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PepsiCo Annual Report 2010 Performance With Purpose
PepsiCo Annual Report 2010 Performance With Purpose
PepsiCo Annual Report 2010 Performance With Purpose
PepsiCo Annual Report 2010 Performance With Purpose
PepsiCo Annual Report 2010 Performance With Purpose
PepsiCo Annual Report 2010 Performance With Purpose
PepsiCo Annual Report 2010 Performance With Purpose
PepsiCo Annual Report 2010 Performance With Purpose
PepsiCo Annual Report 2010 Performance With Purpose
PepsiCo Annual Report 2010 Performance With Purpose
PepsiCo Annual Report 2010 Performance With Purpose
PepsiCo Annual Report 2010 Performance With Purpose
PepsiCo Annual Report 2010 Performance With Purpose
PepsiCo Annual Report 2010 Performance With Purpose
PepsiCo Annual Report 2010 Performance With Purpose
PepsiCo Annual Report 2010 Performance With Purpose
PepsiCo Annual Report 2010 Performance With Purpose
PepsiCo Annual Report 2010 Performance With Purpose
PepsiCo Annual Report 2010 Performance With Purpose
PepsiCo Annual Report 2010 Performance With Purpose
PepsiCo Annual Report 2010 Performance With Purpose
PepsiCo Annual Report 2010 Performance With Purpose
PepsiCo Annual Report 2010 Performance With Purpose
PepsiCo Annual Report 2010 Performance With Purpose
PepsiCo Annual Report 2010 Performance With Purpose
PepsiCo Annual Report 2010 Performance With Purpose
PepsiCo Annual Report 2010 Performance With Purpose
PepsiCo Annual Report 2010 Performance With Purpose
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PepsiCo Annual Report 2010 Performance With Purpose

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  • 1. Performance withPurpose: ThePromise of PepsiCo 1–9In 2009, PepsiCo made a promise todeliver sustainable growth by investing ina healthier future for our consumers,our planet, our associates and our com-munities. Every day we deliver on thispromise by striving to meet the goals andcommitments we’ve made in four key Performance 10–20areas: Performance, Human sustainability, page 20Environmental sustainability and Talentsustainability. With these as our guide,PepsiCo is strategically transforming itselffor success in a changing global environ-ment. The following pages provide asnapshot of our 2010 activities and progress,and the beginning stages of defining, Human Sustainability 21–35measuring and tracking the data underlying page 26each goal or commitment. PepsiCo’s2010 Corporate Citizenship Report, due forrelease later this year, will continue tooffer a deeper look at our progress as weadvance on our journey. We are proud of ourPerformance with Purpose achievementsto date, but realize that fulfilling thePromise of PepsiCo will be a continuously Environmental Sustainability 36–47challenging and rewarding journey. page 32 Talent Sustainability page 40 Certain metrics in the following commitments and goals exclude the impact of significant acquisitions, such as the acquisitions of PBG, PAS and Lebedyansky, due to challenges in obtaining certain data for periods prior to our acquisitions. We continue to work to collect and aggregate this data and intend to incorporate such data into our externally reported metrics as soon as it has been collected, aggregated and verified. We have identified in this report the instances in which the underlying data for such acquisitions has been excluded through the use of the symbol (*). 19
  • 2. 1–9PerformanceTo all our investors … It’s a promise to strive todeliver superior, sustainable financial performance.20 PepsiCo, Inc. 2010 Annual Report
  • 3. PerformanceTop Line1 2 about 3.5 times Brazil’s real GDP growth rate. And we continue to strengthen our growth potential with strategic invest- ments in key markets. In 2011, for Grow savory snack and example, we acquired a controlling inter- liquid refreshment bev- est in Wimm-Bill-Dann, Russia’s erage market share in theGrow international largest food and beverage business, and top 20 markets.revenues at two made plans in 2010 to build a new plant, part of a $1 billion investmenttimes real global GDP program there. We also initiated a We’re committed to growing ourgrowth rate. $2.5 billion investment program in businesses faster than the market. In 2010, we grew share in many China in 2010, which includes plans to of our top 20 markets where weAs the world’s second-largest food and open 10 to 12 new food and beverage increased the relevance of ourbeverage business, we make, market or plants and R&D facilities over three brands to consumers, intro-sell our products in more than 200 years. With these and other investments, duced new products that meetcountries. In fact, more than 45 percent we expect to continue increasing our changing tastes or extended ourof our business comes from outside the international revenues at a faster pace portfolio into fast-growingU.S. In 2010, our revenues outside than that of the world economy. category sub-segments. Forthe U.S. grew approximately 30 percent, example, Pepsi Max offers asignificantly above our target of two zero-calorie beverage option intimes the real global GDP growth rate. We opened a snacks plant in Azov, Russia, in markets where consumers areNotably, our India business grew at 2009, and announced plans to build a beverage plant on the same property in 2010. This is just looking for healthier choicesabout 2.5 times India’s real GDP growth part of our commitment to growing international while maintaining great taste.rate and our Brazil business grew at revenues through investments. In 2011, we are pursuing similar strategies: 50 percent of Frito- Lay’s snacks will be made with all-natural ingredients, a highly demanded consumer product sub-category. 21
  • 4. 3Sustain or improvebrand equity scores forPepsiCo’s 19 billion-dollar brands in the top10 markets.The reputation and performance of ourbrands are critical to building brandequity scores. We have sustained or grownbrand equity in the majority of the topmarkets for most of our 19 billion-dollarbrands. Driving these overall positiveresults have been very successful con-sumer engagement programs on ourbillion-dollar brands across the globe,such as the “Do Us a Flavour” competi-tions in the U.K. (Walkers), theNetherlands (Lay’s) and India (Lay’s).These programs allow consumers tohave a say in selecting new flavorsintroduced by the brands, through textand online messages. Mountain Dewdeveloped a partnership with consum-ers in the DEWmocracy 2 campaignto create three new DEW flavor innova-tions. And through the GatoradeMission Control social media platform,which tracks online sports perfor-mance conversations in real time andthen uses the information to deepenconsumer engagement, we are able toadjust marketing plans and influenceproduct innovation.Gatorade’s Mission Control monitors, reactsand engages with consumers in real time acrossthe social web, building awareness of the brand.22 PepsiCo, Inc. 2010 Annual Report
  • 5. Learn more about the Walkers “Do Us a Flavour” campaign at www.tinyurl.com/pepsico1.4 number one for insights. Internationally, we had strong results in the Advantage Group International’s Advantage Report in a number of countries. In the U.K.,Rank among the top two Walkers was ranked number two forsuppliers in customer (retail overall performance among sixteen con-partner) surveys where fectionery and snack food companies.third-party measures exist. Tropicana, in the U.K., was ranked num- ber one out of thirteen companies in theWe know that being viewed as a premier refrigerated dairy and juice category. Insupplier by our customers is part of our Canada, Frito-Lay was ranked numbersuccess, and we pride ourselves on deliv- three among a total of 23 fast-movingering superior value and expertise to our consumer goods companies in the grocerycustomers in important areas, including channel. Going forward, we plan toconsumer insights, innovative market- expand our Power of One approach to aing and supply chain management. broader set of key customers and expectAssessing our performance through our the efforts to translate into positivecustomers’ eyes ensures we are focused results in future surveys.on the areas they believe are mostimportant. Many retailers today havesupplier scorecards that measure impor-tant sales and operational metrics. Inaddition, we also leverage third-partybenchmarking tools from the U.S.’sKantar Retail surveys and globally throughthe Advantage Group Internationalsurvey. In Kantar Retail’s 2010 surveys,PepsiCo ranked among the top two food-service suppliers in the U.S. and rankednumber four among retail customers.We delivered year-over-year improve-ments in the areas of supply chain man-agement and customer sales teams.Where we have dedicated PepsiCoPower of One retail customer teams, weranked number three overall and 23
  • 6. PerformanceBottom Line5Continue to expanddivision operating Three years ended 2010: operating cash flow > net incomemargins.PepsiCo is committed to delivering 6sustainable operating performance. Inorder to succeed, we know it’s importantto balance both the short and the longterm. The 2010 acquisition of ouranchor bottlers in North America and Increase cash flow inEurope, for example, enables us to drive proportion to net incomegrowth, ensure a dynamic future for growth over three-yearPepsiCo and create a more integrated windows.supply chain. As expected, the decisionto acquire these bottlers reduced overall In the three years ended 2010, operatingdivision operating margins in 2010. cash flow significantly outpaced theHowever, we also understood that real- rate of net income. We believe that ourizing operational synergies would better disciplined approach to cash flow man-position us to increase margins over the agement will enable us to continue tolong term. We also invested in some key meet or exceed this goal in the future. 7growth drivers of our business, includ-ing expanding our business in China(one of our priority growth markets) andincreasing advertising and marketingspending in our North America beverage Deliver total shareholderand U.S. Quaker Foods businesses. returns in the top quartile ofThrough these and other investments, our industry group.we expect to increase overall divisionoperating margins over time. We deliver strong returns to our share- holders through substantial profit growth, sound investment decisions and disciplined cash flow management. We increased our annual dividend in 2010 for the 38th consecutive year, from $1.80 to $1.92, or 7 percent, and we returned a total of $8 billion to share- holders in the form of share repurchases and dividends. From 2001-2005, our total cash returned to shareholders was $18 billion. Over the five-year period from 2006 to 2010, which included the economic turmoil of recent years, our24 PepsiCo, Inc. 2010 Annual Report
  • 7. PerformanceCorporate Governance and Valuestotal cash returned to shareholders was$29 billion. While delivering top-quartile returns remains a goal wecontinue to strive for, we’re proud thatwe delivered above-average totalshareholder returns among the top15 global consumer product companiesin 2010, as well as in six of the last10 years.8Utilize a robust corporategovernance structure to bestrepresent the interests ofPepsiCo and its shareholders.PepsiCo maintains the highest stan-dards of corporate governance, sup-ported and monitored by a diverse andannually elected Board of Directors, 9and widely recognized by proxy advi-sory firms such as InstitutionalShareholder Services (ISS) andGovernanceMetrics International measuring how well our values are(GMI). In 2010, Ethisphere magazine embraced company-wide and haverated PepsiCo one of the world’s most received very positive ratings. In our lastethical companies. And again in 2010, all-employee survey in 2009, we againwe were included in the Dow Jones received very favorable ratings in allSustainability Indexes (DJSI World levels of the company, from the front lineand DJSI North America) with a “best Ensure our PepsiCo to senior executives. The aggregate globalin class” score for corporate gover- value commitment to score from employees regarding ournance in our industry group. We con- commitment to living our values wastinue to achieve this level of success deliver sustained 82 percent favorable, a rating we continu-because we not only operate with strict growth through ally strive to increase. In 2011, as partcorporate standards, but also track empowered people of our biannual survey process, we willaccountability and train our associates acting with responsibility once again seek feedback on our commit- ment to our values from our associates,in our Worldwide Code of Conduct. and building trust. including those from our recently acquired bottling organizations. (*) With clear values at the core of PepsiCo’s culture, empowered associ- ates have the guidance they need to act and work responsibly. We have rein- forced the importance of our values through training, annual Code of Conduct certification and our new-hire orientation processes. In our 2006(*) See page 19. Organizational Health Survey we began 25
  • 8. 10–20HumanSustainabilityTo the people of the world … It’s a promise toencourage people to live healthier by offering aportfolio of both enjoyable and healthier foodsand beverages.26 PepsiCo, Inc. 2010 Annual Report
  • 9. Human SustainabilityProducts10Increase the amount ofwhole grains, fruits,vegetables, nuts, seedsand low-fat dairy in ourglobal product portfolio.We’ve made great strides in increasingthe amount of wholesome foods acrossour global portfolio. Through estimated2010 U.S. data, the Quaker divisionis expected to have contributed nearly500 million pounds of whole grainsto the American diet. In Russia, with theacquisition of Lebedyansky in 2009, webecame the number one juice companyacross Europe and expect to have sold230 million servings of 100 percent juicein Russia in 2010. During the same year,Sabritas is estimated to have deliveredmore than 19 million pounds of nutsand seeds to Mexican consumers throughits varied nuts and seeds product port-folio. In 2010, we also formed our GlobalNutrition Group, which we believe willhelp us strive to become the leadingprovider of Good-for-You foods andbeverages. This groundbreaking initia-tive is intended to help accelerate thegrowth of our Good-for-You productsfrom $10 billion in net revenue in 2010to $30 billion by 2020.$10 billionIn 2010, our Good-for-You portfoliodelivered $10 billion in net revenue. 27
  • 10. Learn more about Frito-Lay’s natural ingredients at www.tinyurl.com/pepsico2.11Reduce the average amount of 12 Reduce the averagesodium per serving in key global amount of saturated fatfood brands, in key countries, per serving in key globalby 25 percent by 2015, compared food brands, in keyto a 2006 baseline. countries, by 15 percent by 2020, compared toWe are making good progress in reduc- a 2006 baseline.ing sodium in many of our key globalfood brands. In the U.K., Walkers has We’ve been an industry leader insignificantly reduced sodium by 25 to eliminating nearly all trans fats55+ percent in its products since 2005, from our U.S. product portfoliowhile continuing to be the country’s and many of our global products;number one selling brand of crisps. In and now we’re committed tothe U.S., Frito-Lay developed “Lightly reducing the saturated fat contentSalted” versions of Fritos corn chips and of our key global food brands. InRold Gold Tiny Twist pretzels in 2010, India, for example, we’re usingeach with 50 percent less sodium than blended rice bran oil, whichtheir original versions. And in 2011, has led to a 40 percent decreaseFrito-Lay in the U.S. will reduce sodium in saturated fat in leadingby nearly 25 percent, on average, across products such as Kurkure nam-its entire flavored potato chip portfolio, keen snacks and Lay’s potatoincluding Lay’s. In Brazil, we reduced chips. In China, increased salessodium in one of our most popular snacks, of our Quaker products has 13Fandangos, by more than 30 percent, been a driver behind a 10 percentwhile expecting to achieve volume growth decrease in saturated fat perof more than 50 percent from 2006 to serving across our foods portfo-2010. In 2011, we will continue to invest lio. And in Russia, saturatedin developing different approaches to fat levels have been reduced bysodium reduction in our food brands, almost 13 percent through theincluding the development of different introduction of lower-saturated-salt crystal shapes that deliver great fat versions of Cheetos and thetaste with less sodium. With these and more than 300 percent growth Reduce the averageother initiatives, we believe we are on of low-saturated-fat Hrusteamtrack to meet our 2015 goal. products since 2006. In 2010, we amount of added sugar launched versions of Cheetos per serving in key global and Fandangos in Brazil made beverage brands, in key with heart-healthier sunflower oil, and expect to incorporate it countries, by 25 percent into other products throughout by 2020, compared to the world. To reach our 2020 a 2006 baseline. goal, however, we will need to continue developing products While reducing added sugars in bever- that are great tasting with less ages is challenging — due to strong saturated fat. consumer taste preferences for sugar and complex regulatory processes for alternatives — we have set aggressive28 PepsiCo, Inc. 2010 Annual Report
  • 11. Human Sustainability Marketplace 14 Display calorie count and 15 Advertise to children key nutrients on our food and under 12 only products beverage packaging by 2012. that meet our global science-based nutrition We’re working to ensure that by 2012, standards. basic nutritional information is avail- able to consumers on packages (where PepsiCo has taken a firm stand feasible to print on the packaging and on responsible marketing to where permissible by local regulations) children by joining other global for all of our food and beverage products food and beverage manufacturers in key markets. In countries where in adopting a voluntary commit- we’ve already met this standard, we’re ment to advertise to children also working toward an additional under the age of 12 only products goal — displaying calorie or energy counts that meet specific nutrition on the fronts of packages. We have criteria. In 2010, we announced already implemented front-of-pack label- strict science-based criteria that ing on many products in the U.K. and ensure only our most nutritious many other European countries, as well products meet the standard for as in Australia. And we are rapidly advertising to children under the expanding implementation in a number age of 12. As verified by an inde- of countries around the globe, including pendent third party, we achieved the U.S., Canada, Mexico and Brazil. (*) 98.5 percent compliance by the end of 2010 in globally represen- tative markets such as India, China, Mexico and six countriesgoals and are making progress toward in the European Union, all ofachieving our 25 percent reduction which were monitored for com-target by 2020. In the U.S., for example, pliance with our advertising-to-we have further expanded the successful children policy. Additionally, weSoBe Lifewater zero-calorie line of achieved 100 percent complianceproducts to now offer 11 different flavors with our U.S. and Canada adver-with all-natural, zero-calorie sweetener. tising-to-children pledges, asIn Turkey, a leading beverage, Fruko verified by the Children’s Food &Gazoz, has been reformulated with a Beverage Advertising Initiativesweetener blend that reduces added in the U.S. and Advertisingsugar content by 32 percent. Looking Standards Canada.longer term, we established partner-ships that help develop an all-naturalsweetener designed to replicate thetaste and feel of sugar; and we expect tocontinue to invest in sweetener tech-nologies that will help us deliver prod-ucts with fewer calories while preservingthe great taste consumers expect.(*) See page 19. 29
  • 12. 16Eliminate the directsale of full-sugar softdrinks to primaryand secondary schoolsaround the globe by 2012.PepsiCo continues to implement a globalpolicy for beverage sales in schools —focused on water, juice, milk and low-calorie beverages that support healthynutrition habits among students. By2012, when the global school beveragepolicy is fully implemented, we will nolonger sell full-sugar soft drinks directlyto primary or secondary schools world-wide. These changes have already beenmade in a number of key markets. Forexample, between 2006 and 2009, wevoluntarily discontinued direct sales offull-sugar soft drinks to K–12 schools in 17the U.S. and replaced them with smaller- with no artificial sweeteners. In theportioned and lower-calorie beverage U.K., we launched a 600ml zero-calorieoptions. We also do not sell full-sugar soft cola at the same recommended retaildrinks directly to primary and, in some price as a 500ml full-sugar cola. And incases, secondary schools in most of Increase the range of foods Brazil, we recently acquired AmacocoEurope, Canada, Australia and the major- and beverages that offer that positions us to broaden the distri-ity of countries in the Arabian Peninsula. solutions for managing calories, bution and sales of our lower-sugar like portion sizes. coconut water product line. On the foods side, we utilized our expertise in baking In 2010, we continued to provide con- and air-popping technologies to manage sumers with options to manage calorie calories. In Mexico, a baking technique intake, from launching new products is used to produce a version of Sabritas with zero- and low-calorie sweeteners potato chips that has 20 percent fewer to reformulating existing products with calories. Several of our products, includ- fewer calories. Naked Juice, for example, ing SunChips, Sabra, Quaker’s Quakes introduced two 100 percent juice and True Delights rice snacks were rec- smoothies that have 35 percent fewer ognized on Good Housekeeping’s “Best calories than regular Naked Juice Low-Calorie Snack” list. Smoothies, and Tropicana added new flavors — such as Pomegranate Blueberry, Pineapple Mango and Farmstand Apple — to its Trop50 line, which offers 50 percent less sugar and fewer calories30 PepsiCo, Inc. 2010 Annual Report
  • 13. Human SustainabilityCommunity18Invest in our business andresearch and development toexpand our offerings of moreaffordable, nutritionallyrelevant products for under-served and lower-incomecommunities.We have strengthened our efforts tointroduce affordable nutrition and aremaking strides to meet this long-termgoal. For example, we developed a planto launch affordable, fortified snacksand biscuits in India to address iron- 20deficiency anemia, with a pilot launchscheduled for Andhra Pradesh in India The grant is being used for a publicin 2011. Additionally, we are investing education campaign for moms and kids,in research to identify key nutrient- and to implement a school-baseddense staple crops that can be used in program. PepsiCo continued to supportlocally produced nutritious foods Integrate our policies and the YMCA of the USA to improve theand snacks for sub-Saharan Africa. actions on human health, health, nutrition and well-being of agriculture and the environ-19 underserved African-American and ment to make sure that Latino populations — a collaborative they support each other. program that has reached nearly 40,000 people in 85 communities. The Human health and environmental pro-Expand PepsiCo Foundation Foundation’s strong partnership with tection are two critical components ofand PepsiCo corporate Save the Children has reached approxi- sustainable development. To ensure thatcontribution initiatives to mately 850,000 people in India and our efforts in these areas are as cohesivepromote healthier communities, Bangladesh to help improve health and and productive as possible, we haveincluding enhancing diet nutrition. And the Foundation’s part- begun to develop a formal policy to coor-and physical activity programs. nership with the World Food Program dinate our human health, agriculture (WFP), which leverages PepsiCo’s sup- and environment-related initiatives. InThe PepsiCo Foundation is committed ply chain expertise to improve the 2010, we championed a coordinatedto helping people with the greatest health WFP’s logistics efficiency, will indi- approach within the World Economicdisparities achieve improved health and rectly benefit approximately 90 million Forum (WEF) and, in partnership withnutrition through effective and sustain- people served by the program. some of the world’s foremost thinkersable programs. Through a combination in these key areas, called for govern-of Foundation grants and corporate ments and corporations to embrace ancontributions, we increased our annual integrated approach to sustainableinvestment from $4.2 million in 2006 to development and nutrition. In 2011 and$4.7 million in 2010. In the U.S., the beyond, we will accelerate our efforts,Foundation has contributed $2.5 million engaging our internal team of experts toto the Healthy Weight Commitment create an integrated framework forFoundation — a coalition of businesses, company policies and practices that cannonprofit organizations and athletes be used to reach our goal and to serve ascommitted to reducing obesity by 2015. a basis for our Global Nutrition Group. 31
  • 14. 21–35EnvironmentalSustainabilityTo the planet we all share … It’s a promise to bea good citizen of the world, protecting the Earth’snatural resources through innovation and moreefficient use of land, energy, water and packagingin our operations.32 PepsiCo, Inc. 2010 Annual Report
  • 15. Environmental SustainabilityWater21 22 purification system that can recycle and reuse up to 75 percent of the water used in production. Similar technology is also being deployed in our Tingalpa Strive for positive facility in Australia, a water-stressed water balance in our area. We will continue to apply lessons operations in water-Improve our water-use learned in one facility to others across distressed areas.efficiency by 20 percent our global footprint. (*)per unit of production In 2009, PepsiCo’s operations inby 2015. India achieved positive water balance, enabling us to give back to society more water than weWater efficiency has long been an envi- used to manufacture our prod-ronmental focus at PepsiCo. Through ucts. To expand this achieve-the third quarter of 2010, our global food Reduced water- use intensity by ment to other water-distressedand beverage businesses reduced water- 19.5 percent as of areas where we have a presence,use intensity by 19.5 percent versus third quarter 2010, we have launched a number of2006. And we’re on track to achieve our compared to our 2006 baseline.(*) projects. In 2010, for example,2015 target for company-owned facili- we began working with Theties. Upgrading our facilities with new Nature Conservancy to developtechnologies is one important way we ways to identify areas of highare reaching this goal. For example, our water risk, so we can focus ourFrito-Lay facility in Casa Grande, At our Frito-Lay facility in Casa Grande, Arizona, we are applying membrane bioreactor and low- attention and resources onArizona has been equipped with a state- pressure reverse osmosis technology to purify and achieving “net positive waterof-the-art water filtration and recycle up to 75 percent of the site’s process water. impact” in the most vulnerable areas where we operate. We have selected watersheds in China, Mexico, Europe, India and the U.S. to pilot the develop- ment of a flexible and robust system that allows PepsiCo plants not only to characterize their water risk, but also iden- tify locally relevant restoration initiatives that will improve water availability. (*) (*) See page 19. 33
  • 16. Environmental Sustainability Land and Packaging Learn more about how PepsiCo India is conserving water at www.tinyurl.com/pepsico3.23Provide access to safe 24 Continue to lead the industrywater to three million by incorporating at leastpeople in developing 10 percent recycled polyethylenecountries by the end terephthalate (rPET) in ourof 2015. primary soft drink containers in the U.S., and broadlyHaving pledged more than expand the use of rPET across$15 million since 2005 toward key international markets.water projects, the PepsiCoFoundation is working to allevi- We’ve been an industry leader in theate water scarcity in developing innovative use of food-grade rPET incountries. In fact, the Foundation beverage containers in the U.S. market.expects to provide access to In 2010, we continued to meet our com-safe water for one million people mitment by including an average ofby the end of 2011, and to 10 percent rPET in our primary softincrease the number to three drink containers in the U.S. We’re par-million people by 2015. The bulk ticularly proud that our Naked Juiceof the Foundation’s work is brand has commercialized a 100 percentbeing done in partnership with post-consumer-recycled plastic bottleWater.org, Safe Water Network, in the domestic grocery channel.China Women’s Development Innovation is also driving our effort toFoundation and Earth Institute expand the use of rPET internationally.at Columbia University. For example, in France, during the thirdTogether, we make vitally impor- quarter of 2010, we began sellingtant water kiosks, household 1.5-liter containers of Tropicana thatconnections and municipal incorporated 50 percent rPET. Thisvillage systems available. At change represents an annual savings ofthe village level, with the approximately 1.1 million pounds of 25Foundation’s funds, our partners resin. In 2011, we have plans to expandcan install farming irrigation, our use of rPET in countries outside therainwater-harvesting systems, U.S. by more than 2.5 million pounds.construct cisterns, and supportsanitation and hygiene educa-tion programs. Create partnerships that promote the increase of U.S. beverage container recycling rates to 50 percent by 2018. We’re creating national partnerships and developing new technologies to34 PepsiCo, Inc. 2010 Annual Report
  • 17. 26 Reduce packaging weight by 350 million pounds —  avoiding the creation of one billion pounds of landfill waste by 2012. We have made significant prog- ress in reducing the amount of packaging we use to supply many of our products to consumers. For example, the 500ml Eco-Fina bottle weighs 10.9 grams, using 50 percent less plastic than the similar Aquafina packaging produced in 2002. This change helped us achieve a total packag- ing weight reduction of 103 mil- lion pounds in 2009 — getting us close to 30 percent of our 350-million-pound goal. We are confident that moves like this and other new initiatives in beverage and food product packaging will help us reach our 2012 goal. 103-million- pound reduction in packaging weight in 2009.make recycling easier and more effi- PepsiCo’s Dream Machine was developed to support PepsiCo’s goal of increasing the U.S.cient. Last year, we launched the Dream beverage container recycling rate from 38 percentMachine recycling initiative with Waste in 2009 to 50 percent by 2018.Management, Greenopolis and KeepAmerica Beautiful, to promote increas- encourage consumers to recycle anding the U.S. beverage container recy- other organizations to establish recy-cling rate from 38 percent in 2009 to cling systems, because we can’t reach50 percent by 2018. The program, which this goal alone. We need everyone —includes reward-point incentives, industry and consumers — to join us.encourages beverage container collectionat public locations — such as grocerystores, gas stations, sports arenas, collegecampuses and schools — using intelli-gent kiosks equipped with scanners.With these and other efforts, we hope to 35
  • 18. Environmental Sustainability Climate Change Nine PepsiCo U.K. sites send zero waste to landfill.27Work to eliminate allsolid waste to landfillsfrom our productionfacilities.Across our snack businesses inthe U.S. and U.K., we’ve madeconsiderable progress towardachieving the goal of sendingzero waste to landfills. In 2009,PepsiCo generated an estimated984,000 metric tons of solidwaste from our global manufac-turing facilities. Of that total,17 percent was discarded ina landfill, and 82 percent wassent off-site for beneficial uses,such as recycling. Currently,nine PepsiCo U.K. sites sendzero waste to landfill. In 2010, 2813 Frito-Lay North Americamanufacturing sites averagedless than 1 percent of solid waste manufacturing network to improve ourdisposed to landfill. In 2011, electricity-use efficiency. For our globalFrito-Lay North America food and beverage manufacturing oper-expects that 20 facilities will ations, we registered a nearly 9 percentachieve this mark, and we improvement as of third quarter 2010,believe 10 facilities will send compared to the 2006 baseline, andzero waste to landfills by the endof the year. We are now intro- Improve our electricity- we’re on target to achieve our 2015 goal.ducing waste-reduction plans use efficiency by This improvement in electricity effi- ciency was accomplished throughand training in many of our 20 percent per unit of numerous lighting, compressed air andfacilities around the world tofurther our progress. (*) production by 2015. motor efficiency projects across all PepsiCo business units. These reduc- We’re achieving solid results by rolling tions in electricity use helped enable out best practices throughout our Frito-Lay to receive six additional(*) See page 19.36 PepsiCo, Inc. 2010 Annual Report
  • 19. 29 Reduce our fuel-use 30 Commit to a goal of reducing intensity by 25 percent greenhouse gas (GHG) per unit of production intensity for U.S. operations by 2015. by 25 percent through our partnership with the U.S. Fuel-use intensity for our global Environmental Protection food and beverage manufactur- Agency Climate Leaders ing operations has improved program. by more than 12 percent as of the third quarter 2010 versus the We have made important progress by 2006 baseline. Our progress is establishing a rigorous new internal the result of a number of innova- framework to drive our energy conser- tions being introduced in facili- vation efforts and are on track to meet ties around the world. In 2010, our U.S. GHG intensity goal. Frito-Lay’s we extended the deployment of transition to a more fuel-efficient fleet our new high-efficiency heat included a significant investment in exchangers to production plants electric-powered commercial trucks. in the U.K., Portugal, Spain and In 2010, 13 electric Frito-Lay delivery India. This device, which was trucks began their routes in the U.S. and piloted in Australia and Russia, Canada, with another 163 scheduled significantly improves heat trans- for launch in 2011. We believe this will fer and recaptures heat lost in make Frito-Lay the largest operator the potato chip frying process. of all-electric private delivery trucks in Frito-Lay’s Topeka, Kansas North America. These trucks are esti- facility has reduced its natural mated to emit 75 percent less greenhouse gas consumption per pound of gas than conventional diesel trucks and product by 40 percent since 1999 will eliminate the need for approximately by installing new technologies, 500,000 gallons of fuel annually. (*) including high-efficiency oven burners and a high-efficiency biomass boiler. In addition to these and other technologies, ourThe solar power system at Frito-Lay’s Casa Grande, resource conservation programsArizona plant is one way the facility hopes to are providing an essential foun-operate almost entirely on renewable energy sources. dation for helping our plants to reduce fuel-use intensity andLEED awards for Existing Buildings keeping us on track to meet thisGold Certifications in 2010 from the U.S. 2015 goal. (*)Green Building Council Leadership inEnergy and Environmental Design.The Perry, Georgia; Topeka, Kansas;Modesto, California; Beloit, Wisconsin;Jonesboro, Arkansas; and Killingly,Connecticut manufacturing sites joinedthe Casa Grande site in 2010. (*)(*) See page 19. 37
  • 20. Environmental Sustainability Community31Commit to an absolutereduction in GHG emissionsacross global operations.We’re making progress on our goal to 32 Apply proven sustainable agricultural practices on our farmed land. We’ve been committed to sus- 33 Provide funding, technical support andreduce GHG emissions in our global tainable agriculture practices training to local farmers.manufacturing facilities and transpor- for many years. In 2009, wetation systems. In South America, for launched our Global Sustainable PepsiCo is supporting local farmersexample, the Green Stamp Program is Agriculture Policy — designed to globally through funding and training. Inoptimizing vehicle efficiency through encourage all of us, and our 2010, together with 350 British farmers,preventive maintenance and regular growers, to operate in a way that PepsiCo launched an important initia-vehicle inspections, as well as through protects and nourishes land and tive to cut our carbon emissions andguidance on improving fuel-efficiency communities. For example, we water use by 50 percent over five years.procedures for truck drivers and route worked with a grower to deter-salespeople. To date, approximately mine whether alternative fertil-80 percent of PepsiCo’s fleet in Peru, izers could significantly reduceEcuador, Chile, Colombia, Argentina the carbon footprint associatedand Venezuela has participated in with the agricultural productionthe program, with plans for further of oranges. If successful, theseimprovements underway. In the U.S. fertilizers could reduce the totaland Canada, the new Enterprise carbon footprint of TropicanaTransportation Management System Pure Premium juice by as muchis also driving route efficiency, produc- as 15 percent. We’re also work-tivity and cost savings. (*) ing to develop the first certifica- tion program of sustainable practices for our global suppli- ers. In 2011, the program will be piloted in the U.S. and then adopted worldwide. By including industry peers in the develop- ment process, we hope to estab- lish a standard for all consumer goods companies interested in certifying their farming practices in areas such as water and energy management, soil conservation, nutrient and pesticide use.(*) See page 19.38 PepsiCo, Inc. 2010 Annual Report
  • 21. 35To achieve this, we’re exploring a host of agriculture practices, and helping 12,000innovations with our growers, including farmers form a cooperative and establishi-crop™ “precision farming” technology credit through the State Bank of India.(developed with Cambridge University); Integrate our policiesnew low-carbon fertilizers; a plan to The web-based “precision farming” technology and actions on humanreplace more than 75 percent of our in the U.K., i-crop™, is designed to help farmers health, agriculturecurrent potato stock with varieties that produce more while using less water. and the environmentgive greater yields with less waste and to make sure that theyThe Cool Farm Tool software for mea- support each other.suring carbon emissions. As the U.K.’slargest buyer of potatoes and a major Human health and environmen-purchaser of oats and apples, we expect a tal protection are two criticalsignificant, positive environmental components of sustainableimpact from these steps. Similar agricul- development. To ensure that ourtural initiatives are underway on every efforts in these areas are ascontinent. In India, for example, we are cohesive and productive as pos-teaching contract farmers sustainable sible, we have begun to develop a formal policy to coordinate our human health, agriculture and environment-related initiatives. 34 In 2010, we championed a coor- dinated approach within the World Economic Forum (WEF) and, in partnership with some of the world’s foremost thinkers Promote environmental in these key areas, called for education and best practices governments and corporations among our associates and to embrace an integrated business partners. approach to sustainable devel- opment and nutrition. In 2011 We have launched a host of initiatives and beyond, we will accelerate with associates and partners that accel- our efforts, engaging our inter- erate the adoption of environmental nal team of experts to create an sustainability practices through educa- integrated framework for com- tion. In April 2010, more than 700 asso- pany policies and practices that ciates, suppliers and vendors, including can be used to reach our goal representatives from 16 countries and and to serve as a basis for our every PepsiCo division, convened at the Global Nutrition Group. Global Sustainability Summit in Dallas, Texas, to share best practices in envi- Please note that this commitment and copy is ronmental sustainability. The PepsiCo the same as commitment 20. Green volunteer organization inspires associates across the globe to set the standard for environmental sustainabil- ity by voluntarily raising awareness and inspiring wider eco-friendly prac- tices both in the workplace and at home. From its 2007 launch, PepsiCo Green has grown virally in the U.S. and glob- ally, expanding to 19 countries in 2010. 39
  • 22. 36–47TalentSustainabilityTo the associates of PepsiCo … It’s a promise toinvest in our associates to help them succeed anddevelop the skills needed to drive the company’sgrowth, while creating employment opportunitiesin the communities we serve.40 PepsiCo, Inc. 2010 Annual Report
  • 23. Talent SustainabilityCulture36 37 the question was first asked in 2004. Feedback externally is also positive. PepsiCo is frequently benchmarked for its global D&I initiatives, often by manyEnsure high levels of of our most-valued retail customers.associate engagement And in 2010, our D&I leadership andand satisfaction ascompared with other Foster diversity and initiatives were once again recognizedFortune 500 companies. inclusion by developing by numerous organizations and pub- lications. The chart below provides a a workforce that reflects snapshot of PepsiCo’s 2010 diversityWe seek the insights of our asso-ciates through our biannual local communities. statistics after the integration of our anchor bottlers and other acquisitionsOrganizational Health Survey We have a core belief that making the by the company.to help us increase associate most of diverse strengths and talentsengagement and satisfaction helps make our company successful. 2010 Diversity and Inclusion Statisticsglobally, regionally and locally. By People We take great care to weave diversityconducting the survey every two Total Women % of Color % and inclusion (D&I) into the very fabricyears, we’re able to analyze the Board of Directorsa 12 4 33 4 33 of our culture to improve as a global, Senior Executivesb 13 2 15 3 23data, create meaningful action multicultural and multigenerational Executives 2,970 915 31 600 20plans and measure plan effective- All Managers 17,790 5,690 32 4,690 26 company capable of serving the world’sness. We also benchmark our All Associatesc 100,415 19,530 19 29,360 29 communities effectively. To ensureresults against other highly At year-end, we had approximately 294,000 associates that our focus on D&I is supported at worldwide.respected companies from differ- all levels of the company, we seek the a Our Board of Directors is pictured on page 17.ent industries, using data from b Composed of PepsiCo Executive Officers listed on page 18. feedback of our associates as part of our c Includes full-time associates only.the Mayflower Group, a survey biannual Organizational Health Survey. Executives, All Managers and All Associates are approximateconsortium of companies to The feedback is encouraging. In 2009, numbers as of 12/25/10 for U.S. associates only.which PepsiCo belongs. In our Data in this chart is based on the U.S. definition for our last full survey, 80 percent of our people of color.last full survey, conducted in associates said their managers support2009, we learned that 73 percent their involvement in D&I activities, aof our associates rated PepsiCo 14 percentage point improvement sinceas a favorable place to workcompared with other companies,11 percentage points higher thanthe Mayflower benchmark. Ouroverall associate engagementindex was also favorable at75 percent. And our associateresponse rate of 89 percent waswell above survey industrybenchmarks. In 2011, we willagain conduct our OrganizationalHealth Survey of all associates,including those in our recentlyacquired bottling organizations,in approximately 80 countriesand in 38 languages. 41
  • 24. 38Encourage our associatesto lead healthier lives byoffering workplace wellnessprograms globally.Our global wellness strategy is designedto engage associates and their familiesin developing and sustaining healthybehaviors to improve their overall qual-ity of life. To support associate wellness,we offer on-site health and wellnessservices in many countries around theworld, including China, India, Mexico,South Africa, the U.K. and the U.S.These initiatives, which vary by loca-tion, include routine medical care atwork sites, education programs onhealth, nutrition and exercise, programson smoking cessation, on-site fitnesscenters and organized programs toencourage exercise. In 2010, we con-ducted an inventory of our wellnessefforts globally with the intent of help-ing accelerate improvements, share bestpractices and grow beyond the 36 coun-tries in which we currently offer pro-grams. Our associate wellness effortshave been recognized in the U.S. by the 39National Business Group on Health,which awarded PepsiCo the 2010 BestEmployers for Healthy Lifestyles The health and safety of our associatesPlatinum Award. In addition to helping is of paramount importance to PepsiCo.our associates, our focus on health and We are continually working across ourwellness brings a financial benefit. A businesses to prevent occupational2009 study of our U.S. medical claims injuries and illnesses, striving for andata found that associate participation incident-free workplace. In 2011, wein these programs significantly reduced Ensure a safe work- created a new Global Operations organi-healthcare and insurance costs overtime. We are looking to track the impact place by continuing to zation, which will help us strengthen health and safety governance in ourof our programs around the world to reduce lost-time injury supply chain globally as we leverage bestidentify sustained cost-saving trends. rates, while striving practices across sectors while imple- to improve other menting locally relevant safety strate- occupational health gies. The new organization builds on the progress we made with the creation of and safety metrics the PepsiCo Health and Safety through best practices. Leadership Council in 2008 to ensure42 PepsiCo, Inc. 2010 Annual Report
  • 25. we have the strategies, frameworks andsystems to effectively manage risks,build health and safety leadership capa-bilities, identify global metrics and track 40 Support ethical and legal process. Our Code of Conduct, in 2010, also included in-person training for more than 100,000 associates outside of the target group. Distributed to associ-performance. Areas of focus include compliance through annual ates, either electronically or in hardmachinery safety, fleet safety, activities training in our Code of Conduct, copy, our Code of Conduct is translatedrequiring a permit to work and sales which outlines PepsiCo’s into 38 languages. In addition to oursecurity. We are currently in the process unwavering commitment to 2010 ranking as one of the world’s mostof developing and implementing mea- its human rights policy to treat ethical companies by Ethisphere maga-surement tools to consistently track every associate with dignity zine, we also ranked in the top quartilesafety data on a global basis. These and respect. for compliance performance for theprocesses have been put in place due to beverage industry in the 2010 Dow Jonesthe significant growth of the PepsiCo We are fully committed to compliance Sustainability World Index.organization in recent years with the with applicable laws and regulations andacquisitions of our two largest bottlers doing the right thing consistently, with-and the Lebedyansky juice business out compromise. To ensure ethical andin Russia — all of which have increased legal compliance, we provide annualthe number of our manufacturing training on our Code of Conduct to sala-facilities, sales activities, associates ried associates with e-mail accounts,and contractors worldwide. who must certify that they have read and understand the Code and agree to abide by it. In 2010, approximately 57,000Two of Frito-Lay North America’s 500 “Million associates in this target group com-Milers,” pictured below, have career milestonesof more than one million accident-free miles. pleted this training and certification 43
  • 26. Talent SustainabilityCareer Learn more about Talent sustainability at www.tinyurl.com/pepsico4. 72 percent of our associates said they 42 Create a work environ- had opportunities to improve their skills ment in which associates at PepsiCo know that their skills, talents and interests can fully develop.41 We have established many pro- grams that help our associates improve their skills and abili- ties. For example, we launched our annual Manager QualityBecome universally recognized Performance Index (MQPI)through top rankings as one of process in 2009 to collect datathe best companies in the world from associates on how wellfor leadership development. their managers provide feedback, develop “stretch” assignmentsWe are committed to a robust and sys- and recognize and rewardtematic approach to managerial and achievements. With this annualexecutive development and succession input, and with input from man-planning. Our agenda includes formal agers and leaders, we haveleadership-development programs as the opportunity to shape a work-well as annual 360-degree feedback place in which our associatesprocesses and other measurement tools. can grow. In 2010, we saw aTo effectively prepare our managers and positive increase in the overallexecutives to lead in a challenging mac- MQPI scores across our execu-roeconomic environment and to develop tive population, as compared toother associates, we have launched the baseline established infour new development programs in the 2009. Our ongoing efforts enablelast two years, spanning from first-time us to build from a position ofmanagers to senior leaders that provide strength. In the Organizationalleadership training to more than 2,700 Health Survey conducted inassociates around the world. To further 43 2009, 72 percent of our associ-support our leadership-development ates said they had opportunitiesefforts, our Employee Resource Groups —  to improve their skills, 10 per-with company sponsorship — offer centage points above theadditional avenues for leadership devel- Mayflower benchmark, whileopment that have demonstrated impact. Conduct training for associates 77 percent said they hadWe are pleased to be included in Fortune from the front line to senior received the training needed tomagazine’s most recent global ranking management, to ensure that do a quality job, 7 percentageof the 2009 25 “Top Companies for associates have the knowledge points above the average.Leaders” and the Hay Group’s 2010 rank- and skills required to achieveing of the global top 20 “Best Companies performance goals.for Leadership.” In 2010, we werealso recognized as a “Best Company for Training is an integral component of ourLeadership Development” in India talent and performance agendas. Forby the Great Places to Work Institute. example, more than 2,900 associates in 2010 registered and completed at least44 PepsiCo, Inc. 2010 Annual Report
  • 27. Talent Sustainability Community 44 Create local jobs by expanding operations in developing countries. In 2010, we announced numerous investments that will lead to job cre- ation, including $2.5 billion in China over the next three years (in addition to the company’s $1 billion investment announced in 2008); $250 million in Vietnam over the next three years; and $3 million in Peru over the next three years. We also signed a memorandum outlining plans to invest $140 million to build our tenth plant in Russia — part of a $1 billion investment program announced in 2009. The number of jobs created by these investments will be determined in the next few years. Meanwhile, last year we expanded our Sangareddy and Mahul beverage pro- duction facilities in India, as well as their corresponding beverage and food sales organization, creating 5,000 direct and indirect jobs. In Brazil, we grew production in São Paulo and Feira de Santana, and opened up a new business unit in Cachoeiro do Itapemirim, that created 360 jobs. Meanwhile, weone course from our award-winning A PepsiCo associate doing a final quality check are also creating jobs in the U.S. The on the Pepsi line at PepsiCo’s Chongqing facility;Finance University. And, more than China’s first “green” beverage plant is an example investments we are making in our new1,000 non-finance associates completed of our commitment to create jobs locally. Global Nutrition Group is one example,one or more Finance University courses with many new positions based inin 2010 with the aim of increasing their Chicago, while in Virginia the Sabra launched an R&D curriculum in 2010,skills and improving their performance Dipping Company joint venture opened available to our associates globally.in their current roles. In another training its new manufacturing plant in Meanwhile, our operating groups con-initiative, supporting our commercial- Colonial Heights. tinued to provide training for theirization competencies, a robust and frontline sales and operations teams.continuously updated sales and customer We were pleased last year to be namedmanagement curriculum is available for by Actualidad Económica magazineall U.S. sales professionals. And, to as “One of the Best Companies in Spain”enable us to deliver on our Research & for investment in training.Development (R&D)-related goals, we 45
  • 28. 46 Support associate volun- 47 Match eligible associate teerism and community charitable contributions involvement through globally, dollar for dollar, company-sponsored through the PepsiCo programs and initiatives. Foundation. All around the world, thousands of In 2010, the PepsiCo Foundation matched PepsiCo associates are engaged $5.1 million in associate charitable in volunteer activities that improve contributions. And over the past 12 years,45 their communities. In 2010, for the Foundation has provided $47 mil- example, 200 associates in Mexico lion in matching gifts to qualified non- worked with United Way to help profit agencies working in environmental, renovate a school for children with educational, civic, arts and health and disabilities, and — for the fourth human services fields. Available to asso-Support education through year — we continued our commit- ciates worldwide, matching giftsPepsiCo Foundation grants. ment to Vive Saludable Escuelas, leverage and increase the impact of which provides education on diet individual contributions. The matchingIn 2010, the PepsiCo Foundation con- and physical activity to elementary gifts program also helped associatestributed a total of $7.6 million in grants and high school students through- provide aid to populations affected byto support education. The Foundation is out the country. In India, our disaster. In 2010, for example, theproud to be the founding private-sector HIV Prevention Education initiative PepsiCo Foundation matched associates’partner of Diplomas Now, an innovative reached more than one million contributions to assist those affectedschool turnaround model that keeps people in the communities where by the Haiti earthquake, the Chile earth-at-risk students in school and on track we operate. The initiative is run by quake and the Pakistan floods, supple-to graduate. In three years, the Foundation a large network of company volun- menting additional disaster relief aidwill have committed $11 million to teers in association with the country’s provided by the Foundation and PepsiCothe program. The Foundation also funds International Labour Organization. business units.the ExCEL Scholarship Program —  And in the U.S., the 2010 Pepsi $47 millionavailable to children of active, full-time Refresh Project awarded more thanassociates of PepsiCo. The program was $20 million in small grants to helpcreated by the PepsiCo Foundation to in matching contributions since 1999 communities move forward inhelp those who have the ability to the areas of health, arts and culture,achieve their full potential in college but Contribution Summary food and shelter, the environment,have limited means to attend. Each year, (in millions) neighborhoods and education. One 2010the program awards up to 250 renew- of the original projects included a PepsiCo Foundation $25.9able scholarships worldwide, ranging $10,000 grant to Mosaic, our African- Corporate Contributions 2.0from $1,000 to $10,000, for study at four- Division Contributions 13.0 American Employee Resourceyear colleges and universities, two-year Estimated PepsiCo In-Kind Donations 37.7 Group, which coordinated the efforts Total $78.6colleges and vocational-technical schools of nearly 1,400 associate volunteersin any country. In 2010 alone, the in 30 food banks across the U.S.PepsiCo Foundation provided $3.1 mil- The Pepsi Refresh Project will belion in scholarships. expanding to additional markets (Europe, Latin America and the Middle East) in 2011.46 PepsiCo, Inc. 2010 Annual Report

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