We are a leading, global snack and beverage company. We manufacture, market and
sell a variety of salty, convenient, sweet and grain-based snacks, carbonated
and non-carbonated beverages and foods. We are organized in four divisions:
Frito-Lay North America,
PepsiCo Beverages North America,
PepsiCo International, and
Quaker Foods North America.
Our North American divisions operate in the United States and Canada. Our international
divisions operate in nearly 200 countries, with our largest operations in Mexico
and the United Kingdom.
Our products are brought to market through direct-store-delivery, broker-warehouse
and food service and vending distribution networks. The distribution system
used depends on customer needs, product characteristics, and local trade practices.
The principal ingredients we use in our food and beverage businesses are almonds,
aspartame, cocoa, corn, corn sweeteners, flavorings, flour, juice and juice
concentrates, oats, oranges, grapefruits and other fruits, potatoes, rice, seasonings,
sugar, vegetable and essential oils and wheat. Our key packaging materials include
P.E.T. resin used for plastic bottles, film packaging used for snack foods and
cardboard. Fuel and natural gas are also important commodities due to their
use in our plants and in the trucks delivering our products. These products
are purchased mainly in the open market. We employ specialists to secure adequate
supplies of many of these items and have not experienced any significant continuous
shortages. The prices we pay for such items are subject to fluctuation. When
prices increase, we may or may not pass on such increases to our customers.
We own numerous valuable trademarks which are essential to our worldwide businesses,
including Alegro, AMP, Aquafina, Aunt Jemima, Cap’n Crunch, Cheetos, Cracker
Jack, Diet Pepsi, Doritos, Frito-Lay, Fritos, Fruitworks, Gamesa, Gatorade,
Golden Grain, Grandma’s, Lay’s, Life, Mirinda, Mountain Dew, Mountain Dew Code
Red, Mr. Green, Mug, Near East, Pasta Roni, Pepsi, Pepsi Blue, Pepsi Max, Pepsi
One, Pepsi Twist, Pepsi-Cola, Propel, Quaker, Quaker Chewy, Quaker Quakes, Rice-A-Roni,
Rold Gold, Ruffles, Sabritas, 7UP and Diet 7UP (outside the United States),
Sierra Mist, Slice, Smith’s, SoBe, Sunchips, Tostitos, Tropicana, Tropicana
Pure Premium, Tropicana Season’s Best, Tropicana Twister, Walkers, Wild Cherry
Pepsi and Wotsits. Trademarks remain valid so long as they are used properly
for identification purposes, and we emphasize correct use of our trademarks.
We have authorized, through licensing arrangements, the use of many of our trademarks
in such contexts as snack food joint ventures and beverage bottling appointments.
In addition, we license the use of our trademarks on promotional items for the
primary purpose of enhancing brand awareness.
Our Customers
Our customers include franchise bottlers and independent distributors and retailers.
We grant our bottlers exclusive contracts to sell and manufacture certain beverage
products bearing our trademarks within a specific geographic area. These arrangements
specify the amount to be paid by our bottlers for concentrate and full goods
and for Aquafina royalties, as well as the manufacturing process required for
product quality.
Sales to Wal-Mart Stores, Inc. represent approximately 10% of our global net
revenue.
Our Competition
Our businesses operate in highly competitive markets. We compete against global,
regional and private label manufacturers on the basis of price, quality, product
variety and effective distribution. Success in this competitive environment
is primarily achieved through effective promotion of existing products and the
introduction of new products. We believe that the strength of our brands, innovation
and marketing, coupled with the quality of our products and flexibility of our
distribution network, allow us to compete effectively.
Despite holding a significant leadership market position in the snack industry
worldwide, Frito-Lay faces local and regional competitors as well as national
and global snack competitors on issues related to price, quality, variety and
distribution. In the beverage industry, we are focused against The Coca-Cola
Company, our primary competitor. In the United States, The Coca-Cola Company
has a slightly larger share of carbonated soft drink consumption, while we have
a larger share for chilled juices and isotonics. We also face many local value
brand competitors in the United States. Internationally, The Coca-Cola Company
has a significant market share advantage for carbonated beverages. In addition,
internationally we compete with strong local carbonated beverage brands in many
countries.
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