S. including Vail and Brecken- ridge (pictured here), leverages the power of the brand with the Mountain Dew Vertical Challenge, a PBG - sponsored ski race in which consumers race for free. 8
  9. 9. G R O W T H I N O U R S E G M E N T S PBG products handful of companies in the world By year-end, are among the could accomplish, on October 14, Sierra Mist made biggest profit drivers for small PBG stocked store shelves and displays, inroads in heavy format accounts. Here, brands Pepsi and Mountain Dew coolers and cold vaults in thousands flavor markets are executed in a “blue door/green of accounts with Sierra Mist. such as Southern door” set – in which they are California – allocated space in proportion to The effect was dramatic: massive Sierra where we gained sales, to drive maximum profits. Mist two-liter and multi-pack lobby widespread displays,surrounded by new point-of- distribution of purchase materials, sprang up overnight. our key packages and captured the PBG gave the new product prominence market share we expected. by immediately placing it among our Watch for an approaching cold front core brand lineup. The new green bottle was so swiftly integrated into end-caps Comprising the other third of our our profit margin in 2000.The profit and beverage aisles, that it had the business in 2000 was the cold drink on the 20-ounce bottle is significantly marketplace presence of an established segment, the most profitable area of our higher than cans, and the package is brand on Day One of the roll-out. business. For the second consecutive growing in popularity with consumers. Sampling and local promotional events year, we allocated about half of As we work to shift our product mix to introduced the new brand and created our capital spending for equipment contain more of that package, we will interest and excitement. to support our cold drink growth – continue to grow our profitability. adding more George Tyler, than 140,000 To capitalize on the growing trend Merchandising Manager, net placements toward convenience purchases and Philadelphia, PA. George deals with of vending on-the-go consumption, we continued about 20 small for- mat accounts and machines,coolers to expand our reach beyond manages 25 driver A cold, deliveries daily. and checklane the traditional cold single-serve soda is He has played a major role in PBG’s the most frequently merchandisers drink venues such as success in South purchased consumable Philly, and is known item in a convenience in the U.S. Convenience and by his co-workers store. and his customers and Canada. Gas (C&G) stores and for his profession- alism and sense independent business stores (IBS). of urgency in re- solving customer Of our existing Increased placements in supermarkets, issues. The key to his success? placements, mass merchandisers and drugstores have “I don’t lose focus that the the growth of resulted in double-digit growth of our customer is why we’re here,” he 20-ounce, full- cold single-serve sales in those channels says. “That is always foremost service vending versus 1999. in my mind.” sales played a big role in enhancing cold products sold in retail and Full-service vending: PBG places and stocks Channel: outlets that are similar in size, and Cold drink: on-premise channels, which typically carry the the vending machine, paying a commission to that buy, merchandise and sell soft drinks in 9 highest profit margins. the account on the machine’s sales. similar ways.
  10. 10. satisfying We are... consumer-savvy reliable For the third consecutive year, PBG placed well over 100,000 incremental pieces of cold drink equipment across the U.S. and Canada, putting our products where thirsty consumers need them most – such as on this South Beach, Miami boardwalk. 10
  11. 11. G R O W T H I N O U R S E G M E N T S In leaders in the the Little Havana section of Miami, Florida, small format Pepsi products are an integral channel,hands part of the daily game of dominoes. down.Mountain Dew and Pepsi are still the top two best-selling 20-ounce beverages respec- tively.The leading water is Aquafina, and the best-selling ready-to-drink tea and coffee are Lipton and Frappuccino, respectively. Then there is FruitWorks, Nevertheless, a significant amount of Our products are among the biggest our cold drink sales do occur in small profit drivers for small format accounts, format accounts – C&G and IBS and in 2000 we aggressively pursued outlets up and down the street – where the space that is proportionate to those The we face increasing competition for very profits.We reset thousands of cold still a relatively placement of register-area limited and premium space in the cold vaults, gained miles of additional shelf new juice drink, coolers, such as this one in a local vault and near the register. space, and placed tens of thousands of but emerging as a Miami grocery store chain, helps Antonio Rivodo, register-area PBG capture potential market impulse sales. Pre-Sell Represen- coolers and ice leader.The brand tative, Miami, FL. In the two years chests.We are grew more than 300 percent versus Antonio has been with PBG, he armed with a 1999,driven largely by increased has made quite an impact on the compelling selling distribution and strong PBG now Miami market and on his colleagues has more than platform to win consumer response. by consistently 1,000,000 out-performing pieces of cold drink the battle for With the juice drink his goals. Anto- equipment across nio’s 2000 results incremental cold category growing at a North America. included overall volume growth space: in the U.S., healthy rate in the U.S., in the double digits, and 100 the brands we sell we expect FruitWorks to be a percent distribu- tion of Aquafina are the market rising star in the coming years. and FruitWorks in his large format accounts. Small format: convenience stores, gas stations non-chain, Cold vault: refrigerated units housing an Independent business store (IBS): and independent business store accounts. small independent foodstore. assortment of beverages for consumer purchase; 11 typically found in Convenience and Gas stores.
  12. 12. We are... A “new and improved” Pepsi Challenge, con- ducted across PBG’s U.S. markets over the summer, brought renewed excitement and interest to brand Pepsi.TheChallenge was conducted at special events, such as this Massachusetts rock concert, and at the retail store level. 12
  13. 13. G R O W I N G O U R M A R K E T P L A C E P R E S E N C E Execution of The PBG promise national Pepsi While PepsiCo promotions, such as this summertime ownsthetrademarks “Choose Your Music” program, on the products helped PBG increase our total we make and sell, number of product displays – one by building Pepsi key to capturing incremental con- marketplace sumer purchases. PBG increased presence, PBG its total number of foodstore plays a big part displays by 11 percent in 2000. in delivering what those trademarks promise:excitement,innovation,fun, quality and thirst-quenching satisfaction. That is a big promise to keep. It means implementing national and local programs tailored to individual markets and accounts, establishing PBG affilia- The Pepsi Challenge, in particular, it into an even more powerful retail tions with community resources and helped reignite excitement around the merchandising event. events, and linking our business to 102-year-old cola brand.This time, the prestigious sports centers,professional What’s in a name? revamped taste-test pitted both Pepsi teams and cultural institutions. versus Coke, and Pepsi ONE versus Prestige properties – high-profile Diet Coke. Across the nation, the results entertainment venues,professional In 2000, national Pepsi-Cola programs proved Pepsi brands to be the preferred sports teams and arenas – offer a multi- such as “Choose Your Music” and products. And in the process, the faceted platform to reach consumers. “Eat,Drink, and Be Scary,” featuring TM Pepsi Challenge provided excitement They help drive local sales through popular cartoon dog Scooby-Doo , in stores and at major events across the the prominent visibility of the brands, and the resurrection of the Pepsi Chal- country. In 2001 we plan to work through the excitement of our products’ lenge helped us keep our core CSDs with The Pepsi-Cola Company to close association with these properties, “top-of-mind” for consumers. expand the and through the design The “Eat, The majority Pepsi Challenge, of exclusive, of the people who Drink, and Be took the Pepsi Challenge Scary”Halloween starting earlier cross-promotions over the summer promotion, of 2000 preferred featuring cartoon in the year, in conjunction dog Scooby- Pepsi. Doo TM , was a running it in with local retailers. joint program that cross- more markets, merchandised Pepsi beverages and developing with Frito-Lay ® salty snacks. National promotions: promotions developed by The Pepsi Challenge: a “blind” taste-test in Merchandising event: an event conducted in a Pepsi-Cola USA executed across PBG mar- which consumers are offered both Pepsi and retail outlet to create interest and excitement, 13 kets, often customized to individual accounts’ Coke, and express their taste preference. and needs. to draw consumers to purchase a particular product.
  14. 14. We are... The Pepsi Center, home to the Col- orado Avalanche and the Denver Nuggets, is a Pepsi-linked prestige property that has put Pepsi in the forefront of the Denver community. As the centerpiece for numerous cross- promotions with selected Denver- area retailers, The Pepsi Center has helped drive increased beverage sales for both PBG and our local retail partners. 14
  15. 15. G R O W I N G O U R M A R K E T P L A C E P R E S E N C E A One example is our affiliation with The cross-promotions involving PBG, The custom-designed PBG driver makes his way Pepsi Center, home to the Colorado Pepsi Center and the largest Denver- coolers and to one of the mountain lodges of Avalanche and the Denver Nuggets, area foodstore chain, King Soopers, vending machines the Breckenridge, Colorado ski resort, an exclusive a relationship we have used to drive have increased PBG’s community pres- bearing Pepsi Pepsi account. brand recognition and sales. Exclusive ence and driven sales for both PBG and Center graphics. our retail partner. Craig Brown, Customer In 2000, PBG The year 2000 brought some additional Representative, Greeley, CO. sales in King big names to the PBG team, including Craig, a six-year Soopers experi- the Detroit Tigers; the Pittsburgh Pepsi veteran, is a top-performer enced very strong Pirates; the Experience Music Project in his market. He is known for the outstanding growth versus and The Space Needle in Seattle; the customer service that enables him prior year. Sales Space Center in Houston, the largest to consistently exceed his sales of our 20-ounce tourist attraction in Texas; Le Forum targets. True to form, Craig sur- package in King Pepsi in Montréal, Canada; passed his plan The total for volume growth Soopers grew and the hottest in his accounts in number of PBG 2000, and for the foodstore displays almost 100 per- restaurant property in fifth year, earned grew by more than his market unit’s 11% cent versus 1999, Moscow, the Starlite Top Gun Award, versus 1999. which recognizes driven by the Diner – to name a few. outstanding job performance. placement of marketing programs includes coolers, ice high-profile venues such Cross-promotions: Cold drink equipment: Prestige properties: designed to promote sales of two or more prod- chests, as professional arenas and tourist attractions. 15 ucts with similar target consumer groups. vending machines and fountain equipment.
  16. 16. We are... Th rough more widespread distrib- ution in 2000, PBG achieved record volume levels in Russia, dramatically exceeding expec- tations. Here, a PBG truck passes The Kremlin en route to a delivery. M O T I V A T E D F O C U S E D F A R - R E A C H I N G 16
  17. 17. G R O W I N G O U R M A R K E T P L A C E P R E S E N C E Stanislav Russia: a promising frontier of Pepsi and Novikov, Territory Sales Frito-Lay ® Manager, Moscow. Nowhere has the power of marketplace Stanislav has con- products in Russia presence been more evident than in sistently achieved outstanding sales has provided our Russia market.Through more growth in his terri- tory, even during economies widespread distribution the most difficult PBG volume economic times in of scale in distri- in 2000, PBG achieved in Russia Russia. He increased his number of grew more than bution and helped record sales volume PBG customers in 100% Moscow from 500 year-over-year both product lines for Pepsi products in to more than 1,600 in 2000. during his three gain access to Russia. In fact, volume years on the job. His new customers more accounts more than doubled versus 1999, include all three domestic airports through “the The tremendous growth potential exceeding levels that preceded the in his territory – which are now Pepsi Power of One” of the Russian market is becoming a exclusive accounts. 1998 ruble devaluation. Pepsi/Frito-Lay ® reality for PBG. Our results in Russia merchandising strength. are well ahead of where we predicted Big account wins, including the largest we would now be, at the time of Russian airline, AeroFlot, added to our Per capita consumption of bottled water PBG’s initial public offering in 1999. marketplace presence, and to our sales is also rising at a vigorous rate in Russia, We will continue to grow our business volume. So did the expansion of positioning Aqua Minerale, the Pepsi there, gaining our popular “value line” of beverages, In 2000, Russia’s water brand and the leading water momentum marketed under the Fiesta brand. largest airline, AeroFlot Russian there, for tremendous volume growth. through increased Getting our products “on the street,” International Airline, converted In 2000, we expanded the Aqua distribution and in outdoor kiosks and high-traffic areas to exclusive Pepsi beverage service. Minerale line by launching a “still” availability of such as historic Old Arbat Street, The company carries about five version, which will help PBG capture our products. also played a part.The co-distribution million passengers a year on a fleet our share of that consumption. of 70 planes. refers to the purchasing and average number of bever- Value line: a group of products sold at an “Power of One”: Per capita consumption: marketing power achieved by the teaming of age servings (usually measured as 8-ounce servings) everyday low price aimed at the value-conscious 17 multiple products within the PepsiCo portfolio. consumed per person in a market or territory. consumer.
  18. 18. We are... efficient The installation of a high-speed filler in the Mesquite, Texas plant doubled the filling capacity to 1,000 bottles per minute, while taking up less floor space. It also requires significantly less time for line change-overs. 18
  19. 19. R E I N V E S T I N G F O R G R O W T H Me Computer squite, Texas Bottle Line Team, Telephone from left to right: Rocky Rogers, Integration Mechanic; Dempsey Crabtree, De-Palletizer technology, and Operator; Sharon Edwards, Filler installed Call Operator; Jimmy Harris, Packaging Center Sales Area Operator; Angie Fields, Chief software to Efficiency Officer. better train our This high-per- forming team is sales agents. capable of running two bottling lines Combined,these simultaneously without losing investments en- efficiency. To- gether, they keep able Pepsi Direct the high-speed filler in Mesquite representatives to running smoothly, and have greatly increased the provide higher Investing in organizational capability Operations cases per hour their lines produce. quality customer Our front-line sales team is undoubt- With yearly volume of more than service and edly our most powerful marketplace one billion cases moving through the maximize the distribution of our most force. In 2000, we continued to reinvest PBG worldwide manufacturing system, profitable products. in growing the capability of our field we are continually looking for oppor- sales and marketing organization.We tunities to improve efficiency and The impact of Pepsi Pepsi Direct staffed a new field marketing leadership productivity, investing in technology accounts grew their Direct improvements 20-ounce volume function – professionals across our where we will see the best return. by more than on our sales and 25% North America Business Units For example, the installation of a high- delivery system has been who will ensure that our marketing speed filler in the Mesquite,Texas plant overwhelmingly positive.With the programs are executed to achieve was an investment A monthly video maximum results in our local markets. that doubled series focuses PBG’s front-line bottling capacity salesforce on specific market- In 2000, we launched an updated sales to 1,000 bottles place priorities for a four-week training program,“P.E.P.S.I.,” to give per minute, and period. our front line a uniform, fact-based improved the time approach for selling our products and required to change products on the line. equipment.And, an ongoing sales and marketing video series,introduced in In 2000, a key area of investment was 1999,continues to be issued to more in Pepsi Direct, our centralized call than 15,000 sales people on a monthly center for on-premise sales and service, basis, focusing them on the specific which handled nearly a billion dollars marketplace priorities for a four-week in sales this year. We also invested in period. On-premise: outlets where consumers buy soft Front line: members of the PBG sales team who Filler: plant equipment that dispenses product drinks for immediate consumption at or near have daily, face-to-face contact with customers. into 19 the bottles and cans. point of sale.
  20. 20. We are... Progressive Youthful Cool The establishment of school partner- ships is one way to reach the next generation of consumers. The PBG portfolio offers students a variety of alternative beverages including Aquafina water and FruitWorks juice drinks, in addition to carbonated soft drinks. 20
  21. 21. R E I N V E S T I N G F O R G R O W T H PBG customer PBG Goes on-premise sales call already conducted representatives to School don’t just deliver over the phone, our route drivers soda: they are company am- can complete their deliveries more Perhaps no area bassadors who collectively efficiently, gaining more than 20 of investment is represent PBG in thousands of percent in productivity – the equivalent as critical to our customer interac- tions every week. of adding three stops business as our We reached per day to their routes, efforts to engage new soft drink con- an additional 800,000 thereby reducing route sumers,particularly the next generation. students through school partnerships in delivery costs. One way to reach this market is 2000. through school partnerships, in which Pepsi Direct customers benefited from we make our products available to more efficient delivery schedules and students, while providing schools with fewer out-of-stock issues. Revenue in needed financial resources.Revenue Pepsi Direct accounts led the PBG generated by these partnerships has our younger consumers, while helping system with more than five percent funded scholarships, athletic programs, to support the educational objectives of same-store growth year-over-year. and other student-focused programs. their schools. Those same accounts grew their Soda in the City 20-ounce volume, our most profitable PBG’s well-rounded product portfolio, package, by more than 25 percent. which offers the brands that teens The wave of the future is not solely in prefer, along our schools. In 2000, PBG targeted U.S. Jennifer Stenson, with a variety urban community development as a key Key Account of best-selling investment, aiming to be the preferred Manager, Jacksonville, FL. alternatives to beverage supplier to urban retailers and A 14-year veteran of the Pepsi carbonated consumers.Over the next decade, urban system,Jennifer knows what it drinks, such as and ethnic consumers will contribute takes to grow vol- ume in her food- Aquafina and most of the population growth in the store accounts: in-store execution, FruitWorks,has top ten U.S. markets, posing a long- solid category management and helped us form term growth opportunity that we began diligent perfor- mance tracking. In successful school to systematically pursue in 2000. 2000, Jennifer grew volume more partnerships.So than six percent in her accounts, has our history Recognizing that urban consumers and gained almost two share points of strong com- and business owners – who span in her market – while getting the munity relations ethnic backgrounds and generations – targeted price increases. and youth have distinct lifestyles and beverage activity sponsorships. In 2000, school preferences, PBG embarked on a partnerships gave us the opportunity formal program to better meet their to reach an additional 800,000 of needs and tastes. It included research non-carbonated development of the Out-of-stock: refers to shelf space or vendors Alternative beverages: Category management: beverages with a broad product range, includ- optimum marketing strategy to maximize cate- lacking product. 21 ing water, teas, juices and “sports drinks.” gory sales and profitability.
  22. 22. In We are... addition to careful attention to beverage category management, PBG’s urban marketing efforts include installation of awnings and murals like this one in Hamtramck – the most ethnically diverse section of Detro i t .T h e s e exterior enhance- ments both brighten the neighborhood and increase brand awareness. Said one Detroit passerby, “This is Pepsi town.” 22

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