2013 GRI Report Table of Contents Company Overview 3 Human Sustainability 37 Environmental Sustainability 52 Talent Sustainability 82 PepsiCo 2013 GRI Report 2 Company Overview That’s why we see Performance with Purpose as the catalyst for our success. Strategy and Analysis It’s our contract with society, and it’s also the driver of our innovation and our competitive advantage. G4-1 CEO Letter Let me give you some examples: When I first articulated Performance with Purpose seven years ago, sustainability was often viewed as tangential to the business, or a program For a number of years, we have seen a shift by consumers to more nutritious owned by a dedicated team. But PepsiCo has shown how a clear, focused products, a trend we believe is here to stay. Consumers are increasingly sustainability agenda can be ingrained into a company’s daily operations, looking for foods and beverages that offer nutrition and convenience without be a powerful rallying cry among employees, drive strong performance and sacrificing taste. Thanks to the range of products we offer and our world‑class unlock shareholder value. Performance with Purpose is not a defined set scientific capabilities, PepsiCo is in position to meet this need. In recent years, of issues, a collection of goals or metrics, or something of interest only to a we have invested in our healthy snacks in the areas of baked grains, dairy, and select set of stakeholders. It is quite simply the way all of us at PepsiCo do hummus and fresh dips, and we have built up our non‑carbonated beverage business to deliver sustained growth. portfolio, including teas, juices, sports drinks and protein smoothies. At the same time, we continue to work on reducing sodium, saturated fats and Performance with Purpose means just what it says. It is delivering results in added sugars across our portfolio. While in some respects this has proven the right way, in a sustained way. It means we live our values and do so in a challenging, we are focused on doing more. To that end, we believe our way that fuels our performance. We like to think of it as the way we strive to aggressive investments in Research & Development will prove critical to “future‑proof” PepsiCo. meeting consumer demand, unlocking new growth streams and keeping PepsiCo strong for the long term. Let me explain. Today, we are a $66 billion company with products found in virtually every corner of the world. But even with our size, we see vast As the global population continues to grow, and the middle class expands, opportunity to grow and thrive in an evolving environment. As we do so, demand for finite natural resources is rising. Capturing efficiencies in our Performance with Purpose is our guide. operations through innovation is an absolute necessity. In recent years, we have positioned our business for the future by doing just that. Water The corporations that win in today’s competitive, resource‑scarce and hyper‑ stewardship, in particular, is an area of intense focus for PepsiCo. Having transparent world are those that create real value for society. They are those already met our 2007 goal to improve water use efficiency by 20 percent who see their success as inextricably linked to the success of the world with a 2006 baseline, we are now looking to set more challenging goals around them. to minimize our water usage. And as a company that depends heavily on agricultural raw ingredients, our Sustainable Farming Initiative — ​which helps PepsiCo 2013 GRI Report > Company Overview > Strategy and Analysis 3 Company Overview growers increase yields and improve social and economic conditions while We continue to work toward our ambitious goals in all of these critical decreasing environmental impacts — ​is vital to our success. We are pleased areas and recognize that collaboration is the best path to innovative with, and proud of, our progress — ​but we are not satisfied. solutions and progress. If you have comments on this report and our Performance with Purpose journey, we welcome them via email at Finally, competition for top‑tier talent has never been as great as it is today. [email protected]. For PepsiCo to remain a leader that anticipates change in order to meet it, we need to be among the world’s best at attracting and developing talent. While it gives me great pleasure to publish this sustainability report detailing Last year, we revitalized our PepsiCo University program, launching new skills our progress and accomplishments, in many ways it becomes more difficult and leadership trainings at every level of the company. We also champion with each iteration. It is becoming harder to answer the questions: Where diversity and inclusion within our teams globally. A more complex and do the sustainability issues begin and end? What distinguishes sustainability fragmented marketplace requires a vibrant workforce armed with diversity performance from financial performance? When does sustainable business of thought to meet the dynamic needs of our business and our world. become “business as usual?” At PepsiCo, they are one and the same. And we call it Performance with Purpose. Indra K. Nooyi Chairman and Chief Executive Officer PepsiCo 2013 GRI Report > Company Overview > Strategy and Analysis 4 Company Overview G4-2 Description of key impacts, risks and opportunities Since we began our transformation journey, we have undertaken a variety of initiatives to position ourselves for superior value creation over the long Performance with Purpose, set out in 2007, is our goal to deliver top‑tier term, including investment in our core brands, increased innovation, focus on financial performance while creating sustainable growth in shareholder developing and emerging markets, the strengthening of our most important value. Performance with Purpose is our recognition that PepsiCo’s success nutrition platforms and brands (Quaker, Tropicana, Gatorade and Naked is inextricably linked to society’s success. To create and sustain long‑term Juice), reinforcement of our global go‑to‑market capability, and a redoubling benefits for our shareholders, we must take into account the needs and of our efforts in developing and recruiting top talent. In 2013: concerns of a wide range of stakeholders. If our financial success comes at the expense of the environment, our consumers or our communities, we will not 1. We invested to enhance the equity of our portfolio of 22 billion‑dollar be viable in the long run. brands, which together account for more than 70 percent of our total revenue. We increased advertising and marketing, which in 2013 stood at In practice, Performance with Purpose means we provide a wide range of 5.9 percent of net revenue — ​up from 5.2 percent in 2011. More importantly, foods and beverages from treats to healthy eats; we find innovative ways to this investment led to significant brand equity improvement. For example, minimize our impact on the environment and lower our costs through energy in 2013, brand equity scores for our global beverage and snack brands and water conservation, as well as reduced use of packaging material; we held or gained in 90 percent of our strategic markets, and six of our global provide a safe and inclusive workplace for our employees globally; and we brands saw brand equity hold or gain in 100 percent of their strategic respect, support and invest in the local communities in which we operate. markets. Our brand‑building efforts are paying off: PepsiCo has nine of Performance with Purpose remains our true north, and it is more important the 40 largest packaged goods trademarks in the United States according than ever. to IRI. In 2013, PepsiCo continued the transformation we began back in 2007 — ​to 2. We fine‑tuned and ramped up our innovation to make this one of PepsiCo’s deliver the strong financial results our shareholders expect year after year, best years ever for innovation. In fact, in 2013, PepsiCo had nine of the top while investing in and transforming the company to ensure that it is built for 50 new food and beverage product introductions across all measured long‑term, sustainable growth. U.S. retail channels. We also opened a state‑of‑the‑art food and beverage innovation center in Shanghai, China, to fuel new product, packaging and In short, we perform while we transform. equipment innovation for our businesses throughout Asia. Innovation as Despite a very challenging operating environment in 2013 that included a percentage of net revenue grew to 9 percent in 2013 and, as a whole, our economic instability and uncertainty in many of our key markets around research and development (R&D) investments have increased more than the world, we delivered on, or exceeded, each and every one of the financial 25 percent since 2011. goals we announced to shareholders at the beginning of the year. PepsiCo 2013 GRI Report > Company Overview > Strategy and Analysis 5 Company Overview 3. Our developing and emerging markets, a major investment area, continued The foundation for our future success is based on execution, discipline to to perform well despite significant volatility in key regions. Our convenient, drive results in the short term, and investments to build capabilities and on‑trend and affordable products, coupled with a long runway for growth advantage for the long term. We are confident that we have the right model, in developing and emerging markets, give us confidence that these capabilities, people, portfolio and policies to continue delivering value to our markets can sustain solid growth over the long term. consumers, customers, shareholders and stakeholders over the long term. 4. Building from our positions of strength with four of the most important The operating environment in 2013 was volatile, and we expect further nutrition platforms and brands — ​Quaker (grains), Tropicana (fruits and changes.