PepsiCo Delivers Strong Financial and Operating Results for Fourth Quarter and Full-Year 2010

PURCHASE, N.Y. – February 10, 2011 – PepsiCo, Inc. (NYSE: PEP) today reported volume, revenue and profit growth for the fourth quarter and full year of 2010 driven by gains across its worldwide snacks and beverage businesses, and from the acquisitions of its anchor bottlers earlier in the year.  Full-year reported earnings per share increased 4 percent to $3.91, core earnings per share increased 12 percent to $4.13 and core constant currency earnings per share grew 12 percent.  For the quarter, reported EPS declined 6 percent to $0.85, core EPS grew 17 percent to $1.05, and core constant currency EPS grew 19 percent.

“We are pleased with PepsiCo’s performance in the fourth quarter and for the full year.  The underlying performance of our businesses remained solid despite a challenging macroeconomic environment,” said PepsiCo Chairman and CEO Indra Nooyi.  “We posted broad-based worldwide gains in both snacks and beverages, our businesses deftly balanced a delicate price-value consumer equation, and we aggressively managed costs and productivity to deliver top-tier financial results.”

Ms. Nooyi continued, “Importantly, we are entering 2011 an even-stronger, more-capable organization:

  • Our core global snacks and beverage businesses benefit from strong brands, world-class go-to-market systems, and innovative and differentiated products and we strengthened these advantages in 2010 through targeted investments;
  • We acquired and successfully integrated our two anchor bottlers, creating more-efficient and effective beverage businesses in our key North American market and in Europe;
  • We acquired Wimm-Bill-Dann, Russia’s preeminent food and beverage company, adding to our terrific competitive position in Russia and Eastern Europe, while also providing a strong foothold in the attractive dairy category; and
  • We established our Global Nutrition Group to accelerate innovation and growth in our large and well-positioned nutrition businesses.

“We are encouraged by the momentum of our businesses as we enter 2011, and are mindful of three realities:

  • A weak consumer landscape given the poor macroeconomic picture, especially the high level of unemployment in key developed markets;
  • High levels of cost inflation for the coming year, driven by broad and pronounced commodity inflation; and
  • A potentially difficult competitive pricing environment, particularly in beverages.

“Our earnings outlook reflects our considered perspective on the marketplace and the macroeconomic picture, and we are confident we have the operating capability, portfolio strength and financial flexibility to effectively compete in this environment.”

PepsiCo Chief Financial Officer Hugh Johnston said, “In addition to our strong fundamental operating performance in 2010, our businesses also generated strong cash flow.  The company generated $6.9 billion of management operating cash flow, excluding certain items, representing a 23 percent increase over 2009.”

“We delivered more than $150 million in synergies from the bottler acquisitions in 2010, above our target for the year.  The strong pace of synergy realization and the identification of additional synergies have led us to increase our expectation for total synergies through 2012 to more than $550 million.”

All references below to net revenue are on a constant currency basis, and to operating profit are on a core constant currency basis.  In addition, all comparisons are on a year-over-year basis unless otherwise noted.

Division Operating Summaries

PepsiCo Americas Foods (PAF)

Frito-Lay North America (FLNA)

FLNA increased its dollar share leadership position in measured channels in salty snacks for the full year and grew operating profit 8 percent for the full year, its strongest profit growth performance in a decade.  Profit growth in the quarter and for the full year benefited from lower input costs and from strong productivity gains and cost control.

Volume grew slightly in the fourth quarter and units grew 1 percent.  Volume growth continued to be impacted by cycling the “20% More Free” promotion from 2009.  Lay’s performance led growth, with strong consumer response to the activation of Lay’s All Natural Ingredients, and continued strong double-digit growth in Sabra dips and spreads.

For the full year, volume declined 1 percent, with unit growth up more than 1 percent.  Volume growth was adversely impacted by cycling the “20% More Free” promotion.  Net revenue growth for the quarter and full year reflected the impacts of volume performance and effective net pricing.

Latin America Foods (LAF)

Strong performance for the quarter and full year benefited from broad-based volume gains, especially in LAF’s largest businesses in Mexico and in Brazil.  Volume, revenue and operating profit growth in both the quarter and full year were driven by strong innovation, price-pack management and marketplace execution.

Quaker Foods North America (QFNA)

Performance for the quarter and full year reflected declines in the hot cereals and ready-to-eat cereals categories, and a competitive pricing environment.  QFNA invested in improving its quality and in innovation launched in the second half of 2010 that will continue to receive marketing support in 2011.

PepsiCo Americas Beverages (PAB)

In a highly competitive environment, North America volume (excluding the impact of incremental volume from the agreement with Dr Pepper Snapple Group) grew 1 percent in the quarter behind strong performance of the company’s advantaged non-carbonated beverage portfolio.  The fourth quarter of 2010 marks the company’s fifth consecutive quarter of sequential improvement in organic volume performance in North America.  PAB widened its liquid refreshment beverage volume share advantage versus its primary competitor in the U.S. in measured channels for the quarter and the full year.

Volume, revenue and operating profit growth for the quarter and full year benefited from the impact of the anchor bottler acquisitions.


Snacks performance in the quarter was driven by double-digit gains in Russia and broad gains across much of Europe.  Performance in Eastern Europe was generally stronger than in the developed markets of Western Europe where macroeconomic conditions remained challenged.

Beverage volume grew 5 percent in the quarter and for the full year, excluding the impact of the anchor bottler acquisitions.  Gains were broad based, and particularly strong in Eastern Europe where the company posted double-digit gains in Russia, Turkey, the Ukraine and Poland in the quarter.  Growth for the full year was also driven by strong performance in Russia, Turkey and Poland.

Growth in snack and beverage volumes, revenue and operating profit was supported by delivering differentiated value through promotion and price-pack management, innovative marketing and broadening the portfolio into adjacencies.  Operating profit in the fourth quarter was adversely impacted by higher costs related to potato crop shortages in Russia. Volume, revenue and operating profit growth in beverages for the quarter and the full year benefited from the impact of the anchor bottler acquisitions.

For the year, the company gained value share in snacks and CSDs in Europe with particularly strong snack gains in the key emerging market of Russia.

Asia, Middle East & Africa (AMEA)

Snack and beverage volume gains for the quarter and full year were led by strong performance in key emerging markets.

The Middle East, India and China each grew snack volumes strong double digits, and acquisitions contributed two points of snacks volume growth in the quarter and for the full year.

Beverage performance for the quarter was led by high-single-digit growth in the Middle East, 9 percent growth in China and double-digit growth in India.   For the full year, beverage volume was led by double-digit growth in India and China.

The company gained one CSD share point in China, and gained relative share versus its closest competitor in India in the most recent quarter.  The company further strengthened its position in India through the formation of a joint venture with Tata Global Beverages to develop and market hydration beverages for the India market.

Full-year operating profit was negatively impacted by the lapping of the gain from the formation of a joint venture with Calbee in Japan in the third quarter of 2009 as well as from marketplace investment spending.

Tax Rate

PepsiCo’s reported tax rate was 23.0 percent for the full year versus 26.0 percent in 2009.  PepsiCo’s core tax rate was 26.9 percent which compares to a core tax rate of 25.6 percent in 2009.

Cash Flow

Full-year cash flow from operating activities was $8.4 billion.  Management operating cash flow, which is net of capital expenditures, was $5.3 billion and included: after-tax merger and integration payments of $0.3 billion; $1.0 billion of after-tax discretionary contributions to PepsiCo’s pension and retiree medical plans; capital expenditures of $0.1 billion related to the bottler integration; after-tax interest costs related to a debt repurchase of $0.1 billion; and other items as set out in the attached financial schedules.  Management operating cash flow excluding these items was $6.9 billion, an increase of 23 percent from 2009.

The company returned $8 billion of cash to shareholders in 2010 through share repurchases of $5 billion and dividends of $3 billion, bringing the cash returned to shareholders over the past three years through share repurchases and dividends to $18 billion.


For 2011, the company is targeting earnings per share growth of 7 to 8 percent on a 52-week, core constant currency basis from its fiscal 2010 core EPS of $4.13.  The company’s outlook for 2011 anticipates high global commodity cost inflation, difficult macroeconomic conditions in developed markets and ongoing strategic investments in emerging markets and in brand-building activities.  The company expects to benefit from synergies from the bottling acquisitions and the acquisition of Wimm-Bill-Dann.  In addition, the company expects higher net interest expense and a core tax rate of approximately 27 percent.  Based on current spot rates, foreign exchange translation would have between a one and two point favorable impact on the company’s full-year, core EPS growth.  The company anticipates share repurchases of approximately $2.5 billion in 2011.  Beyond 2011, the company expects high-single-digit core constant currency EPS growth reflecting, in part, its outlook for commodity cost inflation and macroeconomic uncertainty.

Please refer to the glossary for more information about the items excluded from the company’s fiscal 2011 core tax rate guidance and fiscal 2011 and longer-term core constant currency EPS guidance.

Anchor Bottler Synergies

The company expects total synergies of more than $550 million from the acquisitions of its anchor bottlers through 2012, with one-time costs of approximately $925 million, of which approximately $250 million is non-cash.

The above estimates compare to the company’s prior synergy targets of $400 million once fully implemented by 2012 and one-time costs of approximately $650 million.

Conference Call

At 8 a.m. (Eastern Time) today, the company will host a conference call with investors to discuss fourth-quarter results and the outlook for full-years 2011 and beyond. Further details, including a slide presentation accompanying the call, will be accessible on the company’s website at in advance of the call.  

About PepsiCo

PepsiCo offers the world’s largest portfolio of billion-dollar food and beverage brands, including 19 different product lines that each generate more than $1 billion in annual retail sales. Our main businesses – Frito-Lay, Quaker, Pepsi-Cola, Tropicana and Gatorade – also make hundreds of other nourishing, tasty foods and drinks that bring joy to our consumers in more than 200 countries. With annualized revenues of nearly $60 billion, PepsiCo’s people are united by our unique commitment to sustainable growth, called Performance with Purpose. By dedicating ourselves to offering a broad array of choices for healthy, convenient and fun nourishment, reducing our environmental impact, and fostering a diverse and inclusive workplace culture, PepsiCo balances strong financial returns with giving back to our communities worldwide. For more information, please visit

Cautionary Statement

Statements in this release that are “forward-looking statements,” including our 2011 and longer-term guidance, are based on currently available information, operating plans and projections about future events and trends.  They inherently involve risks and uncertainties that could cause actual results to differ materially from those predicted in such forward-looking statements.  Such risks and uncertainties include, but are not limited to: changes in demand for PepsiCo’s products, as a result of changes in consumer preferences and tastes or otherwise; damage to PepsiCo’s reputation; trade consolidation, the loss of any key customer, or failure to maintain good relationships with PepsiCo’s bottling partners; PepsiCo’s ability to hire or retain key employees or a highly skilled and diverse workforce; unstable political conditions, civil unrest or other developments and risks in the countries where PepsiCo operates; changes in the legal and regulatory environment; PepsiCo’s ability to build and sustain proper information technology infrastructure, successfully implement its ongoing business process transformation initiative or outsource certain functions effectively; unfavorable economic conditions and increased volatility in foreign exchange rates; PepsiCo’s ability to compete effectively; increased costs, disruption of supply or shortages of raw materials and other supplies; disruption of PepsiCo’s supply chain; climate change or changes in legal, regulatory or market measures to address climate change; PepsiCo’s ability to realize the anticipated cost savings and other benefits expected from the acquisitions of The Pepsi Bottling Group, Inc., PepsiAmericas, Inc. and Wimm-Bill-Dann Foods OJSC; failure to renew collective bargaining agreements or strikes or work stoppages; and any downgrade of PepsiCo’s credit rating resulting in an increase of its future borrowing costs.

For additional information on these and other factors that could cause PepsiCo’s actual results to materially differ from those set forth herein, please see PepsiCo’s filings with the SEC, including its most recent annual report on Form 10-K and subsequent reports on Forms 10-Q and 8-K.  Investors are cautioned not to place undue reliance on any such forward-looking statements, which speak only as of the date they are made.  PepsiCo undertakes no obligation to update any forward-looking statements, whether as a result of new information, future events or otherwise.

Miscellaneous Disclosures

Reconciliation. In discussing financial results and guidance, the company may refer to certain non-GAAP measures. Reconciliations of any such non-GAAP measures to the most directly comparable financial measures in accordance with GAAP can be found in the attached exhibits, as well as on the company’s website at in the “Investors” section under “Investor Presentations.” Our non-GAAP measures exclude from reported results those items that management believes are not indicative of our ongoing performance and how management evaluates our operating results and trends.


Beverage volume: Volume shipped to retailers and independent distributors from both PepsiCo and our bottlers.

Core: Core results are non-GAAP financial measures which exclude the following items in our historical results: the commodity mark-to-market net impact included in corporate unallocated expenses; merger and integration charges (including charges related to PBG, PAS and Wimm-Bill-Dann); restructuring and impairment charges; a one-time charge related to the change to hyperinflationary accounting and devaluation in Venezuela; an asset write-off for SAP software; a contribution to the Foundation; interest expense incurred in connection with our debt repurchase; and, with respect to our PBG and PAS mergers, certain fair value adjustments to acquired inventory and the gain on previously held equity interests in PBG and PAS.  With respect to our 2011 and longer-term guidance, our core results exclude: the commodity mark-to-market net impact included in corporate unallocated expenses; merger and integration charges related to PBG, PAS and Wimm-Bill-Dann; and the impact of the 53rd week in 2011.  For more details and reconciliations of our 2010 and 2009 core and core constant currency results and full-year 2011 core tax rate guidance and full-year 2011 and longer-term core constant currency EPS guidance, see “Reconciliation of GAAP and Non-GAAP Information” in the exhibits attached hereto.

Constant currency: Financial results (historical and projected) assuming constant foreign currency exchange rates used for translation based on the rates in effect for the comparable prior-year period. In addition, the impact on EPS growth is computed by adjusting core EPS growth by the after-tax foreign currency translation impact on core operating profit growth using PepsiCo’s core effective tax rate.

Division operating profit: The aggregation of the operating profit for each of our reportable segments, which excludes the impact of corporate unallocated expenses.

Effective net pricing: The combined impact of mix and price.

Management operating cash flow: Net cash provided by operating activities less capital spending plus sales of property, plant and equipment. This non-GAAP financial measure is our primary measure used to monitor cash flow performance. See the attached exhibits for a reconciliation of this measure to the most directly comparable financial measure in accordance with GAAP (operating cash flow).

Management operating cash flow, excluding certain items: Management operating cash flow, excluding: (1) discretionary pension and retiree medical contributions,  (2) restructuring payments in connection with our Productivity for Growth initiative, (3) merger and integration payments in connection with our PBG, PAS and WBD acquisitions, (4) a contribution to The PepsiCo Foundation, (5) capital investments related to the bottling integration, (6) interest paid related to our debt repurchase and (7) the tax impacts associated with each of these items, as applicable. See the attached exhibits for a reconciliation of this non-GAAP financial measure to the most directly comparable financial measure in accordance with GAAP (operating cash flow).

Mark-to-market gain or loss or net impact: Change in market value for commodity contracts that we purchase to mitigate the volatility in costs of energy and raw materials that we consume. The market value is determined based on average prices on national exchanges and recently reported transactions in the marketplace.

Net pricing: The combined impact of list price changes, weight changes per package, discounts and allowances.

Net capital spending: Capital spending less cash proceeds from sales of property, plant and equipment.

Pricing: The impact of list price changes and weight changes per package.

Transaction foreign exchange: The foreign exchange impact on our financial results of transactions, such as purchases of imported raw materials, commodities, or services, occurring in currencies other than the local, functional currency.