Faster, Stronger, Better. PepsiCo Annual Report 2020 Annual Report 2020 Creating More ® ® Smiles with BRAND ® Every Sip and BRAND Every Bite SM A LEMON LIME SOD 2020 Financial Highlights Net Revenue Operating Profit by Division 5 Frito-Lay North America 26% 5 Frito-Lay North America 46% 6 5 26 Quaker Foods North America 4% Quaker Foods North America 6% 12 17 PepsiCo Beverages PepsiCo Beverages North America 32% North America 17% 46 4 Latin America 10% 9 Latin America 9% 10 Europe 17% Europe 12% Africa, Middle East and 17 Africa, Middle East and 32 South Asia 6% 6 South Asia 5% Asia Pacific, Australia and Asia Pacific, Australia and New Zealand and China Region 5% New Zealand and China Region 5% Mix of Net Revenue 45 42 55 58 Food 55% U.S. 58% Beverage 45% Outside U.S. 42% PepsiCo, Inc. & Consolidated Subsidiaries (in millions, except per share data; all per share amounts assume dilution) Summary of Operations 2020 2019 % Chg(a) Net revenue $70,372 $67,161 5% (a) Percentage changes are based on unrounded amounts. Core operating profit(b) $10,531 $10,602 (1)% (b) Excludes the mark-to-market net impact of our commodity derivatives, restructuring and impairment charges, as well as inventory fair value Reported earnings per share $5.12 $5.20 (2)% adjustments and merger and integration charges. See page 128 “Reconciliation of GAAP and Non-GAAP Information” for a reconciliation to the most directly comparable financial measure in accordance with GAAP. 2020 Core earnings per share(c) $5.52 $5.53 – reported operating profit decreased 2%. (c) Excludes the mark-to-market net impact of our commodity derivatives, Free cash flow(d) $6,428 $5,587 15% restructuring and impairment charges, inventory fair value adjustments and merger and integration charges, as well as pension-related settlement charges. In 2019, also excludes net tax related to the Tax Cuts and Jobs Capital spending $4,240 $4,232 – Act (TCJ Act). See page 128 “Reconciliation of GAAP and Non-GAAP Information” for a reconciliation to the most directly comparable financial measure in accordance with GAAP. Common share repurchases $2,000 $3,000 (33)% (d) Includes the impact of net capital spending. See page 128 “Reconciliation of GAAP and Non-GAAP Information” for a reconciliation to the most Dividends paid $5,509 $5,304 4% directly comparable financial measure in accordance with GAAP. 2020 net cash provided by operating activities increased 10%. Sustainability & Community Highlights We continue to make progress in our sustainability journey, using positive outcomes for all our stakeholders. At the same time, we our scale, reach, and expertise to help build a more sustainable remain committed to addressing systemic barriers to opportunity food system that can meet 21st century needs. We are committed through our Racial Equality Journey, and we continue to support to setting and working toward goals around climate, agriculture, communities in need through The PepsiCo Foundation. For more water, packaging, people, and products, while partnering with information on our Sustainability progress, Racial Equality Journey, peers, governments, and nongovernmental organizations to deliver and The PepsiCo Foundation, please visit www.pepsico.com. CLIMATE AGRICULTURE WATER In 2020, we achieved 100% OF OUR DIRECT As of 2020, our operational 100% RENEWABLE COMMODITIES1 ARE WATER-USE EFFICIENCY ELECTRICITY FOR OUR SUSTAINABLY SOURCED IMPROVED BY 15% U.S. DIRECT OPERATIONS IN 28 COUNTRIES, in high water-risk areas since 2015, progress toward our goal of 25% by 2025. and announced plans to transition to 100% and globally, nearly 86% of our direct renewable electricity globally. commodities are sustainably sourced as The Pioneer Foods acquisition is included in the Approximately 57% of our global electricity of 2020. presented metric and contributed 3 percentage points needs were met by renewable sources in 2020. We achieved our goal to source 100% to the improved progress against the 2015 baseline year. The SodaStream acquisition is not included in Bonsucro certified sustainable cane sugar the presented metric because data was not readily globally by 2020 and achieved 99% RSPO2 available; this exclusion is estimated to be not physically certified palm oil as of 2020. statistically consequential. PACKAGING PEOPLE PRODUCTS We are transitioning several brands to WOMEN HOLD 41% We’ve continued to expand our portfolio of improved choices for consumers. No-sugar BOTTLES MADE OF 100% OF OUR GLOBAL Pepsi Black (also known as Pepsi Zero 3 4 Sugar or Pepsi MAX), which had double- rPET ACROSS 22 MANAGER POSITIONS digit volume growth in 2020, is available in GLOBAL MARKETS, and continue to be paid within 1% of men in 71 countries (representing 99% of 118 GLOBAL MARKETS. in key packaging sizes, to help drive a our salaried employee population), after circular economy and ensure packaging Quaker showed strong growth across all key controlling for legitimate drivers of pay never becomes waste. markets in 2020 and gained market share such as job level, geographic location, in the cereals category in the U.S. We are also investing in strategies beyond and performance ratings.5 the bottle through reusable platforms like SodaStream, a business that delivered double-digit net revenue growth in 2020. RACIAL EQUALITY DIVERSITY COVID-19 RELIEF In 2020, together with The PepsiCo In 2020, we set new targets to Together with The PepsiCo Foundation, Foundation, we committed to investing we invested more than $60 million INCREASE OUR BLACK & globally and provided over MORE THAN $570 HISPANIC MANAGERIAL MILLION OVER 5 YEARS 145 MILLION MEALS POPULATIONS to communities and families impacted to lift up Black and Hispanic businesses in the U.S. to 10% of our workforce by COVID-19 in 2020. and communities, address issues of over the next five years. inequality, and create opportunity. 1Potatoes, whole corn, oats, and oranges 2Roundtable on Sustainable Palm Oil 3Recycled PET 4Based on full-time and part-time employees 5Based on base compensation Organizational changes (e.g., acquisitions, mergers, divestitures) are evaluated to determine if they have a statistically significant impact to sustainability metric performance. Dear Fellow Shareholders, When I wrote to you the challenge, creating smiles for our fellow associates, our communities, our consumers, our customers, the planet, and, of course, our shareholders. last Spring, few could In doing so, we welcomed the opportunity to drive positive change among have imagined what ourselves and in the wider world. Our commitment to transparency in our 2020 had in store reporting underpins this aspiration to be not just a successful company, for our company and but a sustainable one. our world. From a global pandemic that Smiles for Our Associates cost millions of lives and Communities and unleashed an economic catastrophe, We know that our company can only succeed when the society we serve flourishes. That’s why we are focused on creating to tragic examples smiles for our associates and communities by: of systemic racial Working to ensure safe working environments through social inequality, to an distancing and distribution of personal protective equipment (PPE), escalating climate especially for our frontline workers, and donating PPE to fellow crisis, and even the passing of PepsiCo’s patriarch and frontline workers around the world; first CEO, Donald M. Kendall, the past 12 months have Expanding benefits for associates who were diagnosed with COVID-19 or had to care for a sick family member; been among the most challenging in recent memory. Working with The PepsiCo Foundation to invest more than $60 million and provide over 145 million meals to hungry families And yet, despite all the heartache and pain, all the volatility and impacted by COVID-19 in 2020, with a special focus on providing disruption, I am extremely proud to tell you that PepsiCo continues nutritious meals for students who usually get meals through school; to persevere. Our strategy to become Faster, Stronger, and Better has proven to be the right one, in good times and bad—enabling us to be there Launching our Racial Equality Journey to elevate diverse voices for our communities when they need us most, whilst accelerating our within our company, our supply chain partners, and communities, growth and gaining share in many key markets. whilst helping break down longstanding racial barriers. In 2020, we began with a $400 million set of initiatives focused on increasing 1 In 2020 : Black representation at PepsiCo, supporting Black-owned businesses, Our organic revenue growth accelerated to 5.7 percent in Q4, with and lifting up Black communities over five years. We built on this 5 percent growth in global snacks and foods and 6 percent growth in with a further $172 million set of initiatives over five years focused global beverages, and mid-single digit growth in both our international on Hispanic Americans, in addition to spending $224 million with developed markets and developing and emerging markets. Hispanic suppliers in 2020; and We delivered 4.3 percent organic revenue growth for the full year, Celebrating success through our internal Smiles initiative, which which is a true testament to the dedication and efforts of our encourages associates to send smiles to each other for living our employees during a global pandemic, our diversified portfolio and PepsiCo Way behaviors and to commemorate special events. In 2020, channel mix, and our agile supply chain and go-to-market systems. we created more than 240,000 smiles on the platform. We gained or held share in most of our top markets in both snacks These efforts were recognized by our associates in our annual and beverages. organizational health survey. In 2020, we achieved our highest-ever engagement score, which is a measure of the energy, pride, and Core constant currency EPS increased 2 percent for the full year.