PEPSICO INC

Previous wording

During the 12 and 24 weeks ended June 15, 2024, we continued to experience higher operating costs, including on transportation and labor costs, which may continue for the remainder of 2024. Many of the commodities used in the production and transportation of our products are purchased in the open market. The prices we pay for such items are subject to fluctuation, and we manage this risk through the use of fixed-price contracts and purchase orders, pricing agreements and derivative instruments, including swaps and futures. A number of external factors, including the ongoing conflict in Ukraine, the inflationary cost environment, adverse weather conditions, supply chain disruptions and labor shortages, have impacted and may continue to impact transportation and labor costs. When prices increase, we may or may not pass on such increases to our customers, which may result in reduced volume, revenue, margins and operating results.

Current wording

During the 12 and 36 weeks ended September 7, 2024, we continued to experience higher operating costs, including on transportation and labor costs, which may continue for the remainder of 2024. Many of the commodities used in the production and transportation of our products are purchased in the open market. The prices we pay for such items are subject to fluctuation, and we manage this risk through the use of fixed-price contracts and purchase orders, pricing agreements and derivative instruments, including swaps and futures. A number of external factors, including the ongoing conflict in Ukraine, the inflationary cost environment, adverse weather conditions, supply chain disruptions and labor shortages, have impacted and may continue to impact transportation and labor costs. When prices increase, we may or may not pass on such increases to our customers, which may result in reduced volume, revenue, margins and operating results.

Previous wording

In the 12 weeks ended June 15, 2024, our financial results outside of North America reflect the months of March, April and May. In the 24 weeks ended June 15, 2024, our financial results outside of North America reflect the months of January through May. In the 24 weeks ended June 15, 2024, our operations outside of the United States generated 42% of our consolidated net revenue, with Mexico, Canada, Russia, China, the United Kingdom, Brazil and South Africa comprising approximately 24% of our consolidated net revenue. As a result, we are exposed to foreign exchange risk in the international markets in which our products are made, manufactured, distributed or sold. In the 12 and 24 weeks ended June 15, 2024, unfavorable foreign exchange reduced net revenue growth by 1 percentage point primarily due to declines in the Russian ruble and Egyptian pound, partially offset by an appreciation of the Mexican peso. Currency declines against the U.S. dollar which are not offset could adversely impact our future financial results.

Current wording

In the 12 weeks ended September 7, 2024, our financial results outside of North America reflect the months of June, July and August. In the 36 weeks ended September 7, 2024, our financial results outside of North America reflect the months of January through August. In the 36 weeks ended September 7, 2024, our operations outside of the United States generated 43% of our consolidated net revenue, with Mexico, Canada, Russia, China, the United Kingdom, Brazil and South Africa comprising approximately 25% of our consolidated net revenue. As a result, we are exposed to foreign exchange risk in the international markets in which our products are made, manufactured, distributed or sold. In the 12 weeks ended September 7, 2024, unfavorable foreign exchange negatively impacted net revenue performance by 2 percentage points primarily due to declines in the Egyptian pound, Mexican peso and Brazilian real. In the 36 weeks ended September 7, 2024, unfavorable foreign exchange reduced net revenue growth by 1 percentage point primarily due to declines in the Egyptian pound and Russian ruble, partially offset by an appreciation of the Mexican peso. Currency declines against the U.S. dollar which are not offset could adversely impact our future financial results.

Previous wording

In addition, volatile economic, political, social and geopolitical conditions, civil unrest and wars and other military conflicts, acts of terrorism and natural disasters and other catastrophic events in certain markets in which our products are made, manufactured, distributed or sold, including in Argentina, Brazil, China, Mexico, the Middle East, Pakistan, Russia, Turkey and Ukraine, continue to result in challenging operating environments and have resulted in and could continue to result in changes in how we operate in certain of these markets. Debt and credit issues, currency controls or fluctuations in certain of these international markets (including restrictions on the transfer of funds to and from certain markets), as well as the threat or imposition of new or expanded tariffs, sanctions or export controls have also continued to impact our operations in certain of these international markets. We continue to closely monitor the economic, operating and political environment in the markets in which we operate, including risks of additional impairments or write-offs and currency devaluation, and to identify actions to potentially mitigate any unfavorable impacts on our future results. Our operations in Russia accounted for 4% of our consolidated net revenue for both the 12 and 24 weeks ended June 15, 2024. Russia accounted for 4% of our consolidated assets, including 11% of our consolidated cash and cash equivalents, and 34% of our accumulated currency translation adjustment loss as of June 15, 2024.

Current wording

In addition, volatile economic, political, social and geopolitical conditions, civil unrest and wars and other military conflicts, acts of terrorism and natural disasters and other catastrophic events in certain markets in which our products are made, manufactured, distributed or sold, including in Argentina, Brazil, China, Mexico, the Middle East, Pakistan, Russia, Turkey and Ukraine, continue to result in challenging operating environments and have resulted in and could continue to result in changes in how we operate in certain of these markets. Debt and credit issues, currency controls or fluctuations in certain of these international markets (including restrictions on the transfer of funds to and from certain markets), as well as the threat or imposition of new or expanded tariffs, sanctions or export controls have also continued to impact our operations in certain of these international markets. We continue to closely monitor the economic, operating and political environment in the markets in which we operate, including risks of additional impairments or write-offs and currency devaluation, and to identify actions to potentially mitigate any unfavorable impacts on our future results. Our operations in Russia accounted for 5% and 4% of our consolidated net revenue during the 12 and 36 weeks ended September 7, 2024, respectively.

Previous wording

Numerous countries have agreed to a statement in support of the OECD model rules that propose a global minimum tax rate of 15%. Certain countries have enacted legislation incorporating the agreed global minimum tax effective in 2024. Legislation enacted as of June 15, 2024 is not expected to have a material impact on our 2024 financial statements. More countries are expected to enact similar legislation, with widespread implementation of a global minimum tax by 2025. As legislation becomes effective in more countries in which we do business, our taxes could increase and negatively impact our provision for income taxes. We will continue to monitor pending legislation and implementation by countries and evaluate the potential impact on our business in future periods.

Current wording

Numerous countries have agreed to a statement in support of the OECD model rules that propose a global minimum tax rate of 15%. Certain countries have enacted legislation incorporating the agreed global minimum tax effective in 2024. Legislation incorporating the agreed global minimum taxenacted as of September 7, 2024 is not expected to have a material impact on our 2024 financial statements. More countries are expected to enact similar legislation, with widespread implementation of a global minimum tax by 2025. As legislation becomes effective in more countries in which we do business, our taxes could increase and negatively impact our provision for income taxes. We will continue to monitor pending legislation and implementation by countries and evaluate the potential impact on our business in future periods.

Previous wording

We report all of our international operations on a monthly calendar basis. The 12 weeks ended June 15, 2024 and June 17, 2023 include volume outside of North America for the months of March, April and May. The 24 weeks ended June 15, 2024 and June 17, 2023 include volume outside of North America for the months of January through May.

Current wording

We report all of our international operations on a monthly calendar basis. The 12 weeks ended September 7, 2024 and September 9, 2023 include volume outside of North America for the months of June, July and August. The 36 weeks ended September 7, 2024 and September 9, 2023 include volume outside of North America for the months of January through August.

Previous wording

Operating profit increased 11% and operating margin increased 1.6 percentage points. Operating profit growth was primarily driven by effective net pricing, productivity savings and a 3-percentage-point impact of prior-year impairment charges related to our TBG investment. These impacts were partially offset by certain operating cost increases and a decline in organic volume.

Current wording

Operating profit decreased 4% and operating margin decreased 0.5 percentage points. Operating profit performance was primarily driven by certain operating cost increases, a decline in organic volume, a 4-percentage-point impact of higher restructuring charges and a 3-percentage-point impact of net mark-to-market losses on commodity derivatives. These impacts were partially offset by effective net pricing and productivity savings.

Previous wording

Operating profit increased 8% and operating margin increased 0.9 percentage points. Operating profit growth was primarily driven by effective net pricing and productivity savings. These impacts were partially offset by certain operating cost increases and a decline in organic volume.

Current wording

Operating profit increased 3% and operating margin increased slightly. Operating profit growth was primarily driven by effective net pricing and productivity savings. These impacts were partially offset by certain operating cost increases and a decline in organic volume.

Previous wording

Other pension and retiree medical benefits income decreased $4 million, primarily reflecting the recognition of special termination benefits due to restructuring actions as part of our 2019 Productivity Plan, partially offset by the recognition of gains on plan assets and impact of discretionary plan contributions.

Current wording

Other pension and retiree medical benefits income decreased $21 million, primarily reflecting settlement charges related to certain U.S. and international defined benefit plans and the recognition of special termination benefits due to restructuring actions as part of our 2019 Productivity Plan, partially offset by the recognition of gains on plan assets and impact of discretionary plan contributions.

Previous wording

Net interest expense and other increased $33 million, due to higher interest rates on debt, higher average debt balances and lower gains on the market value of investments used to economically hedge a portion of our deferred compensation liability, partially offset by higher average cash balances and higher interest rates on average cash balances.

Current wording

Net interest expense and other increased $18 million, due to higher interest rates on debt, lower average cash balances and higher average debt balances, partially offset by higher interest rates on average cash balances and higher gains on the market value of investments used to economically hedge a portion of our deferred compensation liability.

Previous wording

The reported tax rate decreased 1.2 percentage points, primarily as a result of the release of a valuation allowance in a foreign jurisdiction in the current year, partially offset by the unfavorable impact of reserves for international unrecognized tax benefits.

Current wording

The reported tax rate increased 0.7 percentage points, primarily as a result of an intercompany tax loss in the prior year, partially offset by the release of a tax reserve in a foreign jurisdiction in the current year.

Previous wording

Other pension and retiree medical benefits income decreased $7 million, primarily reflecting the recognition of special termination benefits due to restructuring actions as part of our 2019 Productivity Plan, partially offset by the recognition of gains on plan assets and impact of discretionary plan contributions.

Current wording

Other pension and retiree medical benefits income decreased $28 million, primarily reflecting the recognition of special termination benefits due to restructuring actions as part of our 2019 Productivity Plan and settlement charges related to certain U.S. and international defined benefit plans, partially offset by the recognition of gains on plan assets and impact of discretionary plan contributions.

Previous wording

Net interest expense and other increased $35 million, dueto higher interest rates on debt, higher average debt balances and lower gains on the market value of investments used to economically hedge a portion of our deferred compensation liability, partially offset by higher average cash balances and higher interest rates on average cash balances.

Current wording

Net interest expense and other increased $53 million, dueto higher interest rates on debt and higher average debt balances, partially offset by higher average cash balances, higher interest rates on average cash balances and higher gains on the market value of investments used to economically hedge a portion of our deferred compensation liability.

Previous wording

The reported tax rate decreased 1.4 percentage points, primarily reflecting the release of a valuation allowance in a foreign jurisdiction in the current year.

Current wording

The reported tax rate decreased 0.6 percentage points, primarily reflecting the release of a valuation allowance in a foreign jurisdiction in the current year.

Previous wording

While our financial results in North America are reported on a 12-week basis, all of our international operations are reported on a monthly calendar basis for which the months of March, April and May are reflected in our results for the 12 weeks ended June 15, 2024 and June 17, 2023, and the months January through May are reflected in our results for the 24 weeks ended June 15, 2024 and June 17, 2023.

Current wording

While our financial results in North America are reported on a 12-week basis, all of our international operations are reported on a monthly calendar basis for which the months of June, July and August are reflected in our results for the 12 weeks ended September 7, 2024 and September 9, 2023, and the months January through August are reflected in our results for the 36 weeks ended September 7, 2024 and September 9, 2023.

Previous wording

(b)Excludes the impact of acquisitions and divestitures. In certain instances, the impact of organic volume on net revenue growth differs from the unit volume change disclosed in the following divisional discussions due to the impacts of product mix, nonconsolidated joint venture volume, and, for our franchise-owned beverage businesses, temporary timing differences between bottler case sales and concentrate shipments and equivalents (CSE). We report net revenue from our franchise-owned beverage businesses based on CSE. The volume sold by our nonconsolidated joint ventures has no direct impact on our net revenue.

Current wording

(b)Excludes the impact of acquisitions and divestitures. In certain instances, the impact of organic volume on net revenue performance differs from the unit volume change disclosed in the following divisional discussions due to the impacts of product mix, nonconsolidated joint venture volume, and, for our franchise-owned beverage businesses, temporary timing differences between bottler case sales and concentrate shipments and equivalents (CSE). We report net revenue from our franchise-owned beverage businesses based on CSE. The volume sold by our nonconsolidated joint ventures has no direct impact on our net revenue.

Previous wording

Net revenue decreased 0.5%, primarily driven by a decrease in organic volume, partially offset by effective net pricing.

Current wording

Net revenue decreased 1%, primarily driven by a decrease in organic volume, partially offset by effective net pricing.

Previous wording

Unit volume declined 4%, primarily driven by mid-single-digit declines in trademark Cheetos, trademark Doritos and trademark Lay’s, partially offset by double-digit growth in trademark Chester’s.

Current wording

Unit volume declined 1.5%, primarily driven by a high-single-digit decline in trademark Tostitos, a mid-single-digit decline in trademark Cheetos and a low-single-digit decline in variety packs, partially offset by mid-single-digit growth in trademark Lay’s.

Previous wording

Operating profit decreased 3%, primarily reflecting certain operating cost increases, including strategic initiatives, and the decrease in organic volume. These impacts were partially offset by the effective net pricing, productivity savings, and a 2-percentage-point favorable impact of lower commodity costs, primarily driven by cooking oil.

Current wording

Operating profit decreased 9%, primarily reflecting certain operating cost increases, including strategic initiatives, and the decrease in organic volume. These impacts were partially offset by productivity savings and a 2-percentage-point impact of lower commodity costs, primarily driven by cooking oil.

Previous wording

Unit volume declined 3%, primarily driven by mid-single-digit declines in trademark Lay’s, trademark Cheetos and trademark Tostitos, partially offset by double-digit growth in trademark Chester’s.

Current wording

Unit volume declined 2%, primarily driven by mid-single-digit declines in trademark Tostitos and trademark Cheetos and a low-single-digit decline in variety packs, partially offset by double-digit growth in trademark Chester’s.

Previous wording

Operating profit decreased 3%, primarily reflecting certain operating cost increases, including strategic initiatives, and the decrease in organic volume. These impacts were partially offset by the effective net pricing and productivity savings.

Current wording

Operating profit decreased 5%, primarily reflecting certain operating cost increases, including strategic initiatives, and the decrease in organic volume. These impacts were partially offset by productivity savings and the effective net pricing.

Previous wording

Net revenue decreased 21%, primarily driven by a decrease in organic volume, which was negatively impacted by the loss of sales from products included in the Quaker Recall.

Current wording

Net revenue decreased 13%, driven by a decrease in organic volume, which was negatively impacted by the loss of sales from products included in the Quaker Recall.

Previous wording

Unit volume declined 20%, primarily driven by double-digit declines in bars, ready-to-eat cereals, pancake syrup and mix and oatmeal. The unit volume decline in bars and ready-to-eat cereals was negatively impacted by the loss of sales from products included in the Quaker Recall.

Current wording

Unit volume declined 13%, primarily driven by double-digit declines in bars, oatmeal and ready-to-eat cereals. The unit volume decline in bars and ready-to-eat cereals was negatively impacted by the loss of sales from products included in the Quaker Recall.

Previous wording

Operating profit decreased slightly, primarily reflecting certain operating cost increases, partially offset by productivity savings.

Current wording

Operating profit decreased 28%, primarily reflecting the decline in organic volume and certain operating cost increases, partially offset by productivity savings, effective net pricing and lower advertising and marketing expenses.

Previous wording

Net revenue decreased 18%, primarily driven by a decrease in organic volume, which was negatively impacted by the loss of sales from products included in the Quaker Recall.

Current wording

Net revenue decreased 18%, driven by a decrease in organic volume, which was negatively impacted by the loss of sales from products included in the Quaker Recall.

Previous wording

Unit volume declined 17%, primarily driven by double-digit declines in bars, pancake syrup and mix, oatmeal and ready-to-eat cereals. The unit volume decline in bars and ready-to-eat cereals was negatively impacted by the loss of sales from products included in the Quaker Recall.

Current wording

Unit volume declined 17%, primarily driven by double-digit declines in bars, ready-to-eat cereals, oatmeal and pancake syrup and mix. The unit volume decline in bars and ready-to-eat cereals was negatively impacted by the loss of sales from products included in the Quaker Recall.

Previous wording

Operating profit decreased 34%, primarily reflecting the net revenue performance, certain operating cost increases, a 12-percentage-point impact of charges associated with the Quaker Recall and a 6-percentage-point unfavorable impact of commodity costs, partially offset by productivity savings and lower advertising and marketing expenses.

Current wording

Operating profit decreased 71%, primarily reflecting a 40-percentage-point impact of charges associated with the Quaker Recall, the net revenue performance and certain operating cost increases, partially offset by productivity savings and lower advertising and marketing expenses.

Previous wording

Unit volume declined 3%, driven by a 5% decline in non-carbonated beverage (NCB) volume and a 2% decline in carbonated soft drink (CSD) volume. The NCB volume decline primarily reflected mid-single-digit declines in our overall water portfolio and our juice and juice drinks portfolio, a low-single-digit decline in Gatorade sports drinks and a high-single-digit decline in our Lipton ready-to-drink tea portfolio, partially offset by double-digit growth in our energy portfolio.

Current wording

Unit volume declined 3%, driven by 3% declines in non-carbonated beverage (NCB) volume and carbonated soft drink (CSD) volume. The NCB volume decline primarily reflected a mid-single-digit decline in our overall water portfolio and a high-single-digit decline in our Lipton ready-to-drink tea portfolio, partially offset by low-single-digit growth in Gatorade sports drinks.

Previous wording

Unit volume declined 4%, driven by a 6% decline in NCB volume and a 2% decline in CSD volume. The NCB volume decline primarily reflected mid-single-digit declines in Gatorade sports drinks and our overall water portfolio and a high-single-digit decline in our Lipton ready-to-drink tea portfolio, partially offset by double-digit growth in our energy portfolio.

Current wording

Unit volume declined 3.5%, driven by a 5% decline in NCB volume and a 2.5% decline in CSD volume. The NCB volume decline primarily reflected high-single-digit declines in our overall water portfolio and our Lipton ready-to-drink tea portfolio and a mid-single-digit decline in our Gatorade sports drinks, partially offset by high-single-digit growth in our energy portfolio.

Previous wording

Operating profit increased 24%, primarily driven by the effective net pricing and productivity savings. Additionally, impairment charges related to our TBG investment and net unfavorable insurance adjustments in the prior year contributed 11 percentage points and 4 percentage points, respectively, to operating profit growth. These impacts were partially offset by certain operating cost increases, the decrease in organic volume and a 4-percentage-point impact of higher commodity costs.

Current wording

Operating profit increased 11%, primarily driven by the effective net pricing and productivity savings. Additionally, impairment charges related to our TBG investment and net unfavorable insurance adjustments in the prior year contributed 5 percentage points and 3 percentage points, respectively, to operating profit growth. These impacts were partially offset by certain operating cost increases, the decrease in organic volume and a 5-percentage-point impact of higher restructuring charges.

Previous wording

Beverage unit volume grew 2%, primarily reflecting mid-single-digit growth in Mexico and Brazil and high-single-digit growth in Guatemala, partially offset by a double-digit decline in Colombia, a high-single-digit decline in Argentina, a mid-single-digit decline in Peru and a low-single-digit decline in Chile.

Current wording

Beverage unit volume declined 1%, primarily reflecting a double-digit decline in Colombia and mid-single-digit declines in Guatemala and Argentina, partially offset by high-single-digit growth in Brazil and low-single-digit growth in Mexico.

Previous wording

Net revenue increased 7%, primarily reflecting effective net pricing and a 5-percentage-point impact of favorable foreign exchange, partially offset by a net decline in organic volume.

Current wording

Net revenue increased 4%, primarily reflecting effective net pricing, partially offset by a net decline in organic volume.

Previous wording

Convenient foods unit volume declined 4%, primarily reflecting double-digit declines in Peru and Argentina, partially offset by low-single-digit growth in Brazil. Additionally, Mexico experienced a low-single-digit decline.

Current wording

Convenient foods unit volume declined 3%, primarily reflecting double-digit declines in Peru and Argentina, partially offset by low-single-digit growth in Brazil. Additionally, Mexico experienced a low-single-digit decline.

Previous wording

Beverage unit volume grew 2%, primarily reflecting mid-single-digit growth in Mexico and Brazil and high-single-digit growth in Guatemala, partially offset by double-digit declines in Colombia, Argentina and Peru and a mid-single-digit decline in Chile.

Current wording

Beverage unit volume grew 1%, primarily reflecting low-single-digit growth in Mexico and Guatemala and high-single-digit growth in Brazil, partially offset by a double-digit decline in Colombia, high-single-digit declines in Argentina and Peru and a low-single-digit decline in Chile.

Previous wording

Operating profit increased 8%, primarily reflecting the effective net pricing, productivity savings and a 7-percentage-point impact of favorable foreign exchange. These impacts were partially offset by certain operating cost increases, the net decline in organic volume and higher advertising and marketing expenses.

Current wording

Operating profit increased 11%, primarily reflecting the effective net pricing, productivity savings and a 6-percentage-point impact of lower commodity costs. These impacts were partially offset by certain operating cost increases, the net decline in organic volume and higher advertising and marketing expenses.

Previous wording

Beverage unit volume grew 3%, primarily reflecting double-digit growth in Russia and mid-single-digit growth in Turkey and the United Kingdom, partially offset by a double-digit decline in France and a slight decline in Germany.

Current wording

Beverage unit volume grew slightly, primarily reflecting mid-single-digit growth in Russia and low-single-digit growth in Germany and the United Kingdom, partially offset by a high-single-digit decline in France and a slight decline in Turkey.

Previous wording

Operating profit increased 1%, primarily reflecting the net revenue growth, productivity savings and a 3-percentage-point favorable impact of lower commodity costs. These impacts were partially offset by certain operating cost increases, higher advertising and marketing expenses and a 4-percentage-point impact of unfavorable foreign exchange.

Current wording

Operating profit increased 11%, primarily reflecting the net revenue growth and productivity savings. These impacts were partially offset by certain operating cost increases, a 7-percentage-point unfavorable impact of an insurance recovery in the prior year, higher advertising and marketing expenses and a 4-percentage-point impact of higher commodity costs, driven by transaction-related foreign exchange.

Previous wording

Convenient foods unit volume grew 4%, primarily reflecting double-digit growth in Russia and high-single-digit growth in Turkey, partially offset by a high-single-digit decline in France and a low-single-digit decline in the Netherlands. Additionally, the United Kingdom experienced low-single-digit growth.

Current wording

Convenient foods unit volume grew 3%, primarily reflecting high-single-digit growth in Russia, mid-single-digit growth in Turkey and low-single-digit growth in the United Kingdom, partially offset by a double-digit decline in France and a low-single-digit decline in the Netherlands.

Previous wording

Operating profit increased 30%, primarily reflecting the net revenue growth, productivity savings and a 9-percentage-point favorable impact of lower restructuring charges. These impacts were partially offset by certain operating cost increases, a 6-percentage-point impact of unfavorable foreign exchange and a 6-percentage-point impact of higher commodity costs.

Current wording

Operating profit increased 29%, primarily reflecting the net revenue growth, productivity savings and a 12-percentage-point favorable impact of lower restructuring charges. These impacts were partially offset by certain operating cost increases, a 6-percentage-point impact of higher commodity costs, driven by transaction-related foreign exchange, higher advertising and marketing costs, a 4-percentage-point impact of unfavorable foreign exchange translation and a 3.5-percentage-point unfavorable impact of an insurance recovery in the prior year.

Previous wording

Net revenue increased 2%, primarily reflecting effective net pricing and organic volume growth, partially offset by an 11-percentage-point impact of unfavorable foreign exchange, driven primarily by the weakening of the Egyptian pound.

Current wording

Net revenue decreased 4%, primarily reflecting an 11-percentage-point impact of unfavorable foreign exchange, driven primarily by the weakening of the Egyptian pound, and an organic volume decline, partially offset by effective net pricing.

Previous wording

Convenient foods unit volume grew 1%, primarily reflecting double-digit growth in India and low-single-digit growth in South Africa, partially offset by a double-digit decline in the Middle East and a low-single-digit decline in Pakistan.

Current wording

Convenient foods unit volume declined 3%, primarily reflecting double-digit declines in the Middle East and Pakistan, partially offset by slight growth in South Africa and high-single-digit growth in India.