2008 Q2 Earnings Call -...

July 23, 2008July 23, 2008

2008 Q2 Earnings Call2008 Q2 Earnings Call

2

Safe Harbor Statement Safe Harbor Statement

This material may contain “forward-looking” statements about our expectations regarding future performance, such as our business outlook. These forward-looking statements 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 any such forward-looking statements. Such risks and uncertainties include, but are not limited to: changes in demand for our products, as a result of shifts in consumer preferences or otherwise; our ability to maintain our reputation; our ability to build and sustain our information technology infrastructure and successfully implement our business process transformation initiative or to outsource certain functions effectively; fluctuations in the cost and availability of raw materials; our ability to compete effectively; disruption of our supply chain; trade consolidation, the loss of any key customer, or failure to maintain good relationships with our bottling partners; unfavorable economic, environmental or political conditions in the countries where we operate; changes in the legal or regulatory environment; our ability to hire or retain key employees; and market risks arising from changes in commodity prices, foreign exchange rates and interest rates. For additional information on these and other factors that could cause our actual results to materially differ from those set forth herein, please see our filings with the Securities and Exchange Commission, including our 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. We undertake no obligation to update any forward looking statements, whether as a result of new information, future events or otherwise.

Please refer the “Investors” section of PepsiCo’s web site at www.pepsico.com under the heading “PepsiCo Financial Press Releases” to find disclosure and a reconciliation of any non-GAAP financial measures contained herein.

Indra Indra NooyiNooyiChairman & CEO, PepsiCoChairman & CEO, PepsiCo

5

Worldwide Volume:Worldwide Volume:SnacksSnacksBeveragesBeverages

RevenueRevenue

EPS EPS (excluding mark(excluding mark--toto--market)market)

PepsiCo: Q2 2008 ResultsPepsiCo: Q2 2008 Results

4%4%5%5%

14%14%

11%11%

Growth Versus Q2 Prior YearGrowth Versus Q2 Prior Year

6

Confirming 2008 Full Year GuidanceConfirming 2008 Full Year Guidance

•• EPS at least $3.72, excluding markEPS at least $3.72, excluding mark--toto--market commodity gainsmarket commodity gains

•• Increased share repurchases to at least Increased share repurchases to at least $5.3 Billion, an increase of at least $1 Billion$5.3 Billion, an increase of at least $1 Billion

7

PepsiCo Q2 2008PepsiCo Q2 2008

•• Markets outside the U.S. remain vibrantMarkets outside the U.S. remain vibrant

•• PI delivered doublePI delivered double--digit snack and beverage digit snack and beverage growth in Q2 and H1growth in Q2 and H1

•• Strong brands, local relevance and Strong brands, local relevance and unparalleled distribution delivered category unparalleled distribution delivered category growth in spite of increased pricinggrowth in spite of increased pricing

•• Monitoring the markets for signs of changeMonitoring the markets for signs of change

8

Navigating the EnvironmentNavigating the Environment

•• Increasing commodity hedges and taking Increasing commodity hedges and taking longer positions to minimize volatilitylonger positions to minimize volatility

•• Leveraging pricing and revenue capabilities Leveraging pricing and revenue capabilities from around the worldfrom around the world

–– Optimal price/pack architecturesOptimal price/pack architectures

–– Efficient trade promotionsEfficient trade promotions

–– Strong pricing power of brands Strong pricing power of brands

•• Raising the bar on productivityRaising the bar on productivity

9

Snacks: An Affordable TreatSnacks: An Affordable Treat

•• Stable global consumer demand Stable global consumer demand

•• Snacks offer affordability and value around Snacks offer affordability and value around the worldthe world

•• Local cost base and global scale drive Local cost base and global scale drive affordability and profitabilityaffordability and profitability

10

N.A. PEP Advantages and Action PlanN.A. PEP Advantages and Action Plan

PEP AdvantagesPEP Advantages PEP ActionsPEP Actions

•• Continue to innovateContinue to innovate

•• Leverage Power of One Leverage Power of One sales teamsales team

•• Work together with bottling Work together with bottling partnerspartners

•• Focus on productivity & Focus on productivity & cost measurescost measures

•• Ongoing share gains in CSDOngoing share gains in CSD

•• #1 position in hydration #1 position in hydration with 150 index vs. next with 150 index vs. next competitorcompetitor

•• Excellent Health and Excellent Health and Wellness credentials with Wellness credentials with Tropicana and Naked juice Tropicana and Naked juice brandsbrands

•• Leadership in Tea and Leadership in Tea and CoffeeCoffee

John ComptonJohn ComptonCEO, PepsiCo Americas FoodsCEO, PepsiCo Americas Foods

12

VolumeVolume

RevenueRevenue

Operating ProfitOperating Profit

Growth Versus Q2 2007Growth Versus Q2 2007

2%2%

16%16%

13%13%

PAF: Q2 2008 ResultsPAF: Q2 2008 Results

13

VolumeVolume

RevenueRevenue



2%2%

8%8%

8%8%

FLNA: Q2 2008 ResultsFLNA: Q2 2008 Results

14

Volume Increases in FLNA Core BrandsVolume Increases in FLNA Core Brands

15

Strong Brands Demonstrated Strong Brands Demonstrated Pricing PowerPricing Power

•• Achieved highAchieved high--singlesingle--digit net pricingdigit net pricing

–– Balanced visual pricing and weightBalanced visual pricing and weight--outsouts

•• Maintained volume growthMaintained volume growth

•• Managed price gaps, resulting in value share Managed price gaps, resulting in value share growth in salty and savory categoriesgrowth in salty and savory categories

•• Revenue growth across all major channel Revenue growth across all major channel segmentssegments

16

FLNA InnovationFLNA Innovation

17

FLNA Productivity FLNA Productivity

•• Productivity savings accelerated to cover Productivity savings accelerated to cover about 20% of commodity inflationabout 20% of commodity inflation

•• Productivity initiatives delivered tangible Productivity initiatives delivered tangible sustainability benefits in H1sustainability benefits in H1

–– Water use down 2%Water use down 2%

–– Electricity down 3% Electricity down 3%

–– Natural gas down 3%Natural gas down 3%

18

FLNA SummaryFLNA Summary

•• Expect solid topExpect solid top-- and bottomand bottom--line results in H2line results in H2

•• Inflation higher in Q3 v. Q4Inflation higher in Q3 v. Q4

•• Pricing and productivity plans in place to Pricing and productivity plans in place to manage inflationmanage inflation

•• Expect fullExpect full--year profitability and share growth year profitability and share growth to be into be in--line with past performanceline with past performance

19


2%2%

4%4%

4%4%

QFNA: Q2 2008 ResultsQFNA: Q2 2008 Results

VolumeVolume

RevenueRevenue


20

QFNA Cedar Rapids QFNA Cedar Rapids

•• Expect insurance Expect insurance payment in late payment in late 2008 to cover 2008 to cover asset damage and asset damage and business business disruptiondisruption

•• Expect return to Expect return to full production full production levels by levels by midmid--AugustAugust

21

Volume Volume

RevenueRevenue



4%4%

41%41%

38%38%

LAF: Q2 2008 ResultsLAF: Q2 2008 Results

22

LAF SummaryLAF Summary

•• Effective net pricing and weightEffective net pricing and weight--outs drove outs drove revenue and profit growth revenue and profit growth

•• SabritasSabritas and and GamesaGamesa onon--tracktrack

•• Brazil showed strong organic growth plus Brazil showed strong organic growth plus Lucky acquisitionLucky acquisition

23

PAF SummaryPAF Summary

•• Very strong Q2 with growth across all Very strong Q2 with growth across all segmentssegments

•• Continue to see opportunities for growthContinue to see opportunities for growth

•• Drive aggressive productivityDrive aggressive productivity

•• Expect continued strong performance for Expect continued strong performance for balance of balance of ‘‘0808

Massimo Massimo dd’’AmoreAmoreCEO, PepsiCo Americas BeveragesCEO, PepsiCo Americas Beverages

25

VolumeVolume

RevenueRevenue



(1%)(1%)

1%1%

(7%)(7%)

PAB: Q2 2008 ResultsPAB: Q2 2008 Results

26

PBNA: Q2 2008 CSD OverviewPBNA: Q2 2008 CSD Overview

•• CSD gained volume and value shareCSD gained volume and value share

27

PBNA: Q2 2008 NCB OverviewPBNA: Q2 2008 NCB Overview

•• Gatorade continued to grow volume and Gatorade continued to grow volume and value sharevalue share

–– G2 and Tiger results encouragingG2 and Tiger results encouraging

•• SoBeSoBe Life Water > 50% volume growthLife Water > 50% volume growth

•• Amp Energy more than doubled Amp Energy more than doubled

•• Continued innovation in Lipton Tea and Continued innovation in Lipton Tea and Tropicana Tropicana

28

PBNA: Forward FocusPBNA: Forward Focus

•• Developing price/pack architecture to Developing price/pack architecture to optimizeoptimize

–– Consumer affordabilityConsumer affordability

–– System net price and profit realizationSystem net price and profit realization

•• ConsumerConsumer--driven innovationdriven innovation

•• Laying groundwork for productivityLaying groundwork for productivity

29

LAB HighlightsLAB Highlights

•• Market share gains across marketsMarket share gains across markets

•• MidMid--singlesingle--digit CSD growthdigit CSD growth

•• DoubleDouble--digit NCB growthdigit NCB growth

H2Oh!H2Oh! LiptonLipton GatoradeGatorade

Mike WhiteMike WhiteVice Chairman and CEO, Vice Chairman and CEO, PepsiCo InternationalPepsiCo International

31

PI: Q2 2008 ResultsPI: Q2 2008 Results

Volume:Volume:SnacksSnacksBeveragesBeverages

RevenueRevenue



10%10%13%13%

25%25%

18%18%

32

PI Performance HighlightsPI Performance Highlights

•• BroadBroad--based growth across geographiesbased growth across geographies

•• Solid developed market growthSolid developed market growth

•• Continued strong growth in emerging Continued strong growth in emerging marketsmarkets

33

PI Product InnovationPI Product Innovation

Juice platform Juice platform expansion expansion

across regionacross region

Tropicana Tropicana Smoothies Smoothies

expanded to expanded to Western EuropeWestern Europe

““Fight For your Fight For your FlavourFlavour”” program program

in Indiain India

Baked Snacks Baked Snacks doing well in doing well in

Russia and SpainRussia and Spain

34

PI UK/Europe: Q2 2008 ResultsPI UK/Europe: Q2 2008 Results


RevenueRevenue


Growth Versus 2007Growth Versus 2007

8%8%20%20%

24%24%

19%19%

35

PI MEAA: Q2 2008 ResultsPI MEAA: Q2 2008 Results


RevenueRevenue



13%13%10%10%

25%25%

16%16%

36

PI H2 OverviewPI H2 Overview

•• Full calendar of innovation across PIFull calendar of innovation across PI

•• To date, emerging and developed markets To date, emerging and developed markets continue to growcontinue to grow

•• Closely monitoring for changes in market Closely monitoring for changes in market conditionsconditions

•• Focusing on productivity and cost controlFocusing on productivity and cost control

Richard GoodmanRichard GoodmanCFO, PepsiCoCFO, PepsiCo

38

PepsiCo: Q2 2008 ResultsPepsiCo: Q2 2008 Results

RevenueRevenue

Division Operating ProfitDivision Operating Profit

EPSEPS

% Growth Versus Q2 Prior Year% Growth Versus Q2 Prior Year

14%14%

7%7%

11%*11%*

*Excluding mark-to-market commodity gains

39

Q2 Below the Line: MarkQ2 Below the Line: Mark--toto--MarketMarket

•• Q2 Q2 ‘‘08 Mark08 Mark--toto--market gain on commodities market gain on commodities of $61 million of $61 million

–– Net change vs. Q2 Net change vs. Q2 ‘‘07 of $48 million07 of $48 million

–– Drove 2 percentage points of operating Drove 2 percentage points of operating leverage and $0.02 EPS leverage and $0.02 EPS

–– Management discussion and guidance on Management discussion and guidance on EPS and EPS growth to exclude markEPS and EPS growth to exclude mark--toto--market in current and prior yearmarket in current and prior year

40

Q2 2008: Cash Flow Q2 2008: Cash Flow

•• Returned $2 Billion to shareholdersReturned $2 Billion to shareholders

–– $600 million in dividends$600 million in dividends

–– $1.4 Billion in share repurchases$1.4 Billion in share repurchases

•• Increasing 2008 share repurchases to at Increasing 2008 share repurchases to at least $5.3 billionleast $5.3 billion

–– At least $1 Billion increase in planned At least $1 Billion increase in planned repurchasesrepurchases

41

2008 Full Year Outlook2008 Full Year Outlook

•• Continued strong H2Continued strong H2

–– More challenging commodity overlaps in More challenging commodity overlaps in Q3 v. Q4Q3 v. Q4

•• GuidanceGuidance

–– Volume growth of 3% to 5%Volume growth of 3% to 5%

–– LowLow--doubledouble--digit revenue growth digit revenue growth

–– Core EPS of at Least $3.72*Core EPS of at Least $3.72*

–– No change to cash flow or No change to cash flow or capexcapex targets targets

–– $7.6 Billion and $2.7 Billion, respectively$7.6 Billion and $2.7 Billion, respectively

*Excluding mark-to-market commodity gains

2008 Q2 Earnings Call -...

Documents

Transcript of 2008 Q2 Earnings Call -...