1. Presented By: Aaron Czerkies
Jonathan Barki
Amin Rizwan
Chris Tsoulakas
Frank Damian
December 6, 2011
PepsiCo, Inc NYSE:PEP

2. Introduction
PepsiCo, Inc. is a global food, snack and beverage company founded in 1919.
The Company's brands include Quaker Oats, Tropicana, Gatorade, Lay's, Pepsi, Walkers, Gamesa and Sabritas.
Market capitalisation: $100.68bn
Approximately around 294,000 employees worldwide.
December 5th 2011 closing price: $64.40
52-week range: $58.50-$71.89

3. (5 Year) Stock Market Performance
Blue line – iShares S&P Global Consumer Staples (KXI)
Red line – PepsiCo
Green – S&P 500 index
Yahoo Finance

4. Technical Analysis
20 and 200 day moving average over a 5-year time horizon
Yahoo Finance

5. 20 and 200 day moving average over a 2-year time horizon
Yahoo Finance

6. Ownership Above 10 holders comprise 22.27% of shareholders’ ownership.
Shares (millions)
% Held
The Vanguard Group Inc.
66.24
4.39%
State Street Global Advisors
58.69
3.85%
BlackRock Fund Advisors
57.82
3.74%
Capital Research Global Investors
38.60
1.83%
Wellington Management Co. LLP
31.56
1.62%
Banc of America Securities LLC
24.92
1.61%
Northern Trust Investments
22.96
1.43%
T. Rowe Price Associates, Inc.
21.98
1.33%
Yacktman Asset Management Co., Inc
18.11
1.25%
Fidelity Management & Research Co.
15.34
1.22%
Above 10 holders comprise 22.27% of shareholders’ ownership.
Data as of 30th September, 2011, Financial Times

7. Macroeconomic Analysis
Consumer spending: 
IBIS World estimates 2.6% compound growth in consumer spending from 2011 to 2016
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8. Industry Analysis Soda Production in the US:
~$17bn revenue, $2.5bn profit
Performance
Industry has been suffering recently with an annual 7.1% decline from 2006 to 2011
Outlook
IBIS World project a negative annual growth rate of -2.0% for 2011 to 2016
Major Players
The Coca-Cola Company - Market Share: 41.2%
PepsiCo Inc. - Market Share: 33.6%
Dr Pepper Snapple Group Inc. - Market Share: 15.4%

9. Industry Analysis (cont.)
Snack Food Production in the US
~$28.4bn revenue, $5.9bn profit
Performance
Steady growth with an annual rate of 4.2% from 2006 to 2011
Outlook
IBIS World project an annual growth rate of 2.1% for 2011 to 2016
Major Players
Frito Lay North America - Market Share: 48.4%
Kraft Foods Inc. - Market Share: 5.2%
General Mills Inc. - Market Share: 5.1%

10. Industry Analysis (cont.)
Juice Production in the US
~$27bn revenue, $6.1bn profit
Performance
Recent performance has been strong with annual growth rates of 10.4% from 2006 to 2011
Outlook
IBIS World project an annual growth rate of 0.5% for 2011 to 2016
Major Players
PepsiCo Inc. - Market Share: 38.4%
The Coca-Cola Company - Market Share: 21.5%
Dr Pepper Snapple Group Inc. - Market Share: 6.1%  

11. Product Segments Source: Barclays “BTS” Consumer Conference, Sep 2011

12. 2010 Revenue Breakdown
Source: Annual Report, Dec 2010

13. Global Markets Exposure
About $20 billion or 31% of Revenue from emerging markets in 2010
Focus on growth in Central Asia and Eastern Europe
70% growth of sales in Russia over last 2 years
Robust economic indicators, low debt ratios, good foreign exchange reserves
Wimm-Bill-Dann acquisition
66% at $3.8 B total ownership to 77%
15 Aug 2011, ‘squeeze-out demand’ for other 23%
3, Russian rubles per share
Source: Q3 Earnings Release, Oct 2011

14. Financial Performance
24% 5-year CAGR
High operating margins and potential for growth
5-year Compounded Annual Growth Rates:
12% in Net Revenue
10% Operating Profit
$29 B in Dividend and Share repurchases in the last 5 yrs
9% EPS
8% Operating Cash Flow

15. Savory Snacks Frito Lay’s World’s largest Food Brand $9.4bn
Doritos $4 B, Cheetos $3.1 B, Ruffles $2.6bn,
Tositos $1.7bn, Fritos $1.3bn
Transnational expansion strategy through balance between:
Localization
Maintaining consistent quality standards and cooking processes
5-year CAGR:
3% Volume
8% Revenue
8% NOPBT
Source: Q3 Earnings Release, Oct 2011

16. Beverages Source: Barclays “BTS” Consumer Conference, Sep 2011

17. Carbonated Soft Drinks
Sustain powerhouse brands
Sierra Mist, +7% in volume
Mountain Dew, +2.5% in volume
Pepsi Max, +93% in volume
Focused advertising & marketing campaigns
Pepsi Max
Diet Pepsi
Pepsi
Social media exposure
Continue innovating products
Pepsi Next
Develop Occasion-based marketing
On-the-Go Refreshment
Special Occasion and Celebrations
Meal-time and Snacking
Source: Q3 Earnings Release, Oct 2011

18. Hydration & Nourishment
Gatorade
11% Sales growth
77.3% Sports Drink market share
Tropicana
About 50% Sales TTM growth
$150 MM
Source: Q3 Earnings Release, Oct 2011
Barclays “BTS” Consumer Conference, Sep 2011

19. Nutrition
Top 3 globally in Nutrition, aiming to be $30B business by 2020
Huge growth potential, 5-year double-digit revenue CAGR
Strong demographic and consumer interest in health and wellness
Aging population seeking healthy and tasty foods
On-the-Go consumers and their demand for convenience
Source: Q3 Earnings Release, Oct 2011
Barclays “BTS” Consumer Conference, Sep 2011

20. Recent Challenges and Concerns
2012 Pricing Strategy
Commodity inflation and Demand elasticity
Margins & Cost cutting measures
Currency exposure
Investors appealing for a split of Snacks and Beverages
Strong growth in snacks business
Strong growth with Tropicana and Gatorade
Weak CSD strategy and culture has impacted PepsiCo’s overall stock performance
While Coke has increased by about 50%
Over-spending in marketing and advertising
Kraft and Sara Lee example
Source: “Don’t Rule Out a Pepsi Breakup Yet”, Barron’s, 11/19/2011
Q3 Earnings Release, Oct 2011

21. The Power of One Two powerful businesses worth $31B each Consumption:
Planned together
Bought together
Consumed together
Synergies unique to PepsiCo that lead to selling & service advantages and efficient operations:
Common Merchandising
Convenience Store Channel
Demographics
Broad Price Points
Prime-time Merchandising
Distribution Networks
New NFL 10 Year Deal
Source: Q3 Earnings Release, Oct 2011

22. Public Comparable Analysis
Quaker/Nutrition
SWX:NESN Nestlé S.A.
Business areas include Food and Beverage, Nestle Waters and Nestle Nutrition.
NYSE:KFT Kraft Foods Inc.
Manufactures and markets packaged food products, including biscuits, confectionery, beverages, cheese, convenient meals and various packaged grocery products.
NYSE:BGS B&G Foods Inc.
B&G Foods, Inc. (B&G Foods) manufactures, sells and distributes a diverse portfolio of branded shelf-stable food products. 
NYSE:GIS General Mills, Inc.
Global manufacturer and marketer of consumer foods. products categories in the US include cereals, refrigerated yogurt, soups, shelf stable and frozen vegetables, dough products, dessert and baking mixes, grain, fruit and savory snacks, and a variety of organic products.

23. Public Comparable Analysis - Quaker
Range: to 73.73
Median: 71.06
Price: 8.36

24. Public Comparable Analysis (cont.)
Soft Drinks
NYSE:KO The Coca-Cola Company
Produce over 3,500 beverages. Notable brands include: Coca-Cola, Powerade, Fanta, Sprite, Dasani and Vitamin Water
NYSE:COT Cott Corporation
Products: Red Rooster, Blue Charge
NYSE:DPS Dr Pepper Snapple Group, Inc.
Products: Dr Pepper, 7UP, Canada Dry, RC Cola Deja Blue
NasdaqGS:FIZZ National Beverage Corp.
Products: Shasta, Faygo, Everfresh

25. Public Comparable Analysis – Soft Drinks
Range: 5029 to 81.79
Median: 56.40
Price: 24.00

26. Public Comparable Analysis (cont.)
Frito-Lay
NasdaqGS:LNCE Snyder's-Lance, Inc.
Manufacturer and distributer of snack food products, including pretzels, crackers, kettle chips, cookies, potato chips and tortilla chips.
NasdaqGS:DMND Diamond Foods, Inc.
Products: Kettle Brand Potato Chips,
NYSE:CAG ConAgra Foods, Inc.
Consumer Foods producer. Brands include Banquet, David Seeds, Egg Beaters, Healthy Choice, Hebrew National, Pam and Snack Pack.
NYSE:HSY Hershey Co.
Snacks

27. Public Comparable Analysis – Frito-Lay
Range: to 67.22
Weight: 55.00
Other multiples low so used closer to P/E
Price: 15.17

28. Public Comparable Analysis (cont.)
Tropicana
NasdaqGS:HANS Hansen Natural Corporation
Develops, sells and distributes beverages. Brands include Monster Energy, Peace Tea, Hansen's, Hansen's Natural Sodas, Junior Juice, Blue Sky, X-Presso Monster, Vidration, Hubert's, Rumba, Samba and Tango.
NYSE:CQB Chiquita Brands International Inc.
Products: Chiquita Fruit juices

29. Public Comparable Analysis - Tropicana
Range: to
Median:
Price: 19.78

30. Recommendation DCF value: $65.93 Comps value: $67.31
Current market price (12/06/2011): $64.40
Current recommendation: Watch List, but would love to buy on a pullback below $60