PepsiCo 19 July 2017 Copyright © PSG Contents 1. Recommendation 2. Nature of business 3. Financial review 4. Divisions 5. Company guidance 6. Portfolio Guidance 2 Copyright © PSG 01 Recommendation 3 Copyright © PSG Recommended exposure – 0% • 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 4 Copyright © PSG 02 Nature of business 5 Copyright © PSG Nature of business Global Food and Beverage company PepsiCo offers products to over 200 countries and territories 22 iconic, billion-dollar brands 6 Copyright © PSG 03 Financial review 7 Copyright © PSG Financial review 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 8 Copyright © PSG 04 Divisions 9 Copyright © PSG Frito-Lay North America (FLNA) Includes the group’s branded food and snack businesses in the US and Canada 10 Copyright © PSG Frito-Lay North America (FLNA) % Impact of: Reported Growth Foreign exchange Acquisitions, divestitures Organic Growth translation and structural changes Revenue 3% ---- ---- 3% Operating profit 5% ---- ----* 6% *Items affecting comparability 11 Copyright © PSG North America Beverages (NAB) Includes the group’s beverage businesses in the US and Canada 12 Copyright © PSG North America Beverages (NAB) % 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 13 Copyright © PSG Quaker Foods North America (QFNA) Includes the group’s cereal, rice, pasta and other branded food businesses in the US and Canada 14 Copyright © PSG Quaker Foods North America (QFNA) % Impact of: Reported Growth Foreign exchange Acquisitions, divestitures Organic Growth translation and structural changes Revenue -2% ---- ---- -2% Operating profit -1% ---- ----* -1% *Items affecting comparability 15 Copyright © PSG Latin America (LA) 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 16 Copyright © PSG Europe Sub-Saharan Africa (ESSA) 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 17 Copyright © PSG Europe Sub-Saharan Africa (ESSA) % 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 18 Copyright © PSG Asia, Middle East and North Africa (AMENA) 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. 19 Copyright © PSG Asia, Middle East and North Africa (AMENA) % 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 20 Copyright © PSG 05 Company guidance 21 Copyright © PSG Company guidance 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 22 Copyright © PSG 06 Portfolio guidance 23 Copyright © PSG Portfolio Guidance • Good quality company • Attractive dividend yield • Strong brands • Fully valued • Not recommend exposure to share at current levels 24 Copyright © PSG FAIS Affiliates of the PSG Konsult Group are authorised financial services providers. Copyright © PSG .