PEPSICO PepsiCo Annual 2014 Report YEARS & GROWING 5PepsiCo 2014 Annual Report 1 Letter to Shareholders Corporate Headquarters Other services include dividend reinvest- PepsiCo Values 12 2014 Financial Highlights PepsiCo, Inc. ment, direct deposit of dividends, optional Our Commitment: To deliver SUSTAINED 13 PepsiCo Board of Directors 700 Anderson Hill Road cash investments by electronic funds GROWTH through EMPOWERED Purchase, NY 10577 transfer or check drawn on a U.S. bank, PEOPLE acting with RESPONSIBILITY and 14 PepsiCo Leadership Telephone: 914-253-2000 sale of shares, online account access, and building TRUST. 15 PepsiCo Form 10-K electronic delivery of shareholder materials. PepsiCo Website Guiding Principles 141 Reconciliation of GAAP Organic% revenue www.pepsico.com Additional Information We must always strive to: Care for custom- and Non-GAAP Information 4 1 was up 4% in 2014 Investors and others should note that we ers, consumers and the world we live in. Sell currently announce material information to only products we can be proud of. Speak 144 Common Stock and Independent Auditors KPMG LLP our investors using filings with the Securities with truth and candor. Balance short term Shareholder Information 345 Park Avenue and Exchange Commission, press releases, and long term. Win with diversity and inclu- New York, NY 10154-0102 public conference calls, webcasts or our sion. Respect others and succeed together. Telephone: 212-758-9700 corporate website (www.pepsico.com). We may from time to time update the list of © 2015 PepsiCo, Inc. Direct Stock Purchase channels we will use to communicate infor- Interested investors can make their initial mation that could be deemed material and purchase directly through Computershare, will post information about such changes 110 BPS transfer agent for PepsiCo and Administrator on www.pepsico.com/investors. Core net ROIC improved 110 bps for the Plan. A brochure detailing the Plan is in 2014 compared to 20131 available on our website, www.pepsico.com, PepsiCo’s Annual Report contains many or from our transfer agent: of the valuable trademarks owned and/ Environmental Profile or used by PepsiCo and its subsidiaries This Annual Report was printed with Computershare Inc. and affiliates in the U.S. and internation- Forest Stewardship Council™ (FSC®)– B P.O. Box 30170 ally to distinguish products and services of certified paper, the use of 100% certified Free cash flow, excluding certain items, $8.3 College Station, TX 77845-3170 outstanding quality. All other trademarks renewable wind power resources and soy reached $8.3 billion1 % 9 Telephone: 800-226-0083 featured herein are the property of their ink. PepsiCo continues to reduce the costs Core constant currency 201-680-6578 (outside the U.S.) respective owners. and environmental impact of annual report 1 EPS grew 9% Website: www.computershare.com/investor printing and mailing by utilizing a distribu- Online inquiries: www-us.computer tion model that drives increased online share.com/investor/contact readership and fewer printed copies. You can learn more about our environmental efforts at www.pepsico.com. $8.7B We returned $8.7 billion to shareholders in 2014 through share repurchases and dividends Photography by Onishi, Teru Jason Schmidt and Steve Giralt 2014 Diversity Statistics Contribution Summary (in millions) % Women % People of Colora 2014 Board of Directors 38 31 PepsiCo Foundation $ 30.1 Senior Executivesb 27 36 Corporate Contributions* 6.6 Executives (U.S.) 32 22 Division Contributions 11.5 All Managers (U.S.) 33 27 Division Estimated In-Kind 58.8 Printing by Sandy Alexander Inc. All Employees (U.S.) 19 35 Total $107.0 The data in this chart is as of December 31, 2014, and, other than the Board of Directors, this * Corporate Contributions includes estimated in-kind donations of $0.1 million. B chart reflects full-time employees only. We delivered $1 billion in savings in 2014 $1 a) U.S. only; primarily based on completed self-identification forms. 1. Organic, core and constant currency results, as part of our 2012 Productivity Plan b) Composed of PepsiCo Executive Officers subject to Section 16 of the Securities Exchange as well as free cash flow excluding certain items, www.addison.com Act of 1934. are non-GAAP financial measures. Please refer and expect to deliver $1 billion in annual to “Reconciliation of GAAP and Non-GAAP productivity savings from 2015–2019 Information” beginning on page 141 of this Annual Report for more information about these results, including a reconciliation to the most directly comparable financial measures On the front cover: A selection of PepsiCo Design by Addison in accordance with GAAP. Annual Report covers from our first 50 years. 2014 ANNUAL REPORT 1 Indra K. Nooyi PepsiCo Chairman of the Board Dear Fellow and Chief Executive Officer Shareholders, PepsiCo delivered another year of Looking Back: Two core attributes of PepsiCo Our Half-Century Journey underlie our strong outperformance: strong performance in 2014, resulting • Adaptability: We anticipated major in double-digit total shareholder As we prepare to celebrate PepsiCo’s shifts in the consumer landscape and returns. As 2015 heralds our company’s 50th year in June, we look back at our business environment and met them journey with pride. In 1965, when 50th anniversary, I want to take head-on by preemptively retooling the the Pepsi-Cola Company and Frito-Lay, company for advantage and growth. this opportunity to share my thoughts Inc. merged to create PepsiCo, our • Performance: At the same time on what has made PepsiCo one of revenue was $510 million. Today, that we have been driving sometimes it stands at more than $66 billion. the top-performing food and beverage radical change, we have managed Our market capitalization, which to deliver strong financial results over companies of the past 50 years, and was $842 million at the end of 1965, the long term. the steps we are taking to extend this grew to $141 billion at the end of I am confident that these attributes 2014, putting us in the top 10% of legacy of success for decades to come. will continue to define our company the S&P 500 by market value. If you for the next 50 years. invested $100 in PepsiCo stock at the end of 1965, it was worth nearly The “Adaptable” Corporation $43,000 at the end of 2014, a 13.2% annualized return.1 A $100 investment Throughout the past half-century, in the S&P 500 over the same time PepsiCo has made bold moves to period was worth nearly $10,000 at the reshape our portfolio, build new end of 2014, a 9.8% annualized return. capabilities and invest in new geog- raphies. I’d like to share with you four major trends and how we adapted in order to thrive. 1. For further information, please see pages 2 and 3. 2 PEPSICO The Growth of $45,000 PepsiCo’s Portfolio of Billion Dollar Brands BRAND PepsiCo’s product portfolio includes 22 brands that generate more than $1 billion each in estimated annualPEPSI_S1_2PMS_NB _SM (R SE 2" 1") DT_PEPSI_S1_NB_S_4C (R SE "T 1") retail sales. PANTONE PANTONE CMYK $40,000 2945 185 $35,000 Cumulative Total PEPSI_S1_2PMS_NB_MEDIM (R SE 1" 4") DT_PEPSI_S1_NB_EDI_4C (R SE 1"T 4") Shareholder ReturnPANTONE PANTONE CMYK 2945 185 $30,000 Since 1965 Return on PepsiCo stock investment On October 6, 1997, PepsiCo spun off its and the S&P 500, assuming the restaurant business to its shareholders, reinvestment of all dividends paid and who received one share of common stock $25,000 adjusted for stock splits, calculated of Yum! Brands, Inc. (formerly known as through December 31, 2014. TRICON Global Restaurants, Inc.) (Yum!) for every 10 shares of PepsiCo capital stock A $100 investment in PepsiCo stock owned by them (Spin-Off). This return on at the end of 1965 was worth nearly PepsiCo stock assumes that shareholders $20,000 $43,000 at the end of 2014, a 13.2% immediately sold the Yum! shares received annualized return, compared to a PEPSI_S1_2PMS_NB_LARGE (4" AND LARGER) from the Spin-Off and concurrentlyDT_PEPSI_S1_NB_LARGE_4C (4" AND LARGER) $100 investment in the S&P 500 over PANTONE PANTONE CMYK 2945 185 CYAN 100 CYAN 0reinvested the proceeds in additional To convert the PEPSI logo to 4 - color process MAGENTA 69 MAGENTA 100 the same time period, whichplease was use these worth values; YELL OW 17 YELLOW 82 BLACK 3 BLACK 0shares of PepsiCo common stock. $15,000 nearly $10,000 at the end of 2014, a 9.8% annualized return. $10,000 PepsiCo, Inc. Total Shareholder Return from December 31, 1965 to December 31, 2014 S&P 500 Total Shareholder Return from In 1986, a $100 December 31, 1965 to December 31, 2014 investment made in 1965 would be worth more than: $5,000 $1,000 $100 PEP Net Revenue* $510 M $2.3 B $8.1 B End-of-Year Split Share $0.75 $1.30 $4.04 Price** End-of-Year Actual $81.50 $70.50 $72.75 Closing 1965 1975 1985 1995 2005 2014 Price 1965 1975 1985 *Represents net revenue as initially reported for each of the years presented and does not reflect subsequent reclassifications or changes in presentation. **Closing prices have been restated to reflect PepsiCo stock splits. 2014 ANNUAL REPORT 3 In 2014, a $100 investment made in 1965 would be MAX_H1_4CP_NB_SM_ (FOR USE .25” 1.5" ) SM_LL_H1_4C CMYK worth nearly: Large 1 inch .5 inch $43,000 or less In 2013, a $100 MAX_H1_4CP_NB_MEUM(FOR USE 1.5" O 4") investment made CMYK in 1965 would be worth more than: $30,000 zero calorie cola maximum taste MAX_H1_4CP_NB_ARE_ (FOR USE 4" AN ARER) CMYK In 2005, a $100 investment made in 1965 would be worth more than: $20,000 In 1997, a $100 investment made in 1965 would be worth more than: $10,000 $30.4 B $32.6 B $66.7 B $27.94 $59.08 $94.56 $55.88 $59.08 $94.56 1995 2005 2014 4 PEPSICO Trend 1: The Growth of the Middle Class Throughout this transformation, we In 2014, we continued to expand our portfolio The past few decades saw the rise of the understood the paramount importance of of nutritious beverages middle class and the growth of women in the remaining a key partner to our large retail and foods.