Indra nooyi project

ACKNOWLEDGEMENT

we owe my sincere thanks and heartfelt gratitude to Mr. Pankaj Upadhyaya (faculty), who
gave time to share their thoughtful criticism and suggestions to improve the work. Their
contribution gave me valuable insights into this project and immense knowledge of the area.

I am thankful to Mr. Pankaj Upadhyaya (faculty), JAGANNATH INTERNATIONAL
MANAGEMENT SCHOOL for his help and guidance at every stage to help me complete this
dissertation on time.

Last but not the least, I would also like to thank my institute JAGANNATH INTERNATIONAL
MANAGEMENT SCHOOL for inculcating in me the management knowledge and skills and then
providing me with the best faculty.

JEET BAHADUR KUMAR VERMA

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EXECUTIVE SUMMARY

The scope of the project is to study about Indra nooyi‘s risk and fall in Pepsi. From the last 20
days or so our group is in the process of a continuous research on marketing functions and
strategies adopted by Pepsi under Indra. These marketing functions mainly include the
marketing mix i.e., Product Strategy and OPPORTUNITY MAPPING as well as other market
strategies.

By looking into this study, the company will be able to take corrective measures to avoid the
loopholes provided by the company in earlier period as a result the market share of the company
will increase.

Moreover the project also discusses the analysis of competition, market growth and trend,
opportunity analysis and strategies for creating competitive advantage adopted by Pepsi.

We will like to add that the project will provide the readers and listeners very high profile
information about the marketing strategies as a whole and also about the Pepsi Company.
Therefore the company is the market leader among all beverages in 21st century.

In the end we hope that the project will result very profitable for the readers and Coca Cola.
Your feedback in the end either critical or substantial will be very highly appreciated

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CONTENT

Acknowledge

Executive

About Indra Nooyi 4

Her entry in to PepsiCo 7

The position of Pepsi when she joined and at present 8

Change in the strategy of Pepsi after Indra 9

Strategic alliances undertaken by Indra in Pepsi 11

Strategy of Pepsi after and before Indra 18

Tough time and good time of Indra 25

Growth of Pepsi v/s coke after Indra and before Indra 28

Shareholders value before Indra and after Indra 30

BCG matrix application of Pepsi under Indra 43

Should she be allowed to continue or not 49

Opposition faced by Indra 55

Future of Pepsi under Indra 58

Future of Pepsi without or after Indra 63

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About Indra Nooyi

Indra Nooyi is Chairman and Chief Executive Officer of PepsiCo. In its global food
and beverage portfolio, PepsiCo has 22 brands that generate more than $1 billion
each in annual retail sales. PepsiCo's main businesses include Quaker, Tropicana,
Gatorade, Frito-Lay and Pepsi-Cola. With more than $65 billion in annual net
revenue, PepsiCo makes hundreds of enjoyable foods and beverages that are loved
throughout the world.

Mrs. Nooyi is the chief architect of Performance with Purpose, PepsiCo‘s promise to
do what‘s right for the business by doing what‘s right for people and the planet. It‘s
the company‘s commitment to sustained growth with a focus on Performance,
Human, Environment and Talent Sustainability. In keeping with this commitment,
PepsiCo is proud to be listed on the Dow Jones Sustainability North America Index
and Dow Jones Sustainability World Index.

Mrs. Nooyi was named President and CEO on October 1, 2006 and assumed the role
of Chairman on May 2, 2007. She has directed the company's global strategy for
more than a decade and led its restructuring, including the divestiture of its
restaurants into the successful YUM! Brands, Inc., the acquisition of Tropicana and
the merger with Quaker Oats that brought the vital Quaker and Gatorade businesses
to PepsiCo, the merger with PepsiCo's anchor bottlers, and the acquisition of Wimm-
Bill-Dann, the largest international acquisition in PepsiCo's history.

Prior to becoming CEO, Mrs. Nooyi served as President and Chief Financial Officer
beginning in 2001, when she was also named to PepsiCo's Board of Directors. In this
position, she was responsible for PepsiCo's corporate functions, including finance,
strategy, business process optimization, corporate platforms and innovation,
procurement, investor relations and information technology. Between February 2000
and April 2001, Mrs. Nooyi was Senior Vice President and Chief Financial Officer of
PepsiCo. Between 1996 and 1999, Mrs. Nooyi was Senior Vice President of
Corporate Strategy and Development.

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Before joining PepsiCo in 1994, Mrs. Nooyi spent four years as Senior Vice President
of Strategy and Strategic Marketing for Asea Brown Boveri, a Zurich-based
industrials company. She was part of the top management team responsible for the
company's U.S. business as well as its worldwide industrial businesses, representing
about $10 billion of ABB's $30 billion in global sales.

Between 1986 and 1990, Mrs. Nooyi worked for Motorola, where she was Vice
President and Director of Corporate Strategy and Planning, having joined the
company as the business development executive for its automotive and industrial
electronic group. Prior to Motorola, she spent six years directing international
corporate strategy projects at The Boston Consulting Group. Her clients ranged from
textiles and consumer goods companies to retailers and specialty chemicals
producers. Mrs. Nooyi began her career in India, where she held product manager
positions at Johnson & Johnson and at Mettur Beardsell, Ltd., a textile firm.

In addition to being a member of the PepsiCo Board of Directors, Mrs. Nooyi serves
as a member of the boards of U.S.-China Business Council, U.S.-India Business
Council, The Consumer Goods Forum, Catalyst, and Lincoln Center for the
Performing Arts, The Peterson Institute for International Economics and Tsinghua
University. She is also a member of the Foundation Board of the World Economic
Forum, Successor Fellow of Yale Corporation and was appointed to the U.S.-India
CEO Forum by the Obama Administration.

She holds a B.S. from Madras Christian College, an M.B.A. from the Indian Institute
of Management in Calcutta and a Master of Public and Private Management from
Yale University. Mrs. Nooyi is married and has two daughters.

Membership and association
Nooyi is a Successor Fellow of the Yale Corporation. She serves as a member of the
Foundation Board of the World Economic Forum, International Rescue
Committee, Catalyst and the Lincoln Center for the Performing Arts. She is also a
member of the Board of Trustees of Eisenhower Fellowships, and has served as
Chairperson of the U.S.-India Business Council.

Nooyi serves as an Honorary Co-Chair for the World Justice Project. The World
Justice Project works to lead a global, multidisciplinary effort to strengthen the Rule of
Law for the development of communities of opportunity and equity.

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Honours, award and international recognition

Forbes magazine ranked Nooyi fourth on the 2008 and 2009 list of The World's 100
Most Powerful Women. Fortune magazine has named Nooyi number one on its
annual ranking of Most Powerful Women in business for 2006, 2007, 2008, 2009 and
2010. In 2008, Nooyi was named one of America's Best Leaders by U.S. News &
World Report. In 2008, she was elected to the Fellowship of the American Academy
of Arts and Sciences.
In January 2008, Nooyi was elected Chairwoman of the US-India Business Council
(USIBC). Nooyi leads USIBC's Board of Directors, an assembly of more than 60
senior executives representing a cross-section of American industry.
Nooyi has been named 2009 CEO of the Year by Global Supply Chain Leaders
Group.
In 2009, Nooyi was considered one of "The Top Gun CEOs" by Brendan Wood
International, an advisory agency. In 2010 she was named 1 on Fortune's list of the
"50 Most Powerful Women" and 6 on Forbes' list of the "World's 100 Most Powerful
Women‖. After five years on top, PepsiCo's Indian American chairman and CEO
Indra Nooyi has been pushed to the second spot as most powerful woman in US
business by Kraft's CEO, Irene Rosenfeld.
Nooyi was named to Institutional Investor's Best CEOs list in the All-America
Executive Team Survey in 2008 to 2011.

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Entry of Indra in PepsiCo

Early life and career

Nooyi was born in Madras (presently Chennai), Tamil Nadu, India. She was educated
at Holy Angels Anglo Indian Higher Secondary School in Madras. She received a
Bachelor's degree in Physics, Chemistry and Mathematics from Madras Christian
College in 1974 and a Post Graduate Diploma in Management (MBA) from Indian
Institute of Management Calcutta in 1976.[4] Beginning her career in India, Nooyi held
product manager positions at Johnson and textile firm Mettur Beardsell. She was
admitted to Yale School of Management in 1978 and earned a Master's degree in
Public and Private Management. While at Yale, she completed her summer
internship with Booz Allen Hamilton.[5] Graduating in 1980, Nooyi joined the Boston
Consulting Group (BCG), and then held strategy positions at Motorola and Asea
Brown Boveri.

PepsiCo executive
Nooyi joined PepsiCo in 1994 and was named president and CFO in 2001. Nooyi has
directed the company's global strategy for more than a decade and led PepsiCo's
restructuring, including the 1997 divestiture of its restaurants into Tricon, now known
as Yum! Brands. Nooyi also took the lead in the acquisition of Tropicana in 1998, and
merger with Quaker Oats Company, which also brought Gatorade to PepsiCo. In
2007 she became the fifth CEO in PepsiCo's 44-year history.
According to Business Week, since she started as CFO in 2000, the company's
annual revenues have risen 72%, while net profit more than doubled, to $5.6 billion in
2006.
Nooyi was named on Wall Street Journal's list of 50 women to watch in 2007 and
2008, and was listed among Time's 100 Most Influential People in The World in 2007
and 2008. Forbesnamed her the 3 most powerful women in 2008. Fortune ranked her
the 1 most powerful woman in business in 2009 and 2010. On the 7th of October
2010 Forbes magazine ranked her the 6th most powerful woman in the world.
While CEO of PepsiCo in 2011, Nooyi earned a total compensation of $17 million
which included a base salary of $1.6 million, a cash bonus of $2.5 million, pension
value and deferred compensation was $3 million.

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Position of Pepsi when she joined at between and at present

Since 1994, Nooyi took up different roles and transformed PepsiCo into the world‘s
leader in food and beverages; with a turnover of around $43bn. Her boundless hard
work, strong determination, apt and quick decision making and ability to connect the
circumstances in the corporate and the outside world pushed PepsiCo way beyond
imagination into 19 product lines like Quaker Oats, Tropicana, Gatorade, Frito-Lay,
and Pepsi-cola. It is nothing amazing to tell that PepsiCo products entered the
shelves of every family in 200 countries. This all happened because of concrete long
lived vision of Mrs.Nooyi.

After joining PepsiCo in 1994, Nooyi took up role of President and the Chief Financial
Officer in 2001 and Chief Executive Officer on 14th August 2006 as fifth CEO in forty
one -year history of PepsiCo.

Top on compensation

Nooyi is the top-paid woman on the Forbes 2010 list, with $19.53 million in
compensation in 2010, which was prestigious to PepsiCo.
The Indian origins CEO of PepsiCo was stated to ea 81 times more than the world‘s
richest man Warren Buffet, in 2007 by search firm Equilar for the New York Times. At
that time Nooyi’s compensation was $14.74mn.

Pepsi is moving to deepen its management bench and line up a potential successor
to Chairman and Chief Executive Indra Nooyi, tapping an outsider for a senior role
and an internal candidate to a new post following investor frustration with the
company's recent performance.

PepsiCo said last month it will focus much of its redoubled sales push on a dozen
major global brands. It plans to roll out its first-ever global marketing campaign for its
flagship Pepsi-Cola brand in coming weeks and to increasingly market its most-
popular drink and snack brands, such as Mountain Dew and Doritos, together.

Mrs. Nooyi signaled in February that the company could revisit its business strategy
in 18 months if performance doesn't improve. PepsiCo executives insist that breaking
up the food and beverage businesses would put PepsiCo at a big disadvantage and
that it needs the combined scale to compete effectively in developing markets around
the globe. But it hasn't ruled out eventually selling its U.S. bottling operations.

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PepsiCo's Indian-born CEO has been named in recent media reports as a potential
candidate to head the World Bank, but she hasn't been approached about the
position, according to a person familiar with the matter.

CHANGE IN THE STRATEGY OF PEPSI AFTER INDRA
This case examines the importance of strategy and leadership in the transformation
of a company. It highlights in the strategy vision and leadership style of PepsiCo‘s
CEO indra k. Nooyi. Nooyi started her career at PepsiCo in 1994 as senior vice
president (strategic planning). She rose to the post of CFO in 2001 and later become
the CEO in 2006. During her tenure at PepsiCo, she undertook a number of strategic
initiatives, Nooyi recommended spinning off taco bell, KFC and Pizza hut, arguing
that PepsiCo couldn‘t bring enough value to the fast food industry with restaurant
businesses as it required dedicated services industry management. Nooyi also led
the acquisition of Tropicana in 1998 ad merger with Quaker Oats Company in 2001.

When Nooyi became the CEO of PepsiCo, the primary goal advocated by her was to
achieve "Performance with Purpose." She implemented a number of measures to
improve the sustainability of the company's operations and image by focusing on
improvements in the health implications of PepsiCo's products. She expanded
PepsiCo's business into developing markets worldwide and focused on increasing
the composition of healthy foods in PepsiCo's product portfolio.

Issue

» Understand the role of strategic and transformational leadership in management.
» Compare and contrast different styles of leadership.
» Appreciate the strategic vision of Indra Nooyi.
» Study and comment on the leadership style of Indra Nooyi.
» Understand the importance of sustainability in the management of a company.

In 2006, Nooyi became the fifth CEO of PepsiCo. As CEO, she continued to steer
PepsiCo based on the vision of "Performance with Purpose."

She implemented a number of measures to improve the sustainability of the
company's operations and image by focusing on improvements in the health
implications of PepsiCo products.

Measures such as removing trans-fats from PepsiCo snacks, product innovations in
the Quaker Oats brand to come out with a range of consumer perceived healthy

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snacks, categorization of its snacks into three categories named fun for you, good for
you, and better for you were undertaken under her leadership.

Nooyi's strategic measures to tackle the slow-down in the beverages and snack food
industry included a productivity improvement program, the benefits of which were
expected to the tune of US$ 1.2 billion over the next three years beginning
2009.8 Other measures under her leadership included aggressive expansion into the
emerging markets of Brazil, Russia, China, and India and product and process
simplification across the organization.

When Nooyi was SVP, the strategic measures that she planned and implemented
resulted in a growth in PepsiCo's sales and profits. The company's overall sales
increased from US$ 20,337 million in 1996 to US$ 26,935 million in 2001 and net
profit doubled from US $ 1,149 million to US$ 2,662 million in the same period. After
she became the CFO and However, Nooyi also had her share of critics, who found
fault with what they called her lack of operational skills, her mercenary handling of the
PepsiCo pesticide content issue in India, as also her portraying PepsiCo products as
healthy while according to the health experts, they were not...President, sales
recorded a further growth from US$ 25,112 million in 2002 to US$ 35,137 million in
2006 when she was promoted as the CEO.

The company's overall sales increased from US$ 20,337 million in 1996 to US$
26,935 million in 2001 and net profit doubled from US $ 1,149 million to US$ 2,662
million in the same period. After she became the CFO and President, sales recorded
a further growth from US$ 25,112 million in 2002 to US$ 35,137 million in 2006 when
she was promoted as the CEO.

Nooyi as A Strategist

Within two months of Nooyi joining PepsiCo as SVP, the company's restaurant
business, which it had acquired a decade earlier and in which it had invested billions
of dollars to build up, entered a sluggish phase with lower sales, volumes, and profits.
Nooyi worked with Roger Enrico (Enrico), Chairman and CEO of Frito-Lay, who had
been asked to take charge of PepsiCo's restaurant business as Chairman and CEO
of PepsiCo Worldwide Restaurants, and turn it around. Together, they investigated
the problem and made efforts to analyze what was wrong with the business. They
concluded that the problem was with PepsiCo trying to adopt a management and
distribution model that was more suitable for a packaged goods industry rather than a
restaurant chain in the services industry...

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Strategic Alliance

A Strategic Alliance is a relationship between two or more parties to pursue a set of
agreed upon goals or to meet a critical business need while remaining independent
organizations. This form of cooperation lies between M&A and organic growth.
Partners may provide the strategic alliance with resources such as products,
distribution channels, manufacturing capability, project funding, capital equipment,
knowledge, expertise, or intellectual property.
The alliance is a cooperation or collaboration which aims for a synergy where each
partner hopes that the benefits from the alliance will be greater than those from
individual efforts. The alliance often involves technology transfer (access to
knowledge and expertise), economic specialization, shared expenses and shared
risk.
Stages of alliance formation
A typical strategic alliance formation process involves these steps:

 Strategy Development: Strategy development involves studying the alliance‘s
feasibility, objectives and rationale, focusing on the major issues and challenges and
development of resource strategies for production, technology, and people. It
requires aligning alliance objectives with the overall corporate strategy.

 Partner Assessment: Partner assessment involves analyzing a potential partner‘s
strengths and weaknesses, creating strategies for accommodating all partners‘
management styles, preparing appropriate partner selection criteria, understanding a
partner‘s motives for joining the alliance and addressing resource capability gaps that
may exist for a partner.

 Contract Negotiation: Contract negotiations involves determining whether all parties
have realistic objectives, forming high caliber negotiating teams, defining each
partner‘s contributions and rewards as well as protect any proprietary information,
addressing termination clauses, penalties for poor performance, and highlighting the
degree to which arbitration procedures are clearly stated and understood.

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 Alliance Operation: Alliance operations involves addressing senior management‘s
commitment, finding the caliber of resources devoted to the alliance, linking of
budgets and resources with strategic priorities, measuring and rewarding alliance
performance, and assessing the performance and results of the alliance.

 Alliance Termination: Alliance termination involves winding down the alliance, for
instance when its objectives have been met or cannot be met, or when a partner
adjusts priorities or re-allocates resources elsewhere.

The advantages of strategic alliance include:

1. Allowing each partner to concentrate on activities that best match their capabilities.
2. Learning from partners & developing competences that may be more widely exploited
elsewhere.
3. Adequate suitability of the resources & competencies of an organization for it to
survive.
There are four types of strategic alliances: joint venture, equity strategic alliance, non-
equity strategic alliance, and global strategic alliances.

 Joint venture is a strategic alliance in which two or more firms create a legally
independent company to share some of their resources and capabilities to develop a
competitive advantage.
 Equity strategic alliance is an alliance in which two or more firms own different
percentages of the company they have formed by combining some of their resources
and capabilities to create a competitive advantage.
 Non-equity strategic alliance is an alliance in which two or more firms develop a
contractual-relationship to share some of their unique resources and capabilities to
create a competitive advantage.
 Global Strategic Alliances working partnerships between companies (often more
than two) across national boundaries and increasingly across industries, sometimes
formed between company and a foreign government, or among companies and
governments.

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Tingyi Holding and PepsiCo Finalize Strategic Alliance in China

TIANJIN, China and PURCHASE, N.Y., March 31, 2012 /PRNewswire/ -- Tingyi
(Cayman Islands) Holding Corp. (Tingyi) (0322.HK), one of the leading food and
beverage companies in China, and PepsiCo, Inc. (NYSE: PEP), the world's second-
largest food and beverage business, today announced they have completed their
transaction to create a strategic beverage alliance in China, which is projected to
become the world's largest beverage market by 2015.

The alliance was approved by the shareholders of Tingyi in February and received
regulatory approval on March 29, 2012.

As part of the alliance, Tingyi's beverage subsidiary – Tingyi-Asahi Beverages
Holding Co Ltd (TAB), one of the country's leading beverage manufacturers – is now
PepsiCo's franchise bottler in China. TAB will partner with PepsiCo's current bottlers
to manufacture, sell and distribute PepsiCo's carbonated soft drink and Gatorade
brands. In addition, PepsiCo and TAB will begin co-branding their respective juice
drink brands using the Tropicana brand name under license from PepsiCo. PepsiCo
will retain branding and marketing responsibilities for these products.

Under the terms of the alliance, PepsiCo has contributed its indirect equity interests
in its company-owned and joint venture bottling operations in China to TAB and
received as consideration a five percent indirect equity interest in TAB. PepsiCo has
an option to increase its indirect holding in TAB to 20 percent at its sole discretion by
2015. The shareholdings of PepsiCo's existing Chinese joint venture partners in the
joint venture bottling operations will not change as a result of the transaction.

The PepsiCo-Tingyi beverage system now provides Chinese consumers with some of
the country's most popular beverage products, including:

Pepsi, China's top-selling cola
Miranda, China's top-selling flavored carbonated soft drink
Gatorade, one of China's top-selling sports drinks
China's top-selling tea and water brands, sold under TAB's Master Kong brand name
China's second-largest juice portfolio

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PepsiCo and Ocean Spray Announce Strategic Alliance in Latin
America

PURCHASE, N.Y. and LAKEVILLE, Mass., Jan. 17, 2012 /PRNewswire/ -- PepsiCo
(NYSE: PEP) and Ocean Spray Cranberries, Inc. today announced they have formed a
strategic alliance in Latin America. As part of the alliance, PepsiCo will have exclusive
rights to manufacture and distribute a portfolio of cranberry- and blueberry-based
beverages through its Latin America Beverages division. The companies will share
marketing responsibilities for the products and intend to collaborate on product
innovation.

PepsiCo and Ocean Spray have enjoyed a successful business relationship in the U.S.
since 2006, when Ocean Spray's single-serve juices and juice drinks entered the
PepsiCo bottling system. As a result of this relationship, which utilizes PepsiCo's market
leadership and expertise in the convenience and gas (C&G) channel, Ocean Spray has
earned a five percent share of the C&G single-serve juice market and grew volume by 20
percent in 2011.

"We see tremendous opportunities to grow our beverage business in emerging markets
throughout Latin America, and we continue to take steps to strengthen our brand
portfolio through product innovation, marketing and strategic partnerships," said Luis
Montoya, President of PepsiCo's Latin America Beverages Division. "Ocean Spray is
already a great PepsiCo partner in the U.S., and we believe this will be a winning
combination for Latin American consumers and customers. It positions us well to
continue to gain share of the growing juice category."

"We are eager to continue building on our successful partnership with PepsiCo, as it will
help us expand consumer access to Ocean Spray products in important international
markets like Latin America," Ocean Spray's COO of Global Partner Operations, Stewart
Gallagher, said. "We believe this is a great opportunity to further promote and deliver the
health and nutrition benefits of the cranberry to consumers in Latin America."

The Latin America alliance between PepsiCo and Ocean Spray includes key countries in
the Caribbean, Central America and South America and has a term of 20 years.
Financial terms of the transaction were not disclosed.

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Significant Strategic Advantages to Drive Growth

The alliance is expected to create long-term value for PepsiCo and Tingyi
shareholders, employees and local bottling partners while also encouraging the
continued growth and development of China's competitive beverage industry.

Each company, as well as PepsiCo's existing joint venture partners, expects to gain
significant benefits that will enhance business performance in the near-term while
maximizing future growth potential. These important benefits include:

Bringing innovative new products to market faster and improving choice for Chinese
consumers across the country
Improving operating efficiency and reducing costs by combining local and global
expertise in manufacturing and distribution
Providing better service to PepsiCo's retail and food service customers in China
through TAB's distribution expertise
Supporting new opportunities to develop local economies in interior and western
China
Extending the national distribution of PepsiCo's carbonated soft drink and non-
carbonated beverage brands
Increasing the investment made in PepsiCo brands and marketing in China
Tingyi's Chairman Wei Ing-Chou said, "We wish to thank the Chinese government
and all parties concerned for their understanding and support for the strategic alliance
between Tingyi and PepsiCo. The approval of this strategic alliance demonstrates
that we can work more closely with China's beverage industry to embrace a new
opportunity for further development. We believe that this alliance will not only lay a
good foundation for China's beverage market to lead the world in developing the
global beverage industry, but also improve our ability to better serve our consumers,
employees, shareholders and partners and importantly, create a better environment
for the healthy development of the beverage industry in China."

"China will soon surpass the United States to become the largest beverage market in
the world. As a result of this new alliance with Tingyi, PepsiCo is extremely well
positioned for long-term growth in China," said PepsiCo Chairman and CEO Indra
Nooyi. "Tingyi is an outstanding operator with a proven track record of success. By
leveraging the complementary strengths of each company, we'll be able to
significantly enhance our beverage business in China, reach millions of new

15

consumers throughout the country, and create value for Tingyi and PepsiCo
shareholders."

This transaction involves the companies' respective mainland China beverage
operations. Both PepsiCo and Tingyi will continue to independently operate their
respective food businesses.

About Tingyi Holding

Tingyi Holding Corp. is China's leading food and beverage company that specializes
in the production and distribution of instant noodles, beverages and baked goods in
the PRC. Tingyi started its instant noodle segment in 1992 under the brand of Master
Kong, and expanded into the bakery segment and beverages in 1996. The
philosophy of Tingyi is to provide consumers with safe, tasty quality products with
value for money. With sophisticated production processes, outstanding operation,
innovative products and CSR campaigns, Tingyi is widely respected in China's
consumer industry. Continuous attention to operations at the community level in the
past 20 years has made "Master Kong" one of the most recognized brands. The
Company has also made big contributions to rural, agricultural and farmers'
development. For three consecutive years from 2008 to 2010, Tingyi was named one
of the 50 best listed companies in Asia by Forbes for its solid financial track record
and excellent management and entrepreneurial skills. As of 31 December 2011,
market capitalization of the Company was US$ 16.99 billion. For more information,
please visitwww.masterkong.com.cn.

About PepsiCo

PepsiCo is a global food and beverage leader with net revenues of more than $65
billion and a product portfolio that includes 22 brands that generate more than $1
billion each in annual retail sales. Our main businesses – Quaker, Tropicana,
Gatorade, Frito-Lay and Pepsi-Cola – make hundreds of enjoyable foods and
beverages that are loved throughout the world. PepsiCo's people are united by our
unique commitment to sustainable growth by investing in a healthier future for people
and our planet, which we believe also means a more successful future for PepsiCo.
We call this commitment Performance with Purpose: PepsiCo's promise to provide a
wide range of foods and beverages for local tastes; to find innovative ways to
minimize our impact on the environment by conserving energy and water and
reducing packaging volume; to provide a great workplace for our associates; and to
respect, support and invest in the local communities where we operate. For more
information, please visit www.pepsico.com.

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PepsiCo Cautionary Statement

Statements in this communication that are "forward-looking statements" are based on
currently available information, operating plans and projections about future events
and trends. Terminology such as "believe," "expect," "intend," "estimate," "project,"
"anticipate," "will" or similar statements or variations of such terms are intended to
identify forward-looking statements, although not all forward-looking statements
contain such terms. Forward-looking statements inherently involve risks and
uncertainties that could cause actual results to differ materially from those predicted
in such forward-looking statements. Such risks and uncertainties include, but are not
limited to: changes in demand for PepsiCo's products, as a result of changes in
consumer preferences and tastes or otherwise; PepsiCo's ability to compete
effectively; unfavorable economic conditions in the countries in which PepsiCo
operates; damage to PepsiCo's reputation; PepsiCo's ability to grow its business in
developing and emerging markets or unstable political conditions, civil unrest or other
developments and risks in the countries where PepsiCo operates; trade consolidation
or the loss of any key customer; changes in the legal and regulatory environment;
PepsiCo's ability to build and sustain proper information technology infrastructure,
successfully implement its ongoing business transformation initiative or outsource
certain functions effectively; fluctuations in foreign exchange rates; increased costs,
disruption of supply or shortages of raw materials and other supplies; disruption of
PepsiCo's supply chain; climate change, or legal, regulatory or market measures to
address climate change; PepsiCo's ability to hire or retain key employees or a highly
skilled and diverse workforce; PepsiCo's failure to successfully renew collective
bargaining agreements or strikes or work stoppages; failure to successfully complete
or integrate acquisitions and joint ventures into PepsiCo's existing operations; failure
to successfully implement PepsiCo's global operating model; failure to realize
anticipated benefits from PepsiCo's productivity plan; any downgrade of PepsiCo's
credit ratings; and any infringement of or challenge to PepsiCo's intellectual property
rights.

For additional information on these and other factors that could cause PepsiCo's
actual results to materially differ from those set forth herein, please see PepsiCo's
filings with the SEC, including its most recent annual report on Form 10-K and
subsequent reports on Forms 10-Q and 8-K. Investors are cautioned not to place
undue reliance on any such forward-looking statements, which speak only as of the
date they are made. PepsiCo undertakes no obligation to update any forward-looking
statements, whether as a result of new information, future events or otherwise.

17

Strategy of Pepsi after Indra and before Indra

Strategy of Pepsi before Indra: -
In 1993, Pepsi-Cola found itself in a crisis situation when a man in Tacoma,
Washington claimed he had found a syringe inside a can of Diet Pepsi. Soon after the
story hit the news, claims surfaced all over the country. People claimed to find objects
from bullets to crack cocaine vials. Pepsi-Cola knew that the foreign objects had been
inserted by people outside the company who had tampered with the product.

Pepsi-Cola decided to use a defensive strategy, claiming its innocence in the matter.
Proving the company‘s innocence would be pivotal in protecting further damage to
Pepsi-Cola‘s brand name. Pepsi employed a variety of strategies to deal with the
problem.

First, Pepsi attacked the accuser claiming that the objects had been inserted after
having been opened and that many people do this in order to earn money from a
settlement. The company openly declared that it would ―pursue legal action against
anyone making false claims‖.

Second, Pepsi used a denial strategy saying that there was no crisis. Pepsi President
Craig Weatherup made appearances on television and gave interviews to radio
stations and newspapers saying that Pepsi‘s bottling line was secure. Pepsi even
brought video cameras into their bottling factories to show the bottling process and
the impossibility of inserting a foreign object into a can of Pepsi before it is sealed.

The Pepsi crisis turned out to be a hoax. Individuals who had purposely inserted
foreign objects into cans were brought to court. Pepsi was able to rebound from the
hoax using an effective crisis public relations campaign which combined various
strategies.

Pepsi-Cola handled the situation exquisitely. The company communicated with the
public across virtually all media. Investigations took place in order verify the integrity
of Pepsi-Cola‘s bottling plants. When it became clear that there was no possible way
that there could have been foreign objects inserted before being sealed, the crisis
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had ended.

In this case, there was no substance to the crisis. This can occur when false claims
are made, such as the ones made in this situation. While there might not even be an
actual crisis, the perception of a crisis can stir enough negative sentiment from the
public to significantly damage the company‘s image. The Pepsi case study shows
that the perception of a crisis is as important to manage as an actual crisis.

In order to show that a perceived crisis does not actually exist, it is important to
communicate with the public and show them that no crisis actually exists. Honesty
and open communication facilitates the management of a public relations crisis.
Additionally, communication must occur during the early stages of the crisis and
communication must occur often. A crisis, whether real or perceived, requires the
implementation of a crisis public relations plan

Understanding the branding strategy of Pepsi goes beyond the listing of a set of
steps which can effectively summarize their strategy. The entire strategy revolves
around the company‘s response to the changing dynamics of consumer psychology.
This article makes an attempt to unscramble the complexities involved in the
branding steps undertaken by Pepsi and the impact of the marketing campaigns
undertaken by the company.

Before we try to study the competitive environment in which Pepsi operates, it is
necessary to understand the mechanics of PepsiCo‘s entry into India. This is
essential because the pillars of the success of PepsiCo‘s brand were laid in the early
years of its entry. Till 1977, Coca-Cola was the leading soft drink company in India.
However, the regulations in the country laid down by the Foreign Exchange
Regulation Act (FERA) and orders by the Indian government to reveal its secret
recipe forced Coca-Cola to exit the Indian market. PepsiCo entered India in 1988
through a joint venture. The joint venture sold PepsiCo products under the Lehar
brand (Lehar Pepsi). Post liberalization in 1991, the requirement for foreign
companies to operate with a minority stake was relaxed, and PepsiCo bought out its
partners.

Pepsi introduced its products in India at a time when the adoption of Western
products by Indian consumers was on a rise. It did not have any significant
competition in the country at that time and the late entry of Coke (1993) enabled
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Pepsi to establish a stronghold in the Indian markets. The Pepsi brand became
synonymous with soft drinks and this helped the company in dominating the cola
category in the early years.

Classification of Soft drink market

The soft drink market can broadly be classified into cola and non-cola drinks. The
cola segment commands a market share of around 62%. The non-cola segment
consists of soda, flavoured drinks and lemon drinks. For PepsiCo, while Pepsi is in
the cola category, 7UP, Mirinda, Mountain Dew and Nimbooz populate the non-cola
category. Other brands in PepsiCo portfolio include Aquafina (drinking water),
Gatorade (sports drink), Tropicana (fruit juices), and Slice (juice-based drink). The
brands operate independently but a change in the market patterns can make the
parent company shift its focus from one brand to another.

Positioning of Pepsi

Since its inception, Pepsi has always targeted the youth segment. The changing
demands and sentiments of the younger generation in the country have resulted in
changes in the positioning of Pepsi. This can be observed from the changes in the
taglines, logo, advertisement messages and means of communication of messages.
From ‗The choice of a new generation‘ (1990), Pepsi has introduced a number of new
taglines reflecting a shift in focus of the youth. ‗Yeh hi hai right choice baby, Aha‘ was
introduced in 1992, ‗Yeh Dil Maange More‘ in 1999, ‗Yeh Pyass hai Badi‘ in 2004 and
‗Yeh Hai Youngistaan Meri Jaan‘ in 2008. The current Pepsi tagline is ‗Change the
Game‘ which started with company‘s association with the 2011 Cricket World Cup
and was successful in creating a prominent brand recall in the minds of the
consumers. Pepsi advertisements have also been targeted at the youngsters. Pepsi
focused on two of the biggest obsessions of the Indian youth – Cricket and Bollywood
– to design its advertisement campaigns. Even the hoardings, posters and print ads
expanded on this theme. Popular celebrities from these two domains were used to
generate a connect of the brand with the youth. These celebrities are treated as role
models and trend setters for the youngsters and Pepsi has tried to make use of these
desired qualities to project its brand. Its youth focus can also be observed from the
change in its brand icon from Sachin Tendulkar to Mahinder Singh Dhoni. The
success of the Indian cricket team in the recent times (specially the World Cup) has
gone a long way in strengthening its brand value in the minds of the consumers.

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Pepsi has even tried to leverage its logo as a means of connecting with its target
consumers. Recently the Pepsi logo was modified to create a connection with popular
emoticons. These changes in logo were undertaken at the global level but as a result
of internet activities, they were also able to generate buzz among Indian youth.

Pepsi has also used internet as an effective means of reaching its target consumers.
It has run a large number of digital campaigns and contests (‗Youngistan Anthem‘
being one of the examples). The Pepsi facebook page serves as another means of
connecting with its customers. It runs various contests, polls and campaigns on its
facebook page to create a constant buzz.

Despite the evolving messages and communications, the central theme has always
revolved around the youth and Pepsi has made sure that it stuck to the core theme of
being associated with what the youth represents. The impact of the branding
activities has been such that it has been successful in creating a craving of Pepsi ads
among the youth.

Other initiatives/incidents affecting Brand Image

Apart from the marketing activities, PepsiCo has also taken up initiatives which help
in the enhancement of its brand image. The setting up of an agricultural research
centre in India was one such measure. PepsiCo also helped in the setting up of food
and vegetable processing plants in Punjab which provided employment to farmers in
the region. Apart from showing the company (and its brands) in a positive light, it also
benefitted PepsiCo in its processed food business.

The Pepsi story has not always been one of positive brand building. In 2003, Pepsi,
along with Coke, found itself in the midst of pesticide controversy. It was reported that
the colas contained pesticides and insecticides in excess of what is allowed by the
European Economic Commission. Though they were later cleared, the images of the
brands suffered a huge negative impact. It took a substantial time for the companies
to restore the faith of the consumers in the brands.

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Distribution network

A strong distribution network has gone a long way in making sure that the marketing
strategies have been converted to actual sales. In addition to branding strategies, the
company also comes up with promotional strategies from time to time (E.g. freebies
with its 2L packs). These further help in boosting the sales of the product.

Competitive landscape

If we go by the market shares, Coke lags Pepsi in market share in the cola segment
(according to Euro monitor). However, both these brands command a market share
less than that of Coca-Cola‘s other cola brand, Thumbs-Up. Overall, the cola
segment has seen a reduction in growth in the recent years. Despite this, Pepsi has
been able to generate a healthy increase in sales (20% in 2011) as compared to
other brands (8% for Coke).

The brand trust rankings of the major brands are volatile and also vary among
different surveys conducted. While Coca-cola brand was rated higher in one survey,
Pepsi got higher ratings in another major survey.

Challenges and Trends
In light of the tough competition in the soft drinks segment, both Pepsi and Coca-cola
expanded their portfolios and ventured into other categories like fruit juices and
mineral water. The companies are also foraying into tea and milk based drinks in
response to the high preference of Indian consumer for non-carbonated drinks (tea,
milk and coffee).

The increasing health-conscious segment is also shifting from the cola drinks to
healthier alternatives. This can be one of the reasons for the declining growth rate of
the segment. In response to these trends, Cola companies are coming up with new
ways to attract consumers. Diet Pepsi was a product innovation by Pepsi in response
to the changing requirements.

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Strategy of Pepsi after Indra: -
This case examines the importance of strategy and leadership in the transformation
of a company. It highlights in the strategy vision and leadership style of PepsiCo‘s
CEO Indra k. Nooyi. Nooyi started her career at PepsiCo in 1994 as senior vice
president (strategic planning). She rose to the post of CFO in 2001 and later become
the CEO in 2006. During her tenure at PepsiCo, she undertook a number of strategic
initiatives; Nooyi recommended spinning off taco bell, KFC and Pizza hut, arguing
that PepsiCo couldn‘t bring enough value to the fast food industry with restaurant
businesses as it required dedicated services industry management. Nooyi also led
the acquisition of Tropicana in 1998 ad merger with Quaker Oats Company in 2001.

When Nooyi became the CEO of PepsiCo, the primary goal advocated by her was to
achieve "Performance with Purpose." She implemented a number of measures to
improve the sustainability of the company's operations and image by focusing on
improvements in the health implications of PepsiCo's products. She expanded
PepsiCo's business into developing markets worldwide and focused on increasing
the composition of healthy foods in PepsiCo's product portfolio.

Issue

» Understand the role of strategic and transformational leadership in management.
» Compare and contrast different styles of leadership.
» Appreciate the strategic vision of Indra Nooyi.
» Study and comment on the leadership style of Indra Nooyi.
» Understand the importance of sustainability in the management of a company.

In 2006, Nooyi became the fifth CEO of PepsiCo. As CEO, she continued to steer
PepsiCo based on the vision of "Performance with Purpose."

She implemented a number of measures to improve the sustainability of the
company's operations and image by focusing on improvements in the health
implications of PepsiCo products.

Measures such as removing trans-fats from PepsiCo snacks, product innovations in
the Quaker Oats brand to come out with a range of consumer perceived healthy
snacks, categorization of its snacks into three categories named fun for you, good for
you, and better for you were undertaken under her leadership.

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Nooyi's strategic measures to tackle the slow-down in the beverages and snack food
industry included a productivity improvement program, the benefits of which were
expected to the tune of US$ 1.2 billion over the next three years beginning 2009.
Other measures under her leadership included aggressive expansion into the
emerging markets of Brazil, Russia, China, and India and product and process
simplification across the organization.

When Nooyi was SVP, the strategic measures that she planned and implemented
resulted in a growth in PepsiCo's sales and profits. The company's overall sales
increased from US$ 20,337 million in 1996 to US$ 26,935 million in 2001 and net
profit doubled from US $ 1,149 million to US$ 2,662 million in the same period. After
she became the CFO and However, Nooyi also had her share of critics, who found
fault with what they called her lack of operational skills, her mercenary handling of the
PepsiCo pesticide content issue in India, as also her portraying PepsiCo products as
healthy while according to the health experts, they were not...President, sales
recorded a further growth from US$ 25,112 million in 2002 to US$ 35,137 million in
2006 when she was promoted as the CEO.

The company's overall sales increased from US$ 20,337 million in 1996 to US$
26,935 million in 2001 and net profit doubled from US $ 1,149 million to US$ 2,662
million in the same period. After she became the CFO and President, sales recorded
a further growth from US$ 25,112 million in 2002 to US$ 35,137 million in 2006 when
she was promoted as the CEO.

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Tough time and good time of Indra in Pepsi
Tough time of Indra in Pepsi

PepsiCo's Nooyi Gets Tough as Cola Wars Heat Up

As it implements a global re-set of its Pepsi brand and corporate priorities, PepsiCo is
girding for even more pitched battle with a re-energized Coca-Cola. And if only
because PepsiCo plans to boost spending on its major brands by at least a half-
billion dollars this year, the competition between the two giants should be the
sharpest in some time.
PepsiCo CEO Indra Nooyi and the company's board announced strategic
investments during their business review last week that are aimed at the major
pressure points being applied lately by restive PepsiCo investors and others. In the
meantime, Coca-Cola also announced massive overall as well as a decision to use
the savings of up to $650 million in marketing and brand building.
The boost in marketing outlays announced by PepsiCo will be devoted to the largest
beverage brands, especially struggling Pepsi, as well as snack brands. But many of
the agencies that have been serving the brands to date are being swept out in a
massive 65% reduction in the number of partners used by the beverages business.
And Pepsi will be culling many of the non-performers from its 400-plus global brands.
At the same time, PepsiCo is shedding about 3 percent of its global workforce, some
8,700 jobs across 30 countries, as part of a plan to reduce overall costs by $1.5
billion between this year and 2014. That should help the bottom line where investors'
concerns have been focused.
On the top line, Nooyi stressed that some of the more radical ideas for addressing
PepsiCo's financial woes, and its quiescent stock price, aren't going anywhere. That
includes the notion of breaking PepsiCo into higher- and slower-growth companies,
as Kraft announced last year. Nor is Nooyi leaving the CEO's post anytime soon. But
she is going to intensify efforts to bring qualified executive help beneath her and
flatten the company's management structure, as she says goodbye to retiring global
beverage president Massimo d' Amore and digital/social marketing head B. Bonin
Bough, who oversaw the Pepsi Refresh Project and has just moved to Kraft Foods in
a similar role.
Fortune calls this the biggest challenge of her tenure at PepsiCo, commenting that
"Nooyi has boldly changed Pepsi's strategy to emphasize nutritious, 'good-for-you'
products like Quaker oatmeal in addition to its 'fun-for-you' (read: 'bad-for-you')
products like Mountain Dew and Fritos. The new strategy is visionary and clearly in
harmony with societal changes. The trouble is that good-for-you products aren't
nearly as profitable as branded sugar-water."

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Nooyi said she remains committed to the company's shift toward "better-for-you"
foods, which now account for 20 percent of total revenues from 17 percent five years
ago. But clearly, the commitment of more marketing resources to Pepsi signals that
the CEO might have to be more cautious in takings steps she has discussed to
intensify the better-for-you push, such as developing a new yogurt brand in the U.S.
Coke executives, meanwhile, waxed optimistic about their own plans to re-gird for a
potentially leaner and more determined PepsiCo. "This program will further enable
our efforts to strengthen our brands and reinvest our resources to drive long-term
profitable growth," Coca-Cola CEO Muhtar Kent stated during an earnings call with
analysts last week.

Pepsi owners face the Indra Nooyi challenge
Whenever a big new job opens up just about anywhere in the world, Indra Nooyi's
name enters the frame. Last year, scuttlebutt in Mumbai had the PepsiCo (PEP.N)
chief executive returning to India to run the powerful Tata group. Earlier this year,
Nooyi was floated as a candidate to run the World Bank. Her recent recruitment of a
former White House official even had some pegging her for a big job in Washington.
As flattering as such prospects may sound, they make an already challenging job
more difficult. Nooyi, who is determined to stay put, is still working to convince
shareholders to back her vision for an integrated Gatorade-to-Doritos snack-food
giant. Not that her reign has been a disaster. Since she became the first female to
lead Pepsi in late 2006, the company's earnings per share have gained around 36
percent and its sales have nearly doubled to $65 billion. The problem is that the stock
has done relatively poorly - gaining just around 10 percent during that time. By
comparison, Coca-Cola (KO.N) has done nearly 10 times better.
Investors just haven't given the high-margin, cash-generating soft-drink business
sufficient credit. In part, that's because Nooyi has actively worked to dispel the notion
that Pepsi is a junk-food pusher, emphasizing its healthier victuals. Yet its greatest
recent successes have been products like a 24-ounce can of Mountain Dew. As a
result, Pepsi suffers from what brokerage Sanford Bernstein called "a tale of two
companies" problem. The analysts reckoned splitting food from soft drinks would
create more than $10 billion of extra wealth for shareholders.
As a consequence, when Relational Investors, a hedge fund run by activist investor
Ralph Whitworth, popped up with a $600 million position in Pepsi two months ago,
Wall Street was atwitter with talk of a Pepsi breakup. So far, Whitworth has not said
much about his aspirations. But he has pushed for breakups before, occasionally
fighting to replace corporate directors with his own representatives to make that
happen.
True, a carve-up doesn't have to spell the demise of a CEO. Irene Rosenfeld, who
once ran Pepsi's Frito-Lay arm, even championed one at Kraft (KFT.O). But a public
battle with an uppity investor who galvanized Pepsi's shareholders against her would
undermine Nooyi's leadership. And caving to a breakup would be a repudiation of her
"Power of One" strategy.

26

Given this backdrop, a position working for a re-elected President Barack Obama
might appeal to Nooyi, a Democrat, as a chance for a graceful exit. But the better
option for her manifold career possibilities is to stick it out and close the performance
gap with Coke. To do that, she will need to stay another couple of years and ensure
that Pepsi, whose earnings are expected to decline some 6 percent this year from
last, gets back in growth mode in 2013.
That's going to take selling a lot more Doritos Locos Tacos with Taco Bell washed
down with Mountain Dew. It may not be a recipe for good health, but unqualified
success is always satisfying.

Good time of Indra in Pepsi

Achievements:
CEO of PepsiCo; Ranked No.4 on Forbes magazine's annual survey of the 100 most
powerful women in the world.

Indra Nooyi is the newly appointed CEO of PepsiCo-the world's second-largest soft
drink maker. She joins the select band of women who head Fortune 500 companies.
Presently, there are only 10 Fortune 500 companies that are run by women, and
Indra Nooyi is the 11th to break into the top echelons of power. Prior to becoming
CEO, Indra Nooyi was President, Chief Financial Officer and a member of the Board
of Directors of PepsiCo Inc.

Indra Nooyi spent her childhood in Chennai. Her father worked at the State Bank of
Hyderabad and her grandfather was a district judge. She did her BSc. in Chemistry
from Madras Christian College and subsequently earned a Master's Degree in
Finance and Marketing from IIM Calcutta. Indra Nooyi also holds a Master's Degree
in Public and Private Management from the Yale School of Management.

Before joining PepsiCo in 1994, Indra Nooyi was Senior Vice President of Strategy
and Strategic Marketing for Asea Brown Boveri, and Vice President and Director of
Corporate Strategy and Planning at Motorola. She also had stints at Mettur Beard sell
and Johnson & Johnson. At PepsiCo, Indra Nooyi played key roles in the Tricon spin-
off, the purchase of Tropicana, the public offering of Pepsi Cola bottling group and
the merger with Quaker Foods.

Indra Nooyi has been ranked No.4 on Forbes magazine's annual survey of the 100
most powerful women in the world.

27

Growth of Pepsi v/s coke after Indra and before Indra world wide
PepsiCo (NYSE: PEP) is one of the world‘s most familiar consumer food and
beverage companies, offering brands like Frito-Lay, Gatorade, Tropicana and
Quaker.

It‘s best known, of course, for is its flagship soft drink brand… and its rivalry
with Coca-Cola (NYSE: KO).

The Coke vs. Pepsi conflict raged on for decades across the country on supermarket
shelves, fast food restaurants and the like.
Coke always held the bigger market share in this area. But at times, Pepsi – fueled
by smarter and more aggressive advertising campaigns – moved ahead.
Many investors believe the cola war is still going strong. But that‘s where they‘re
wrong.
Sure, the TV commercial designed to show that PepsiMax tastes better than Coke
Zero rather smacked of the blatant competition in the 1980s and 1990s. But in reality,
Pepsi surrendered; the war was lost.
Yet in comes Indra Nooyi, PepsiCo‘s CEO as of 2006, and the game completely
changes.
A former management consultant, she decided not to duke it out directly with Coke.
Instead, she‘s trying to redefine the playing field…

Pepsi’s New Strategy: Better-For-You Products

U.S. Consumption of carbonated soft drinks has steadily declined in the past decade.
Part of that comes down to the array of alternative beverages the market now offers.
Part of it comes down to health concerns in a nation with an obesity problem.
But rather than buck the trend, Ms. Nooyi seeks to refocus Pepsi. ―Lifestyles have
changed,‖ she notes, ―And we have to modify our products.‖

In that spirit, she‘s focusing the company more on water, juices, teas and sports
drinks.

Pepsi‘s top brands in those areas include Aquafina and Gatorade. And while it trails
in soft drink sales, it leads the world in ready-to-drink teas through Lipton, while its
Tropicana wins out in juices/nectars.
The company is betting big on creating healthy foods through its Quaker Oats,
Gatorade and Tropicana divisions. And it just began the Global Nutrition Group to
deliver breakthrough products.

28

Nooyi says the new Group ―is part of our long-term strategy to grow our nutrition
business from about $10 billion in revenues today to $30 billion by 2020.
To further that goal, Pepsi hired several well-known nutritionists to direct its efforts at
reducing fat, sodium and sugar in its products. Already, Lay‘s potato chips have 25%
less sodium… and by 2011; they‘ll be made from 100% natural ingredients.
As Caroline Levy, a CLSA analyst, noted, ―PepsiCo is currently focused on better-for-
you‖ products.

Coke’s Consistent Strategy Wins the Cola War

Meanwhile, Coca-Cola doesn‘t seem to care about what Pepsi has accepted. CEO
Muhtar Kent not only continues to focus on selling soft drinks globally, but even vows
to rebuild Coke sales in the U.S. market.
And admittedly, Coke‘s beverage volume in North America dropped only 2% last
year. 2009 was extremely difficult economically on top of a relatively cool summer.
In comparison, Pepsi‘s beverage volume in the same region plunged 8%.
According to Beverage Digest, this makes Coca-Cola brand the uncontested U.S.
heavyweight.
Indeed, looking at all carbonated soft drinks, Coke brands commanded 41.9% of the
total market last year compared to PepsiCo‘s 29.9%.
The same goes for the companies‘ flagship brands. Through 2009, Coca-Cola
commanded 17% of the U.S. soft drink market; Pepsi held only 9.9%.

And while both brands have been declining, Pepsi is doing so at a slightly faster rate.

Pepsi Admits Defeat… Goes On New Health Kick

As far as Pepsi is concerned, the cola wars are over. It now needs to focus on
convincing investors that it has the right focus in this new health kick.
Currently, the Global Nutrition Group is little but a nice marketing tool. Whether Pepsi
can really develop healthier foods and drinks while still coming up with new types of
chips and soda flavors… well, that‘s the question.
It recently reduced the top end of its guidance for earnings growth this year from 13%
to 11%. This may be due to increased investment in nutrition… or because of a
difficult, competitive global environment.
Coke, among others, continues to steal market share away from Pepsi.
Ms. Nooyi should not neglect the company‘s core business. Carbonated beverages
still produce much of the company‘s sales and for now, they‘re still key to Pepsi‘s
future health.

29

Shareholder value before Indra and after Indra

IN OCTOBER 1996 the cover of Fortune magazine showed Roger Enrico, then the
chief executive of PepsiCo, trapped in a Coke bottle under the headline ―How Coke is
kicking Pepsi's can‖. Ten years later, just after Pepsi had surpassed Coca-Cola in
market capitalization for the first time in their 108-year rivalry, the same magazine ran
another big story on the cola giants. It admitted that it was wrong to have declared
Pepsi defeated and lauded it as one of America's best-run companies.
Fast forward another six years and Coke is again kicking Pepsi's can. Both are losing
cola drinkers in America as consumers switch from fizzy, sugary drinks to healthier
water, tea, juices and sports drinks. But whereas Coca-Cola has lost on average 2%
a year in like-for-like volume of fizzy drinks in America since 2004, Pepsi has lost 3%
(see chart), according to Sanford C. Bernstein, an investment bank. That means its
American drinks business has shrunk by about 20%. Coke's Simply juices and its
lower-priced Minute Maid are taking share from the fruity concoctions of Pepsi's
Tropicana. And Coke's sports drink, PowerAde, is knocking spots off Gatorade,
Pepsi's brew for athletes.
Faced with mounting investor dissatisfaction about Pepsi's stagnant share price, the
food-and-drinks giant recently embarked on an effort to prelaunch the company. On
February 9th the group announced that it was cutting 8,700 jobs, or 3% of its
workforce. Having underinvested in its flagship beverage brands for years, it is
increasing investment in marketing and advertising by $500m-600m. It has some
catching-up to do: at the end of 2010 Pepsi spent 3.3% of sales on advertising
compared with 8.3% of sales at Coca-Cola, according to Judy Hong, who follows
drinks makers for Goldman Sachs.
Pepsi is also pinning its hope on the launch across America on March 26th of Pepsi
Next, a new soda sweetened with both high-fructose syrup and artificial sweeteners
which has 60% less sugar than classic Pepsi. Angelique Krembs of Pepsi says the
new drink is aimed at consumers who are keen to imbibe less sugar with their cola
but dislike the taste of diet drinks. She splits this mostly male group in two: ―dualists‖,
who switch between regular and diet (and sometimes mix the two), and ―resistant‘s‖,
who never touch either.
Repeat performance
Will Pepsi's reset be enough to win over investors? Pepsi Next is dividing opinions.
―We have seen this movie before,‖ says Mark Swartz berg, a drinks analyst at Stifel
Nicolaus, a bank. In 2004 Pepsi launched Pepsi Edge, a mid-calorie soda, which
Coca-Cola matched with a new mid-calorie brew called C2. Both disappeared from
the shelves after a few years. That's going to take selling a lot more Doritos Locos
Tacos with Taco Bell washed down with Mountain Dew. It may not be a recipe for
good health, but unqualified success is always satisfying.

30

Pepsi's boss, Indra Nooyi, is seeking to revive the company's core business while
continuing her ambitious drive to transform the company into a maker of healthier
drinks and snacks, and a better corporate citizen. In the past few years Ms Nooyi has
spent disproportionate time and effort on promoting products that Pepsi calls ―good
for you‖ (oatmeal, fruit juices and sports drinks), which make up about 20% of its
sales. She is aiming nearly to triple the revenue of nutritious products, to $30 billion,
by 2020.
Ms Nooyi has also devoted resources to cultivating a corporate image focused on
global social responsibility. In 2010 Pepsi skipped soda ads at the Super Bowl,
launching instead a $20m online competition for the nomination of worthy causes that
Pepsi might finance. The Refresh Project succeeded in gathering 80m online votes
and helped numerous homeless shelters and orphanages. But it did not sell much
soda, which is why Pepsi went back to its usual ads at the 2011 Super Bowl.
It will take time for the revised strategy to bear fruit, as it did for Coca-Cola when it
reset its course in the late 2000s after a series of management and marketing
mishaps. Coke's bosses now feel they are on the right track with its offering of fizzy
drinks, vitamin water, juice, coffee and tea. They think they are giving health-
conscious customers sufficient choice. Of the 3,500 drinks Coke sells worldwide,
more than 800 are zero- or low-calorie.
If Ms Nooyi's prelaunch does not work Pepsi may get a new chief executive. The
company seems to be preparing for a possible change at the top. On March 12th it
revamped its management structure, poaching back Brian Cornell—a former Pepsi
man who went on to run the Sam's Club division of Wal-Mart—to head Pepsi's
Americas Foods snacks division. It put John Compton, the current head of Americas
Foods, in charge of all the company's global groups, making him an heir apparent in
the newly created role of president. Another possible crown prince is Zein Abdulla,
boss of Pepsi's European business.
Ms Nooyi may leave before she is pushed out. She is one of the contenders for the
top job at the World Bank. Though she says she loves her job, she has talked in the
past of her desire to spend some of her career in public service. And the World Bank
may suit her zeal to do good on a global scale rather more comfortably than the
maker of popular but largely fatty, salty and sugary foodstuffs.

31

Letter from Indra K. Nooyi
Dear Fellow Stakeholders,
By any standard, this is an inspiring paragraph to read in an annual report: "To
ensure a continuing climate in which it can prosper, the modern company . . . must
take an active role in civic, cultural and community programs. While results in this
area are less tangible and harder to measure than sales or profits, they are no less
important."
The idea that ethics and growth are connected is a broadly shared understanding in
today's business world. But these words appeared in the PepsiCo Annual Report
back in 1968—just three years after the Pepsi-Cola Company and the Frito-Lay
Company merged to form PepsiCo. It is a testament to how long we have treasured
the belief that corporate capabilities and corporate character are not just integrated,
but inseparable. Back then, it led PepsiCo to become early corporate leaders on
everything from civil rights to scholarships to recycling, while growing our beloved
brands in markets around the world.
Today, PepsiCo is a $60 billion global food and beverage powerhouse offering
consumers a wide range of choices. Our global beverage business is large and highly
profitable, with brands that stand for quality and are respected household names—
including Pepsi and Diet Pepsi, Pepsi Max, Mountain Dew, Sierra Mist, Gatorade,
Lipton Iced Tea and popular local brands such as Mirinda in Europe and Nimbooz in
India. Meanwhile, our global snack business is driven by equally iconic and delicious
brands, such as Lay's, Ruffles, Doritos, Fritos, Cheetos, Walkers in the U.K., and
Fandangos in Brazil and Gamesa in Mexico. And nested within our snack and
beverage businesses is a nutrition business focused on fruit, vegetables, grains and
dairy, that is nearly $13 billion and growing.
As the world's second-largest food and beverage business, our ability to have a
positive impact on the world is vast. We believe that building a healthier future for
people and our planet is good for PepsiCo's financial success and good for the world.
This is the cornerstone of our Performance with Purpose mission: that our long-term
profitable growth (our Performance) is linked intrinsically to our ability to deliver on
our social and environmental objectives (our Purpose).
From a business standpoint, this is about both the short term and the long term,
today and tomorrow. On one hand, Performance with Purpose has helped PepsiCo
be competitive and profitable today: in 2010 alone, our net revenue grew by 33
percent* and our core division operating profit rose 23 percent*—both on a constant
currency basis—which enabled us to return $8 billion to our shareholders. On the
other hand, Performance with Purpose keeps us ahead of the global challenges
shaping our industry—which are articulated in the pages that follow—setting us up for
market leadership and profitable growth into the next decade.

32

As this report demonstrates through four case studies, Performance with Purpose is
not a stand-alone initiative. Instead, our sustainability goals, across the four planks—
Performance, Human, Environmental and Talent sustainability—are woven into the
fabric of our brands, guiding how they do business, while generating significant
sourcing, operational and consumer impacts that improve both our top and bottom
lines.
We've made progress. As you will see, in some areas, we have made more progress
than others—but we are moving in the right direction. Based on what we have
learned in this challenging process, we are also determining how to best focus our
efforts, in order to have the greatest impact. As with any complex initiative, it's
important to be flexible and responsive to a changing world. As part of this learning
process, we are working to create better measurements to track our progress; invest
in long-term research and development to expand our innovation; and build new
partnerships to help achieve our Performance with Purpose goals.
The Promise of PepsiCo it is not about altruism. It is not about environmentalism. It
is, instead, about enlightened self interest: we believe these are the benchmarks that
PepsiCo must meet to succeed in today's economy while ensuring, as we said in
1968, a continuing climate in which PepsiCo can prosper.
John Kennedy once said that "the problems of the world cannot possibly be solved by
skeptics whose horizons are limited by the obvious realities. We need people who
can dream of things that never were." I look forward to working together, building
together and dreaming together in the days ahead to build an even bigger and better
PepsiCo.

Pepsico's CEO Hosts 2012 Annual Meeting of Shareholders
(Transcript)
PepsiCo Inc. (PEP) 2012 Annual Meeting of Shareholders May 2, 2012 9:00 AM ET
Operator
Before we begin, please take note of our cautionary statement. This presentation
includes forward-looking statements based on currently available information.
Forward-looking statements inherently involve risks and uncertainties that could
cause actual results to differ materially from those predicted in such forward-looking
statements. Also, defined disclosures and reconciliations of non-GAAP measures that
we may use when discussing PepsiCo's financial results, please refer to the Investors
section of PepsiCo's website under the Investor Presentation tab. And now please
welcome the Chairman and Chief Executive Officer of PepsiCo, Indra Nooyi.
Indra K. Nooyi - Chairman and Chief Executive Officer

Good morning, everyone. On behalf of PepsiCo's Board of Directors and our entire
management team, it's my privilege to welcome all of you in the room and those
joining us via webcast to PepsiCo's 2012 Annual Meeting of Shareholders.

33

It was at a pharmacy counter right here in New Bern in 1898 that a pharmacist
named Caleb Bradham set about making a fountain drink that was both delicious and
refreshing, what he originally called Brad's Drink became Pepsi-Cola. And 110 years
ago this September, Bradham filed a trademark for his now world-famous drink.
Since then, we have grown into a global food and beverage leader, but we have
never forgotten where we came from. We are absolutely delighted to be back in New
Bern today.
Even beyond New Bern, we have a rich heritage here in North Carolina and have
continued to maintain incredibly close ties with the state over the years. In fact,
former Governor Jim Hunt has been a longtime advisor to PepsiCo. We feel right at
home here, gathered with members of our New Bern family, and we couldn't risk --
we couldn't not accept the invitation Governor Bev Perdue extended to us to host our
shareholders' meeting here in New Bern. Thanks to all of you for joining us here on
this occasion.
I'd like to begin today by acknowledging the shareholders who have taken the time to
submit proposals for us to consider. Ms. Hannah Freedberg is here, representing the
New York State Common Retirement Fund. We welcome Mr. John Skinner, who will
present a proposal on behalf of Ms. Betsy Krieger, and Mr. Anton Washington [ph] is
here on behalf of Mr. Kenneth Steiner. Thank you all for being here today.
And it's nice to see several of our partners and members of the PepsiCo family here
today. I'd like to welcome our former Chairman and Chief Executive Officer, the
wonderful Don Kendall. Don? And it‘s a special pleasure to welcome Jan Calloway,
whose late husband, Wayne Calloway, succeeded Don Kendall as our Chairman and
Chief Executive Officer. And Wayne Calloway was from North Carolina. Jan
Calloway.
And we are happy to be joined by Jeff Minges, the President and CEO of Minges
Bottling Group, a respected leader of the local business community and our franchise
partner for many counties across the great state of North Carolina. Jeff, welcome,
and Jeff's 2 sons. Welcome, all of you. All 3 look like sons.
Next, I'd like to welcome and introduce the members of our Board of Directors who
will each stand as your name is read. This year, we bid a fond farewell to Arthur
Martinez, the brilliant former Chairman of the Board, President and CEO of Sears,
Roebuck and Co., who served on our board with distinction since 1999. And this
year, we also welcome Alberto Weisser, the Chairman and Chief Executive Officer of
the agribusiness and food company, Bunge Limited, who joined our board in 2011.
We also welcome here in New Bern today Ian Cook, Dina Dublon, Victor Dzau, Ray
Hunt, Alberto Ibarguen, Jim Schiro, Lloyd Trotter, Dan Vasella, Shannon Percy
Rockefeller and Shona Brown. If you'll please stand to be acknowledged.

34

Dividends and Shareholder Value

Does Dividend Policy Enhance Shareholder Value?
by Keisuke Nitta Financial Research Group
nitta@nli-research.co.jp

We approach dividend policy from the perspective of an interactive game between
corporate managers and shareholders. While dividend policy in Japan has been
extensively discussed in connection with hostile takeover defenses, we look at the
more basic issue of how dividend policy might affect shareholder value. Recent
theories suggest that dividend policy decisions carry concealed messages from
management that may influence share prices. We review the literature and explore
ways for shareholders to assess dividend policy.

1. Introduction
Ahead of the new Corporation Law that takes effect in 2006, companies are busily
studying rational defense strategies to prepare against the anticipated increase in
hostile takeovers. While dividend policy is often discussed in connection with
takeover defenses,1 in this paper we examine dividend policy at a more fundamental
level to see how it can enhance shareholder value.2 However, difficulties arise in
trying to link dividend policy directly to shareholder value. First, in measuring
shareholder value, suppose we simply use the share price. Despite the clarity,
standard theory would lead us to only one conclusion—that dividend policy has no
effect on share price—leaving little room to discuss why dividend policy matters. Thus
to better understand the implications
Under the new Company Law, dividends are separated from earnings appropriation,
and distributions no longer need be made annually at fiscal yearend. Moreover, the
distribution limit will change from earnings available for dividends (haito-kano rieki) to
a distributable amount (joyokin no bunpai-kano gaku) that essentially refers to the
retained earnings account. Practically, however, the changes are not significant
enough to affect our dividend policy discussion. 2 Since the interests of shareholders
may sometimes conflict with other stakeholders.

35

Main policies and initiatives

 Shareholder’s Office: The Shareholder‘s office provides detailed information on key
indicators, financial and stock market data; corporate governance information;
quarterly financial reports; information on dividends; the latest presentations to
investors and analysts; the investors‘ agenda, including an annual calendar of
scheduled events with analysts and investors and tentative dates for the release of
quarterly financial reports; analysts‘ recommendations on Indra, including the latest
published research reports; information on the upcoming and past General
Shareholders Meeting, and details on how to attend the meetings online; and the
Annual Report.
 Internal Regulations: the Regulations for the Board of Directors and its Committees,
the General Shareholders Meeting Regulation and the Internal Code of Conduct in
Matters Relating to the Securities Markets make up Indra‘s core governing rules.
These internal rules are rounded out by other codes (e.g. Code of Ethics) and internal
procedures, which are subject to ongoing revision in order to adapt to prevailing
legislation and corporate governance recommendations.

Shareholder’s magazine: Publication containing information on Indra targeted at
retail shareholders. Indra is fully aware that responsibly managing its relationships
with shareholders and investors is a pillar of its economic sustainability since, without
shareholders, Indra would lack the capital resources necessary to conduct its
business. Accordingly, the company aims to cement long-term relationships with
shareholders and investors and understands that this inevitably involves offering:
trust to investors, especially through a solid and sustainable business strategy that
ensures the company‘s growth; a competitive remuneration policy that rewards the
trust placed in it; a transparent, truthful and rigorous disclosure policy; and corporate
governance regulation that ensures good governance.

Indra on the Stock Market
At 31 December 2010, Indra‘s share On 14 April 2000, Spain‘s official equity
capital totaled €32,826,507.80, fully trading platform, MEFF Renta Variable,
subscribed and paid up, and began trading call and put options on
represented by 164,132,539 ordinary the company‘s ordinary shares.
shares of the same class, each with a
par value of €0.20. All the shares are Indra is also listed on major
admitted to trading on the four Spanish international indices, such as the MSCI
stock exchanges. IT (since July 2003), a benchmark for
institutional investors in the sector, the
The ordinary shares have been trading FTSE eTX, which includes the main
on the Continuous Market since 23 European technology securities, and the
March 1999, in the Electronics and Dow Jones STOXX Broad Market
Software segment of the Information Indices, which features the top

36

and Communication Services sector. European listed companies. Since 18
Similarly, since 1 July 1999, Indra has September 2006, Indra‘s shares have
been listed on the Spanish blue chip been trading on the Dow Jones
index, the Ibex 35, which includes the Sustainability World Index (DJSWI) and
top thirty-five listed Spanish companies the Dow Jones STOXX Sustainability
by market capitalization and liquidity. Index (DJSI STOXX) which track the
Indra‘s weighting at 31 December 2010 financial performance of leading
was 0.60%. sustainability-driven companies from
among the largest companies in the
world and in Europe, respectively.

Ownership structure (at 31 December 2010)

The company
does not keep a
nominal record of
its shareholders,
so it only knows
the composition of
its ownership
structure through
the information
they submit to it
directly or publish
in accordance
with legislation
concerning the disclosure of significant shareholdings generally speaking,
shareholders must report shareholdings in excess of 3% of total share capital- and
through the information provided by the Spanish central securities depository,
clearing and settlement company, Iberclear, which the company compiles ahead of
its General Shareholders‘ Meetings.

Accordingly, based on the information available to Indra, its main shareholder at 31
December 2010 was Caja Madrid, with a 20% stake, followed by Corporation
Financier Alba with 10%, Casa Grande de Cartagena with 5% and Coaster with 5%.
Furthermore, according to the records held by the Securities Market Commission
(Commission National del Mercado de Valores - CNMV), Fidelity Management &
Research, Barclays Bank and Fidelity International Ltd reported that as at 17
December 2010, 21 November 2005 and 12 December 2010, they held stakes of
10.02%, 5.15% and 0.97%, respectively.

37

Distribution of capital

The distribution of share capital by tranche, in accordance with data from the June
2010 General Shareholders‘ Meeting is as follows:

, 932,071

Number of ordinary shares held by Shareholders Total shares Shareholding
shareholders
Up to 500 56,340 7,984,529 4.86%
From 501 to 2,000 6,874 6,920,592 4.22%
From 2,001 to 5,000 1,422 4,486,438 2.73%
From 5,001 to 10,000 469 3,340,454 2.04%
From 10,001 to 20,000 205 2 1.79%
From 20,001 to 30,000 64 1,547,041 0.94%
From 30,001 to 50,000 75 2,888,703 1.76%
From 50,001 to 100,000 65 4,565,776 2.78%
From 100,001 to 500,000 72 14,759,723 8.99%
From 500,001 to 2.000,000 22 20,963,988 12.77%
More than 2,000,000 11 93,743,224 57.11%
Total 65,619 164,132,539 100.00%

At 31 December, treasury shares totaled 1,368,400 , representing 1.03% of the
company‘s total shares.

Stock market indicators

The main stock market indicators in the year were as follows:

 Total number of shares (31-12-10)  Minimum price in the year (29
164.132.539 November) 12,315
 No. of ordinary shares outstanding -  Maximum price in the year (8 January)
free-float- (31/12/10) 98,467,977 16,885
 Par value per share 0.20 €  Year-end price (31 December) 12,785
 Average daily trading volume (no. of  Average price 14,140
shares) 1,203,316  Market capitalization at 31 December
 Average daily trading volume 2,098.4
(thousands of Euros) 17,002  Earnings per share (EPS) (in euros)
 Trading days 256 1,161
 Trading frequency 100%  Cash flow per share (CFPS) (in euros)
 Minimum daily trading (in shares) (28 (1) 1,877

38

December) 261,399  Book value per share (in Euros) (1)
 Maximum daily trading (in shares) (15 6,151
April) 11,983,054  Price / EPS (P/E) (2) 11.01
 Total effective trading (million Euros)  Price / CFPS (P/CF) (2) 6.81
4,353  Price / Book value per share (P/BV) (2)
 Total trading in the year (in shares) 2.08
308,049,029  EEV/sales (3) 0.93
 Total trading vs. total ordinary shares  EV/EBITDA (3) 7.25
188%
 Total shares traded vs. outstanding
ordinary shares 313%

 (1) Based on the total number of shares in the company: 164,132,539 shares
 (2) Based on the share price at 31 December 2010
 (Based on enterprise value (EV) at year-end: market capitalization at 31 December
2010 + the company‘s net debt on that date (€274.9M).

Trading volume

 Trading frequency was 100% throughout the year (256 days).
 Average daily trading was 1,203,316 shares, 12% higher than in 2009.

The figure for 1999 is for the period April-December, and excludes the extraordinarily
high trading volume in the week following the IPO (23-30 March 1999), which distorts
ordinary volume.

39

In 2010, 308 million Indra shares changed hands in the market, equivalent to 1.88
times the total number of ordinary shares and 3.13 times the number of ordinary
shares outstanding (i.e. free float). The cash volume trading totalled €4,353M, 1.5%
lower than the year before. Average daily volume and the monthly performance in
2010 are shown in the following chart:

Regarding the volume of options traded on Indra shares on the MEFF Renta Variable
market, there were 51,988 contracts in 2010, of 100 options each, of which 27,580
were call options and 24,408 put options.

Indra’s share performance

The following table shows Indra‘s high, low, average and final monthly share prices
for each month of the year, and the chart below depicts overall share performance
during the year:

Lo Hi Av Mont
w gh g h/End
Janua 15. 16. 16. 15.71
ry 62 88 44 0
0 5 2
Febru 14. 15. 14. 15.03
ary 32 80 86 0
5 0 0
March 14. 15. 15. 15.18
80 64 28 0
5 0 4
1st Q 14. 16. 15.
32 88 51
5 5 7
April 15. 16. 15. 15.11
05 09 51 0
5 0 8
May 13. 15. 14. 14.17
42 04 22 0
0 5 2
June 13. 14. 13. 13.18
18 35 95 0
0 5 9
2nd 13. 16. 14.
Q 18 09 57
0 0 2
July 12. 13. 12. 12.54

40

38 53 74 0
0 0 6
Augu 12. 13. 12. 13.20
st 69 20 92 0
0 5 8
Septe 13. 14. 13. 13.99
mber 39 40 93 0
0 0 0
3rd Q 12. 14. 13.
38 40 20
0 0 1
Octob 13. 14. 14. 14.06
er 41 53 04 0
5 5 5
Nove 12. 14. 13. 12.33
mber 31 12 32 0
5 0 5
Dece 12. 13. 13. 12.78
mber 53 60 00 5
0 5 4
4th Q 12. 14. 13.
31 53 44
5 5 0

Source: Bloomberg

Information for net wealth tax return: The average share price for the final quarter of
2010 was €13.4 (as published in the Official State Gazette no. 50, dated 28 February
2011).

Indra and the sector

Europe‘s stock
markets showed
mixed
performances in
2010, with
peripherals
(including Spain)
hurt by events in
sovereign debt
markets. These
countries‘ flagging

41

economies and budget imbalances, not to mention the impact of the bailouts in
Greece and Ireland, caused their country risk premiums to soar, prompting investors
to unwind positions in equities of these countries throughout the year. To illustrate,
France‘s CAC, Germany‘s DAX and the UK‘s FTSE indices rose an average of 7% in
2010, while Spain‘s IBEX and Italy‘s MIB slumped 17% and 13%, respectively.

The information technology sector performed in line with the broader European
indices. The FTSEeTX, one of the main sector indices, notched up a 9% gain.

Indra‘s share price closed down 22%, in line with the performance of the overall
Spanish market, with the IBEX 35 sustaining a 17% fall.

The chart below shows Indra‘s performance compared to the IBEX 35 and the
European IT services companies‘ average (base 100).

Source : Bloomberg

Between the date of its IPO (22 March 1999) and year-end 2010, Indra‘s share price
rose 186%, while the IBEX 35 shed 1% and the Europe IT sector down 10%.

Dividend in the year

The dividend proposed by the Board of Directors for approval at the General
Shareholders Meeting is 3% higher than the ordinary dividend charged to profit in the
previous year. Accordingly:

 Dividend per share charged to 2010 profit
 Gross dividend per share 0.68
 Increase vs. gross dividend per ordinary share in 2009 3%
 % net profit or EPS (payout) 59%
 Dividend yield 5.3%

42

BCG matrix
MAIN ASPECTS OF THE BCG GROWTH-SHARE MATRIX

TheBCG GrowthShare Matrixisbasedon two dimensional variables:
relative market share and market growth. They often are pointers tohealthiness of a
business (Kotler 2003; McDonald 2003). In other words products with greater market
share or within a fast growing market are expected to wield relatively greater profit
margins. The reverse is also true.The BCG matrix or also called BCG model relates
to marketing. The BCGmodel is a well-known portfolio management tool used in
product life
cycletheory. BCG matrix is often used to prioritize which products withincompany
product mix get more funding and attention. The BCG matrix model is a portfolio
planning model developed by Bruce Henderson of the Boston Consulting Group in
the early 1970's.The BCG model is based on classification of products (and implicitly
alsocompany business units) into four categories based on combinations of market
growth and market share relative to the largest competitor.

When should I use the BCG matrix model?

Each product has its product life cycle, and each stage in product's life-cycle
represents a different profile of risk and return. In general, a company
shouldmaintain a balanced portfolio of products. Having a balanced product portfolio i
ncludes both high-growth products as well as low-growth products.A low-growth
product is for example an established product known by the market. Characteristics
of this product do not change much, customers know what they are getting, and the
price does not change much either. This product has only limited budget for
marketing. The is the milking cow that brings in the constant flow of cash. An
example of this product would be regular Colgate toothpaste.

But the question is, how do we exactly find out what phase our product is in, and how
do we classify what we sell? Furthermore, we also ask, where does each of our
products fit into our product mix? Should we promote one product more than the
other one? The BCG matrix can help with this. The BCG matrix reaches further
behind product mix. Knowing what we are selling helps managers to make
decisions about what priorities to assign to not only products but also company
departments and business units.

43

BCG MATRIX of food product

44

BCG MATRIX of beverages

45

These groups are explained below:

Stars are the leaders in the business but still need a lot of support for promotion a
placement. If market share is kept, Stars are likely to grow into cash cows.

BCG QUESTION MARKS

(High growth, low market share)These are the opportunities no one knows what to do
with. They aren't generating much revenue right now because you don't have a large
market share. But, they are in high growth markets so the potential to make money is
there. Question Marks might become Stars and eventual Cash Cows, but they could
just as easily absorb effort with little return. These opportunities need serious thought
as to whether increased investment is warranted.

•These products are in growing markets but have low market share.

•Question marks are essentially new products where buyers have yet todiscover
them.

•The marketing strategy is to get markets to adopt these products.

•Question marks have high demands and low returns due to low market share.

•These products need to increase their market share quickly or they become dogs.

•The best way to handle Question marks is to either invest heavily in them to gain
market share or to sell them.

BCG STARS

(High growth, high market share)Here you're well-established, and growth is exciting!
These are fantastic opportunities, and you should work hard to realize them. Stars
are defined by having high market share in a growing market.

46

BCG CASH COWS

(Low growth, high market share)Here, you're well-established, so it's easy to get
attention and exploit new opportunities. However it's only worth expending a certain
amount of effort, because the market isn't growing and your opportunities are limited.

•Cash cows are in a position of high market share in a mature market.

•if competitive advantage has been achieved, cash cows have high profitmargins and
generate a lot of cash flow.

•Because of the low growth, promotion and placement investments are low.

•Investments into supporting infrastructure can improve efficiency andincrease cash
flow more.

•Cash cows are the products that businesses strive for.

BCG DOGS

(Low growth, low market share)In these areas, your market presence is weak, so it's
going to take a lot of hard work to get noticed. Also, you won't enjoy the scale
economies of the larger players, so it's going to be difficult to make a profit.

•Dogs are in low growth markets and have low market share.

•Dogs should be avoided and minimized.

•Expensive turn-around plans usually do not help.

Some limitations of the BCG matrix model include:

The first problem can be how we define market and how we get data about market
share
A high market share does not necessarily lead to profitability at all times
The model employs only two dimensions – market share and product or service
growth rate
Low share or niche businesses can be profitable too (some Dogs can be
more profitable than cash Cows)
The model does not reflect growth rates of the overall market
The model neglects the effects of synergy between business units
Market growth is not the only indicator for attractiveness of a
marketThere are probably even more aspects that need to be considered in a particul
ar use of the BCG model.

47

Market Share and Market Growth

To understand the Boston Matrix you need to understand how market share and
market growth interrelates. Market share is the percentage of the total market that
is being serviced by your company, measured either in revenue terms or unit volume
terms. The higher your market share, the higher proportion of the market you control.
The Boston Matrix assumes that if you enjoy a high market share you will normally be
making money (this assumption is based on the idea that you will have been in the
market long enough to have learned how to be profitable and will be enjoying scale
economies that give you an advantage.

48

Should she be allowed to be continue or dropped

She should be allowed to continue because she is the top most lady
which got a 4th rank in this world.
CEO of PepsiCo; Ranked No.4 on Forbes magazine's annual survey of the 100 most
powerful women in the world.

Indra Nooyi is the newly appointed CEO of PepsiCo-the world's second-largest soft
drink maker. She joins the select band of women who head Fortune 500 companies.
Presently, there are only 10 Fortune 500 companies that are run by women, and
Indra Nooyi is the 11th to break into the top echelons of power. Prior to becoming
CEO, Indra Nooyi was President, Chief Financial Officer and a member of the Board
of Directors of PepsiCo Inc.

Indra Nooyi spent her childhood in Chennai. Her father worked at the State Bank of
Hyderabad and her grandfather was a district judge. She did her BSc. in Chemistry
from Madras Christian College and subsequently earned a Master's Degree in
Finance and Marketing from IIM Calcutta. Indra Nooyi also holds a Master's Degree
in Public and Private Management from the Yale School of Management.

Before joining PepsiCo in 1994, Indra Nooyi was Senior Vice President of Strategy
and Strategic Marketing for Asea Brown Boveri, and Vice President and Director of
Corporate Strategy and Planning at Motorola. She also had stints at Mettur Beardsell
and Johnson & Johnson. At PepsiCo, Indra Nooyi played key roles in the Tricon spin-
off, the purchase of Tropicana, the public offering of Pepsi Cola bottling group and
the merger with Quaker Foods.

Indra Nooyi has been ranked No.4 on Forbes magazine's annual survey of the 100
most powerful women in the world.

49

Indra Nooyi Revive PepsiCo?

In one of its biggest new product launches in years, PepsiCo this week unveiled
Pepsi NEXT -- a mid-calorie beverage that contains 60% less sugar than regular
Pepsi-Cola. The soda, which comes in Pepsi's trademark peppy blue can, is
accompanied by an aggressive ad campaign targeting calorie-conscious customers
who in recent years have replaced carbonated soft drinks with teas, flavored waters
and sports drinks. The company calls Pepsi NEXT a "game-changer in the cola
category" and has bestowed a hopeful tagline: "Drink It to Believe It."

The question is: Will Wall Street?

It's been a rough few years for PepsiCo. Indra Nooyi, chairman and chief executive
officer, has diligently tried to transform the company from a purveyor of sugar-laden
bubbly beverages and salty snacks, into one that has healthier and more wholesome
offerings. But performance has -- pardon the pun -- fizzled. Shares of PepsiCo have
barely budged during her six-year tenure, while the stock price of rival Coca-Cola has
nearly doubled in that time. Perhaps most embarrassing for the once stalwart
competitor in the cola wars, its flagship brand, Pepsi, no longer claims second place
in market share of the carbonated soft drink market. In 2010, Diet Coke took over the
number two spot and has remained there.

Investors are impatient. Some accuse Nooyi of focusing too intensely on her nutrition
strategy while overlooking PepsiCo's North American soft drink business. Earlier this
month, the company announced management changes intended to restore their
confidence in the company: John Compton, who most recently ran PepsiCo's highly
successful Frito-Lay business in the Americas, was named president, while Brian
Cornell, a PepsiCo veteran, has been wooed back from running the Sam's Club chain
for Wal-Mart Stores. He will fill Compton's previous position. The restructuring not
only gives PepsiCo's board some options for potential successors to Nooyi, but is
also a clear statement that the company is attempting to return to its profitable past.

"Based on the management changes, it appears that the company will be back to
emphasizing its sugary beverages and snack foods," says Jason Schloetzer, a
professor of accounting at Georgetown University's McDonough School of Business.
"This is kind of like Pepsi saying to its investors, 'We understand we were very
profitable in these areas, and now this is where we are going to refocus our
energy.'... It's hard to shake the past -- particularly when the past was more
profitable."

The renewed focus on high-margin drinks and snacks may assuage investor
concerns for now, but experts caution against trading a solid, long-term strategic
repositioning for a bit of short-term success: Nooyi's goal of reinventing PepsiCo's
product line is sensible, but real and lasting change takes time. To increase market
share and revive earnings, experts suggest, she needs to spend more money on
marketing top beverage brands -- a move that is already in the works -- and to put the

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right people in charge of those divisions. Nooyi also must do a better job of managing
Wall Street expectations and courting institutional investors who care about
sustainability and will give her more time and leeway to achieve her goals.

'Performance with Purpose'

A native of Madras, India, Nooyi joined PepsiCo in 1994 as the company's chief
strategist. Seeing a bleak future for fast food, she pushed the company to make
some bold moves: In 1997, PepsiCo created a spin-off firm (now called Yum! Brands)
to unload KFC, Pizza Hut and Taco Bell. The following year, Nooyi was promoted to
chief financial officer and helped engineer a $3 billion acquisition of Tropicana. In
2001, Nooyi -- who has an MBA from Yale -- co-orchestrated a $14 billion takeover of
Quaker Oats, which makes Gatorade. PepsiCo's earnings skyrocketed, and Nooyi
became a force in the corporate world. In 2005, Forbes magazine ranked her the
11th most powerful woman in business. She became PepsiCo's first female CEO in
2006.

Her strategy -- to more than double PepsiCo's revenue from nutritional drinks and
snacks to $30 billion by 2020 -- is no doubt ambitious. Through senior level
appointments and internal initiatives, she has pursued her cause. She enlisted Derek
Yach, a former World Health Organization official, as senior vice president of global
health and agricultural policy. Under Nooyi's watch, the company also started working
with farmers and scientists in developing countries, like Ethiopia, on sustainable
growing techniques. In 2009, PepsiCo rolled out compostable bags made from
biodegradable plant material for one of its chip brands. (The bags were eventually
scrapped because customers thought they were too noisy.)

Nooyi has also worked to reformulate PepsiCo's existing products, and has made
creative acquisitions to boost the nutritional quality of its offerings. The company has
reduced the fat, and taken out some of the sugar in many of its mainstream products,
and it has added whole grains, fruits and vegetables to some of its snacks. The
company has also come up with entirely new products that are, at least arguably,
healthier -- Pepsi NEXT, which contains high-fructose corn syrup and artificial
sweeteners, has 60 calories to regular Pepsi's 100. In 2010, PepsiCo acquired a
majority stake in Russian dairy Wimm-Bill-Dann to give it more of a presence in
yogurts and grain-enriched dairy products.

In many ways, Nooyi's strategy is aligned with the times. With 34% of adults in the
U.S. classified as obese, and nearly one in three children considered overweight, the
media -- and indeed many Americans -- are paying closer attention to the importance
of healthy eating. It is a trend that has gotten the better of some businesses. For
example, Hostess, the privately held company known for indulgent pleasures
including Twinkies and Drake's snack cakes, filed for bankruptcy in January.

What's more, corporate social responsibility -- once just a catchy phrase -- has
become an increasingly relevant issue for companies and consumers alike.

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According to a recent survey by public relations firm Burson-Marsteller, more than
75% of consumers say that social responsibility is an important factor in their
purchase decisions, and 70% say they are willing to pay a premium for products from
a socially responsible company.

"More companies and consumers are paying attention to greenness and
sustainability," notes Georgetown McDonough's Schloetzer, who is an expert on
corporate governance. "Companies are thinking about how their operations affect the
end-to-end supply chain and are considering the recyclability of their packaging
materials. It's an inventive way to run a business. As an impartial observer, it's
perhaps noble for Nooyi to try to transform a large company in this manner."

Michael Useem, a Wharton management professor and director of the Center for
Leadership and Change Management, says Nooyi represents a new breed of
corporate leadership. In a cover story for U.S. News and World Report on "America's
Best Leaders" in 2008, he wrote that Nooyi "is attempting to move beyond the historic
trade-off between profits and people. Captured in her artful mantra -- 'performance
with purpose' -- she wants to give Wall Street what it wants but also, the planet what
it needs."

Shortchanging Core Brands?

Unfortunately for Nooyi, Wall Street is not getting what it wants. Last month, PepsiCo
warned that its profit would drop 5% this year. Revenue at its Americas beverage unit
-- which includes Pepsi, Mountain Dew, Gatorade, Tropicana and Lipton and
accounts for about a third of PepsiCo's annual revenue -- was flat. Shares of PepsiCo
are down about 2% for the past two years, while the S&P is up about 20% over that
time period. In spite of this, Nooyi received her first salary bump in five years as CEO
last year. Her total compensation was $17.1 million, up 6% from 2010, according to
a regulatory filing.

David Reibstein, professor of marketing at Wharton, says that much of Nooyi's
problem is that she was trying to do too much too soon. "To a large degree, Nooyi is
very progressive in her thinking," he states. "She has a far-reaching vision of what
she is trying to do. The obligation to be responsive to your shareholders and to also
be thinking about societal and environmental impacts are [good goals], but you need
to be able to get there from the here and now. It's going to take a considerable
amount of effort over a sustained amount of time."

Critics charge that Nooyi has allowed the firm's core brands -- namely beverages in
North America -- to languish. "Taking the central focus off your core brands can be
problematic," says Charles Taylor, professor of marketing at the Villanova University
School of Business. "When you're building a new line of business, or doing brand
extensions, the risk is high, especially compared to keeping your focus on brands
with very high equity that have been effective for you for many years. I wouldn't say
[core brands] have been neglected, but they haven't been as aggressively marketed."

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In 2010, for instance, PepsiCo elected not to advertise during the Super Bowl
telecast, which is always one of the most-watched television events of the year. As
an alternative, the company in January of that year debuted The Pepsi Refresh
Project, a social media campaign where customers proposed community service
ideas to invigorate and revive their neighborhoods. The company spent in excess of
$20 million on the effort. In November of that year, Advertising Age ran a story
proclaiming that The Refresh Project "doesn't seem to have had a major influence on
the brand's bottom line." It's impossible to draw a direct correlation, but 2010 was
also the year that Diet Coke overtook Pepsi in market share.

Coca-Cola, of course, is a formidable competitor. The company has been lauded for
making smart, calculated marketing choices. Its heavy investment in advertising in
China during the Beijing Olympics is one example. A full year before the Games,
Coca-Cola advertised on thousands of Chinese billboards and bus shelters with a
media campaign highlighting the country's homegrown athletes. Today, Coca-Cola
holds about 17% of the Chinese beverage market, while PepsiCo has a 6% share,
according to Euro monitor.

Back in 2002, Coca-Cola made another good bet by sponsoring reality-TV talent
contest "American Idol" for less than $10 million. The 12-week television program
captured 23 million viewers for its finale, prompting USA Today to run the headline:
"Real winner of 'American Idol': Coke." The show has since become a ratings
juggernaut. PepsiCo, which passed on the opportunity to sponsor "Idol," now
sponsors "The X Factor," another singing competition, spending up to $60 million for
the sponsorship of the show, according to Ad week.

Cultivating a New Pepsi Generation

In spite of these problems, PepsiCo remains a strong brand. "Your average loyal
Pepsi drinker isn't aware of the efforts to move toward nutritious foods, and Pepsi has
not done anything that [has caused] long-term damage to the brand," says Taylor.
"Pepsi is still considered by Interbrand as one of the top brands in the world." (For the
record, PepsiCo stands at number 22 on Interbrand's ranking, while Coca-Cola has
been named the world's most valuable brand for the past 12 years.)

PepsiCo has its work cut out for it., however. Already plans are taking shape to boost
brand awareness: In February, the company ran its first Super Bowl TV commercial
for Pepsi in three years. Nooyi also recently announced plans to increase PepsiCo's
marketing budget by as much as $600 million this year, which represents about a
15% increase over last year. Most of the new spending will be dedicated to the U.S.
beverage business. The firm also plans to launch its first-ever global marketing
campaign for Pepsi.

Nooyi has also made some strategic management changes that demonstrate her
commitment to PepsiCo's beverages division. In September, Albert Carey, a PepsiCo
veteran and head of the company's smaller, but more profitable, Frito-Lay North

53

America snacks unit, took over its Americas beverages unit. Carey succeeded Eric
Foss and Massimo d'Amore, who co-ran the business. Foss left PepsiCo in
December, while d'Amore was essentially demoted; he still runs the Latin American
beverage business, but reports to Carey.

Nooyi's strategy to reinvent PepsiCo's product line has proven tough to execute
because changing customer appetites is not easy. "You may have a vision for what
the market will be wanting, but it doesn't mean it wants it now," says Wharton's
Reibstein. "You can't leave your customers behind." An effort by McDonald's to
introduce "good for you" menu items serves as a cautionary tale. Take the McLean
Deluxe, which it marketed in 1991 as a heart-healthy alternative to other hamburgers.
The burger had 310 calories and only nine grams of fat. "A healthy breakthrough for
the American public," lauded a New York Times editorial. But customers complained
it lacked taste. In 1996, the company removed it from the menu.

"McDonald's has introduced some healthier foods over the years, and it has had
some success here and there. But the majority of people are still buying Big Macs,"
notes Taylor. "For the most part, consumers are set in their ways. Getting consumers
to eat healthier food is going to take at least a generation - even in spite of best
efforts by companies."

This does not mean Nooyi should abandon her plans, observers say. Rather, she
needs to develop a strategy that better balances the short term with the long term,
according to Yoram (Jerry) Wind, Wharton marketing professor and director of
the SEI Center for Advanced Studies in Management. "Companies can be socially
responsible, provide more nutritional and healthier products and still be profitable, but
it requires careful management of board and Wall Street expectations," he says.

A deft touch as a manager -- and perhaps different investors altogether -- are also
needed, he adds, noting that Nooyi should put more effort into courting institutional
investors who value sustainability and who will give her more latitude to achieve the
company's overarching goals. "There are opportunities for creative approaches here.
She should show them that she has a plan to achieve financial objectives ... and still
be socially responsible," he says. "It is doable."

Whether Pepsi NEXT is the next big thing in cola, or whether it goes the way of the
McLean Deluxe, Wind suggests that Nooyi's pursuit of aligning agriculture and
nutrition is sound. "Maximizing long-term shareholder value and addressing some of
society's biggest problems, such as obesity, nutrition and health, is the right kind of
strategy."

54

Opposition faced by Indra from Pepsi
Whenever a big new job opens up just about anywhere in the world, Indra Nooyi's
name enters the frame.

Last year, scuttlebutt in Mumbai had the PepsiCo chief executive returning to India to
run the powerful Tata group.

Earlier this year, Nooyi was floated as a candidate to run the World Bank.

Her recent recruitment of a former White House official even had some pegging her
for a big job in Washington.

As flattering as such prospects may sound, they make an already challenging job
more difficult. Nooyi, who is determined to stay put, is still working to convince
shareholders to back her vision for an integrated Gatorade-to-Doritos snack-food
giant.

Not that her reign has been a disaster.

Since she became the first female to lead Pepsi in late 2006, the company's earnings
per share have gained around 36 percent and its sales have nearly doubled to $65
billion.

The problem is that the stock has done relatively poorly - gaining just around 10
percent during that time. By comparison, Coca-Cola has done nearly 10 times better.

Investors just haven't given the high-margin, cash-generating soft-drink business
sufficient credit.

In part, that's because Nooyi has actively worked to dispel the notion that Pepsi is a
junk-food pusher, emphasizing its healthier victuals.

Yet its greatest recent successes have been products like a 24-ounce can of
Mountain Dew.

As a result, Pepsi suffers from what brokerage Sanford Bernstein called "a tale of two
companies" problem. The analysts reckoned splitting food from soft drinks would
create more than $10 billion of extra wealth for shareholders.

As a consequence, when Relational Investors, a hedge fund run by activist investor
Ralph Whitworth, popped up with a $600 million position in Pepsi two months ago,

55

Wall Street was atwitter with talk of a Pepsi breakup. So far, Whitworth has not said
much about his aspirations. But he has pushed for breakups before, occasionally
fighting to replace corporate directors with his own representatives to make that
happen.

True, a carve-up doesn't have to spell the demise of a CEO. Irene Rosenfeld, who
once ran Pepsi's Frito-Lay arm, even championed one at Kraft. But a public battle
with an uppity investor who galvanized Pepsi's shareholders against her would
undermine Nooyi's leadership. And caving to a breakup would be a repudiation of her
"Power of One" strategy.

Given this backdrop, a position working for a re-elected President Barack Obama
might appeal to Nooyi, a Democrat, as a chance for a graceful exit.

But the better option for her manifold career possibilities is to stick it out and close the
performance gap with Coke.

To do that, she will need to stay another couple of years and ensure that Pepsi,
whose earnings are expected to decline some 6 percent this year from last, gets back
in growth mode in 2013.

She came, she spoke and she gave the answers. Well, some anyway. PepsiCo's
India-born Chairperson and CEO, Ms Indra Nooyi, had the tough job of speaking last
at the three-day long AdAsia2011. But she was not at loss for words in her
concluding keynote speech; she provided some solutions to dealing with uncertainty.

Dressed in orange and sporting a black jacket, Ms Nooyi, who flew into New Delhi
from the Middle East in a private jet just for the keynote, stuck to the conference
theme of dealing with uncertainty.

―We are living in a period of negative uncertainty,‖ she emphasized, ―Creativity has
given way to fear and risk has triumphed over ingenuity,‖ she said, grimly pointing to
how companies today were grappling with a crisis of leadership, crisis of
governorship and severe crisis of expectations.

56

―While I don't have all the answers, I do have five thoughts,‖ she said.

FIVE LESSONS
Her first tip to corporations was: recognize and accept that we are in a new era of
uncertainty, and adapt accordingly.

Second, lead for today as well as tomorrow at the same time. ―It is companies with a
clear long-term mission that will thrive. So, we have to work on two time scales at
once,‖ she said.

Third, make big changes to big things. ―Disruption is now our friend, not our enemy,
she told the marketers.

―If you don't disrupt yourselves, the competition will,‖ was her warning.

Fourth, nurture talent. ―In the time of volatility and uncertainty, the way we buy,
broaden and bond our talent will be the key to whether we atrophy, just survive or
thrive.‖

And, her final piece of advice to heads of corporations was to be super-visible as a
leader. ―We need to communicate all the time.‖.

FIZZ IN EMERGING MARKETS
Ms Nooyi rued that the $60-billion PepsiCo, which employs 300,000, still had most of
its business volumes and revenues coming from the developed world.

―I wish 60 per cent of our business was in emerging markets,‖ she said, saying she
was working on getting to a 50:50 situation in the next five years — ―50 per cent in
emerging markets and 50 per cent in developed markets.‖

―We are all evolving models, the book on this has not been written yet,‖ she
concluded.

57

Future of Pepsi under Indra
BRONX, N.Y., March 22 /PRNewswire-First Call -- PepsiCo (NYSE: PEP), the world's
second-largest food and beverage company, today announced new global goals in
the areas of nutrition, the environment, and workplace practices at its investor
conference here at the Legends Suite Club in Yankee Stadium.
The goals are designed to advance PepsiCo's commitment to deliver sustainable
growth and they apply to the company's food and beverage businesses around the
world, including Frito-Lay, Quaker, Pepsi-Cola, Tropicana and Gatorade. PepsiCo
calls this commitment Performance with Purpose.
To encourage people to live healthier lives – and to address growing consumer
desire for healthier, great-tasting products – PepsiCo is committing to achieve
industry-leading nutrition goals, including:
Increasing the whole grains, fruits and vegetables, nuts, seeds and low-fat dairy in its
product portfolio
Reducing the average sodium per serving in key global food brands in key markets
by 25 percent by 2015
Reducing the average saturated fat per serving in key global food brands in key
markets by 15 percent by 2020
Reducing the average added sugar per serving in key global beverage brands in key
markets by 25 percent by 2020

"We believe that a healthier future for all people and our planet means a more
successful future for PepsiCo," said Indra Nooyi, PepsiCo chairman and chief
executive officer. "These commitments are shared by all of our businesses and reflect
our focus on profitable, long-term growth and will guide us as we continue to build a
portfolio of enjoyable and wholesome foods and beverages for consumers around the
world."
PepsiCo is among 10 leading food and beverage companies to sign the "Global
Commitment to Action on the Global Strategy on Diet, Physical Activity and Health," a
commitment addressed to the World Health Organization in 2008. The company's
new global goals are action steps that directly address the key WHO commitments.
Following is a sample of some of PepsiCo's commitments:

58

Human Sustainability/Health and Wellness
Display calorie count and key nutrients on food and beverage packaging by 2012
Eliminate the direct sale of full-sugar soft drinks to primary and secondary schools
around the globe by 2012
Expand PepsiCo Foundation and PepsiCo corporate contribution initiatives to
promote healthier communities, including enhancing diet and physical activity
programs
Invest in business and research and development to expand offerings of more
affordable, nutritionally relevant products for underserved and lower-income
communities
Environmental Sustainability
Provide access to safe water to three million people in developing countries by the
end of 2015
Reduce packaging weight by 350 million pounds — avoiding the creation of 1 billion
pounds of landfill waste by 2012
Work to eliminate all solid waste to landfills from PepsiCo's production facilities
Commit to an absolute reduction in GHG emissions across global operations

Talent Sustainability
Ensure a safe workplace by continuing to reduce lost time injury rates, while striving
to improve other occupational health and safety metrics through best practices
Encourage associates to lead healthier lives by offering workplace wellness programs
globally
Match eligible associate charitable contributions globally, dollar for dollar, through the
PepsiCo Foundation

For more information and a full list of PepsiCo's global goals and commitments
please go towww.pepsico.com/goalsandcommitments.

About PepsiCo
PepsiCo offers the world's largest portfolio of billion-dollar food and beverage brands,
including 19 different product lines that each generates more than $1 billion in annual
retail sales. Our main businesses - Frito-Lay, Quaker, Pepsi-Cola, Tropicana and
Gatorade - also make hundreds of other nourishing, tasty foods and drinks that bring
joy to our consumers in more than 200 countries. With annualized revenues of nearly
$60 billion, PepsiCo's people are united by our unique commitment to sustainable
growth, called Performance with Purpose. By dedicating ourselves to offering a broad
array of choices for healthy, convenient and fun nourishment, reducing our
environmental impact, and fostering a diverse and inclusive workplace culture,
PepsiCo balances strong financial returns with giving back to our communities
worldwide. In recognition of its continued sustainability efforts, PepsiCo was named

59

for the third time to the Dow Jones Sustainability World Index (DJSI World) and for
the fourth time to the Dow Jones Sustainability North America Index (DJSI North
America) in 2009. For more information, please visit www.pepsico.com.

Cautionary Statement
Statements in this communication that are "forward-looking statements" are based on
currently available information, operating plans and projections about future events
and trends. They inherently involve risks and uncertainties that could cause actual
results to differ materially from those predicted in such forward-looking statements.
Such risks and uncertainties include, but are not limited to: changes in demand for
PepsiCo's products, as a result of changes in consumer preferences and tastes or
otherwise; damage to PepsiCo's reputation; trade consolidation, the loss of any key
customer, or failure to maintain good relationships with PepsiCo's bottling partners;
PepsiCo's ability to hire or retain key employees or a highly skilled and diverse
workforce; unstable political conditions, civil unrest or other developments and risks
in the countries where PepsiCo operates; changes in the legal and regulatory
environment; PepsiCo's ability to build and sustain proper information technology
infrastructure, successfully implement its ongoing business process transformation
initiative or outsource certain functions effectively; unfavorable economic conditions
and increased volatility in foreign exchange rates; PepsiCo's ability to compete
effectively; increased costs, disruption of supply or shortages of raw materials and
other supplies; disruption of PepsiCo's supply chain; climate change or changes in
legal, regulatory or market measures to address climate change; PepsiCo's ability to
realize the anticipated cost savings and other benefits expected from the mergers
with The Pepsi Bottling Group, Inc. (PBG) and PepsiAmericas, Inc. (PAS); failure to
renew collective bargaining agreements or strikes or work stoppages; and any
downgrade of PepsiCo's credit rating resulting in an increase of its future borrowing
costs.
For additional information on these and other factors that could cause PepsiCo's
actual results to materially differ from those set forth herein, please see PepsiCo's
filings with the SEC, including its most recent annual report on Form 10-K and
subsequent reports on Forms 10-Q and 8-K. Investors are cautioned not to place
undue reliance on any such forward-looking statements, which speak only as of the
date they are made. PepsiCo undertakes no obligation to update any forward-looking
statements, whether as a result of new information, future events or otherwise.

60

To Compete With Coke, PepsiCo Cutting 8,700 Jobs, Boosting Ad

spending
To regain slipping market share, PepsiCo will cut 8,700 jobs worldwide and spend
between $500 and $600 million more on advertising and marketing, the company
announced Thursday.

This is part of a broader cost-cutting plan that is intended to save the company
$1.5 billion by 2014. Pepsi took a $383 charge for restructuring last quarter, and
expects another $425 million charge this year and another $100 million from 2013
to 2015.

All told, Pepsi expects a 5 cent loss per share in 2012.

Pepsi Peppy Going Into Earnings, Snacks Driving Stock To $71
Pepsi will not spin off its snacks division, Frito Lay, despite it should focus on
solely beverages to compete with Coca-Cola. After a six-month review, Pepsi
decided that splitting the company would cost between $800 million and $1 billion,
CEO Indra Nooyi said in a conference call with analysts.

Following the plan‘s announcement, Pepsi stock dropped 4.29% after the opening
bell to $64.03. Investors should see this as a multi-year story, City beverages
analyst Wendy Nicholson wrote in a note to investors. While Pepsi has pledged to
return EPS to high single-digit growth next year, it faces strong headwinds,
including an unsettled global macroeconomic picture and rising commodity costs.

The job losses will stretch across 30 countries and reduce Pepsi‘s workforce by
3%. This could play as a sensible two-part strategy, Nicholson wrote. ―We suspect
it not only will generate savings, but also send a message to the organization that
performance is important,‖ she wrote.

The increase in advertising and marketing will go toward bolstering its iconic
brands in North America, where it has lost market share for four straight years. To
streamline this process, Pepsi plans to consolidate advertising agencies. New
campaigns will focus on the core brands, Nooyi said. This will likely include the 22
brands that are billion-dollar earners for Pepsi, like Pepsi and Mountain Dew in

61

beverages and Lays potato chips and Fritos in snacks, said Tom Mullarkey,
a Morningstar beverages analyst.

―If they just try to focus on the bigger hitters, they‘ll probably be able to get more
bang for their bank,‖ he said.

Pepsi will also try to simply its corporate structure with fewer management layers,
the company said. It also plans to consolidate manufacturing, warehouse, and
sales facilities. It intends to focus efforts on greater net return on invested capital,
hoping to increase it by at least 50 basis points annually, starting in 2013. This
year, Pepsi plans to cut capital expenditures by 10% from a year ago.

Pepsi beat fourth-quarter expectations, booking a 3% in profit at $1.4 billion or
$1.5 adjusted earnings per share EPS, three cents above the forecast.

Revenue rose 11% to $20.2 billion. Like Coke, Pepsi‘s greatest growth came in
emerging markets. In Asia, the Middle East, and Africa, revenue was up 16% at
$2.2 billion.

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Future of the Pepsi without indra
Strategy PepsiCo Global Scenarios and Strategy 2030

The project highlighted that the companies that will prosper will be those that have
prepared for future challenges - like water scarcity, climate change and obesity – and,
critically, those that are actively helping to overcome these challenges now.

One outcome of the Scenarios and Strategy work is that PepsiCo is building a team
to focus on sustainable agriculture, so it can mitigate the risks that climate and water
crises pose to its supply chains, now and in the future. The project work has also
contributed to the development of new strategies for the business on the environment
and health and wellness.

Indra Nooyi, Chairman and CEO, PepsiCo said:

―PepsiCo's commitment to sustainability is about an idea of the company which
focuses on the long-term, as our Scenarios 2030 project has shown us. We cannot
contribute properly to finding an end to the climate crisis until we bring environmental
and social governance into our long-term business strategies/decisions. It‘s not all
about the risks, but also about the opportunities.‖
The scenarios were developed specially for PepsiCo and were based on extensive
desk research, a series of workshops and over 100 interviews on possible future
environment and health trends. The interviewees ranged from senior executives at
PepsiCo, including Chairman and CEO Indra Nooyi, to external experts like Gro
Harlem Brundtland, the former Prime Minister of Norway and ex-Director General of
the World Health Organization. We also held a number of implications workshops in
the US, India, China, Latin America and Europe.

This work is seen as a critical piece of strategic thinking for the business. Robert
Schasel, Director of Energy & Resource Conservation at PepsiCo, who
commissioned the work said: ―I can't express strongly enough my sincere
appreciation and gratitude for the work that the Forum team has done on this project.
The incredible amount that we have achieved in such a short time is truly amazing.
The workshops were all very professionally run and highly engaging.
We've created a snowball within the organization and we've reached globally like no
other project I've seen. I am absolutely overjoyed at the results we've achieved to
date, and I'm very much looking forward to the next steps.‖

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Derek Yach, Senior Vice President, Global Health Policy, PepsiCo said:

―Issues like climate change, hunger and obesity and changing agricultural supply
chains all have a strategic impact on our business. The Scenarios and Strategy
2030, with Forum For The Future was a professional and inspiring process that
enable us to identify risks and opportunities that will impact the core business today
and in the future. As a result PepsiCo will be better prepared and stronger as a
company.‖
Dan Bena, Senior Director, Sustainable Development PepsiCo, said:

―I could not be more thrilled with our experience with Forum. It was the first time at
PepsiCo that we have taken such a formalized and rigorous long-term view of our
business risks and opportunities.
Forum helped us see what we knew in our heart...that the magnitude of the global
crises we face cannot be solved in the short-term. Similarly, companies that will be
successful in 20 years are those who recognize and respect the long term trends,
and who are nimble enough to address them.
The design and activation of Forum's process is, in a word, comprehensive. They
leave no stone unturned during their expert interviews, desk research, and field
validation. We now think strategically, LONG term, thanks to Forum.‖

When Nooyi assumed the CEO post, she was the fifth CEO in the company's history,
and the first woman. Previously she served as CFO since 2000, during which she is
credited with increasing the company's revenue by 72% annually.

Last year, Nooyi completed the $7.8 billion purchase of Pepsi's two largest bottlers in
North America. She's also expanding the company internationally, especially with the
purchase of Wimm-Bill-Dann, which makes Pepsi the largest food-and-beverage
business in Russia.

Nooyi has long pushed for a diversified brand. "The minute you've developed a new
business model, it's extinct, because somebody is going to copy it," she told Fortune.

Today, Pepsi's market cap is $111 billion.

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Indra nooyi project

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