Pepsico 19 July 2017

PepsiCo 19 July 2017

1. Recommendation 2. Nature of business 3. Financial review 4. Divisions 5. Company guidance 6. Portfolio Guidance

• Relative valuation: Offers value – trading at P/E multiple below peers • Absolute valuation: Fully valued – well ahead of historic averages • EBITDA margins is on high base • Sales growth and net margin - lag peers in the medium term • Continued shift in consumer preferences – hamper volumes • Success of Omni-channel is vital • PepsiCo has consistently been at the front end of innovation

Global Food and Beverage company PepsiCo offers products to over 200 countries and territories 22 iconic, billion-dollar brands

Results were impacted by • Restructuring charges in conjunction with multi year productivity plan; • Commodity mark-to-market impacts • Impairment charge relating to TAB Holdings Net revenue increased 1.8% (+3% organic growth) • Food/Snacks volumes up 2% • Beverage volumes down 1% Core gross margin contracted 25 bps Core constant currency operating profit rose 4%, accordingly the core operating margin expanded 15 bps Core EPS rose 9% (+10% constant currency) to 244cps The Britvic gain had 6cents favourable impact on core EPS

Includes the group’s branded food and snack businesses in the US and Canada

% Impact of:

Reported Growth Foreign exchange Acquisitions, divestitures Organic Growth translation and structural changes Revenue 3% ------3% Operating profit 5% ------* 6%

*Items affecting comparability

Includes the group’s beverage businesses in the US and Canada

% Impact of:

Reported Growth Foreign exchange Acquisitions, divestitures Organic Growth translation and structural changes Revenue 2% ---- -1% 1% Operating profit 2% ---- -1%* 2%

*Items affecting comparability

Includes the group’s cereal, rice, pasta and other branded food businesses in the US and Canada

% Impact of: Reported Growth Foreign exchange Acquisitions, divestitures Organic Growth translation and structural changes Revenue -2% ------2% Operating profit -1% ------* -1%

*Items affecting comparability

All of the group’s beverage, food and snack businesses in Latin America % Impact of:

Reported Growth Foreign exchange Acquisitions, divestitures Organic Growth translation and structural changes Revenue 5% 1% 1% 7% Operating profit -14% 7% 6% -1%

*Items affecting comparability

All the group’s beverage, food and snack businesses in Europe and Sub-Saharan Africa Snacks: Lay’s, Walkers, Doritos, Cheetos and Ruffles, and many Quaker-branded cereals and snacks Beverages: Pepsi, Pepsi Max, 7UP, Diet Pepsi and Tropicana

% Impact of:

Reported Growth Foreign exchange Acquisitions, divestitures Organic Growth translation and structural changes Revenue 6% -1% ---- 5% Operating profit 49% 5% -8%* 46%

*Items affecting comparability

All of the group’s beverage, food and snack businesses in Asia, Middle East and North Africa Snacks: Lay’s, Kurkure, Chipsy, Doritos, Cheetos and Smith’s, many Quaker-branded cereals and snacks Beverages: Pepsi, Mirinda, 7UP, Mountain Dew, Aquafina and Tropicana.

% Impact of:

Reported Growth Foreign exchange Acquisitions, divestitures Organic Growth translation and structural changes Revenue -9% 11% ---- 2% Operating profit 104% 4% -127% -19%

*Items affecting comparability

On track to deliver full year financial targets • >3% organic revenue growth • 8% core constant currency EPS growth • Strong cash generation - $10bn CFO and $7bn FCF • Net Capex - $3bn • Dividend payments - $4.5bn • Share repurchases - $2bn

• Good quality company • Attractive dividend yield • Strong brands • Fully valued • Not recommend exposure to share at current levels