Corporate Headquarters WE ARE Performance PepsiCo, Inc. 700 Anderson Hill Road Purchase, NY 10577 WITH Purpose. www..com PepsiCo, Inc.

2 Report Annual 008

2008 Annual Report Every Generation Refreshes the world As PepsiCo refreshes its beverages, snacks and foods for new generations, we dem- onstrate in many ways that “We are Performance with Purpose.” This year’s report features employees, customers and business partners around the world who helped PepsiCo grow under adverse conditions—and stay focused on future opportunities. To represent this perspective, we invited children of PepsiCo associates across our global operations to show us how our products look through the eyes of future consumers. We’re proud to feature some of these drawings on our annual report cover. To view more of these drawings, please go to www.pepsico.com. There’s much more to PepsiCo’s great-tasting beverages, snacks and foods than meets the eye.

Around the world, our people come to work each day ready to perform with purpose. Together, we create the fun, refreshing and nourishing experiences consumers enjoy. In 2008 we faced market pressures that demonstrated the strength of our Performance with Purpose mission—and the power of our people. As costs increased and local economies weakened, customers and consumers held their breath. We met these challenges head-on. By channeling our knowledge, creativity and determination, we continued our legacy of growth and gave consumers powerful new reasons to choose our beverages, snacks and foods.

CONTENTS 2 Financial Highlights 8 24 Europe 41 Financial Contents 4 Letter to Shareholders 18 Latin America 30 India 97 PepsiCo Board of Directors 36 98 PepsiCo Executive Committee

PepsiCo, Inc. 2008 Annual Report  Financial Highlights Core Earnings Management Operating PepsiCo, Inc. and subsidiaries Per Share* Cash Flow** (in millions except per share data; all per share amounts assume dilution) (in millions) $3.68 $4,551 $4,651 $3.37 $4,065 $3.01 2008 2007 Chg(a) Summary of Operations Total net revenue $43,251 $39,474 10% Core division operating profit(b) «$««8,475 $««8,025 6% Core total operating profit(c) $««7,824 $««7,253 8% Core net income (d) $««5,887 $««5,587 5% 06 07 08 06 07 08 *See 5 page 9 for a reconciliation to **See page 95 for a reconciliation to Core earnings per share (d) $««÷3.68 $««÷3.37 9% the most directly comparable financial the most directly comparable financial measure in accordance with GAAP. measure in accordance with GAAP.

Other Data Cumulative Total Shareholder Return Return on PepsiCo stock investment (including dividends), the S&P 500 Management operating cash flow(e) $««4,651 $««4,551 2% and the S&P Average of Industry Groups.*** PepsiCo, Inc. Net cash provided by operating activities $««6,999 $««6,934 1% $250 S&P 500® S&P® Average of *** Capital spending $««2,446 $««2,430 1% $200 Industry Groups Common share repurchases $««4,720 $««4,300 10% $150 Dividends paid $««2,541 $««2,204 15% $100 Long-term debt $««7,858 $««4,203 87% $50

$0 (a) Percentage changes are based on unrounded amounts. 2003 2004 2005 2006 2007 2008 (b) Excludes corporate unallocated expenses and restructuring and impairment charges. See page 95 for a reconciliation to the most directly comparable financial measure in accordance with GAAP. ***The S&P Average of Industry Groups is derived by weighting the returns of two (c) Excludes restructuring and impairment charges and the net mark-to-market impact of our commodity hedges. applicable S&P Industry Groups (Non-Alcoholic Beverages and Food) by PepsiCo’s See page 95 for a reconciliation to the most directly comparable financial measure in accordance with GAAP. sales in its beverage and foods businesses. The returns for PepsiCo, the S&P 500, and the S&P Average indices are calculated through December 31, 2008. (