Built for Consistent, Durable Performance and Returns

Transcription

1 Built for Consistent, Durable Performance and Returns Sanford Bernstein Strategic Decisions Conference May 29, 2013 Indra Nooyi Chairman and Chief Executive Officer

2 Safe Harbor Statement of Terms & Non-GAAP Information Note: This presentation should be viewed in conjunction with PepsiCo s presentation at the Sanford Bernstein Strategic Decisions Conference on May 29, 2013 and PepsiCo s 8-K filed with the Securities and Exchange Commission on May 29,2013. Safe Harbor Statement Statements in this communication that are "forward-looking statements, including statements about PepsiCo s 2013 guidance and longterm targets, 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, expressed confidence, position 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; changes in the legal and regulatory environment; PepsiCo s ability to compete effectively; PepsiCo s ability to grow its business in emerging and developing markets or unstable political conditions, civil unrest or other developments and risks in the markets where PepsiCo s products are sold; unfavorable economic conditions in the countries in which PepsiCo operates; increased costs, disruption of supply or shortages of raw materials and other supplies; failure to realize anticipated benefits from PepsiCo s productivity plan or global operating model; disruption of PepsiCo s supply chain; damage to PepsiCo s reputation; failure to successfully complete or integrate acquisitions and joint ventures into PepsiCo s existing operations or to complete or manage divestitures or refranchisings; PepsiCo s ability to hire or retain key employees or a highly skilled and diverse workforce; trade consolidation or the loss of any key customer; any downgrade or potential downgrade of PepsiCo s credit ratings; 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; climate change, or legal, regulatory or market measures to address climate change; failure to successfully renew collective bargaining agreements or strikes or work stoppages; any infringement of or challenge to PepsiCo s intellectual property rights; and potential liabilities and costs from litigation or legal proceedings. 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 Securities and Exchange Commission, including its most recent annual report on Form 10-K and subsequent reports on Forms 10-Q and 8-K, including PepsiCo s 8-K filed on May 29, 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. Non-GAAP Information Please refer to the Investors section of PepsiCo s web site at under the heading Investor Presentations to find disclosure and a reconciliation of any non-gaap financial measures contained herein. Glossary Please refer to the Glossary and attachments to PepsiCo s 8-K filed with the Securities and Exchange Commission on May 29, 2013 available at for the definitions of core, constant currency, organic and certain other terms used herein. 2

3 PEP: Portrait of a Consistent, Durable CPG Revenue $65B Organic Revenue Growth 5% Core Operating Margin 15% Core Net ROIC 15% 10 Year EPS CAGR 9% 10 Year Dividends Per Share CAGR 14% 10 Year Cumulative Cash Returns $53B All figures are for the year Certain of the above items represent non-gaap financial measures that exclude certain items. Please refer to the Reconciliation of GAAP and Non-GAAP Information attachment posted on May 29, 2013 under the "Investors - Investor Presentations section on PepsiCo s website at to find disclosure and a reconciliation of the above non-gaap financial measures. 3

4 Delivered Strong Shareholder Returns Annualized Total Shareholder Return (%) 5-Year 10-Year +170 bps +90 bps +140 bps +150 bps PEP DJIA S&P 500 PEP DJIA S&P 500 The total shareholder return for PepsiCo and the S&P 500 and Dow Jones Industrial Average indices include dividends and are calculated as of April 30,

5 Transformed PepsiCo for Durability Eight Macro Trends How We Transformed to Thrive 1. Global growth shifting to D&E markets Invested to increase D&E market participation 2. Consumer base changing 3. Increasing preoccupation with health & wellness Increased permissibility of FFY products/ Stepped up focus on GFY products Created Growth Ventures to pursue premium opportunity 4. Technology deployment and disruption driving business model changes Stepped up investment in R&D, digital capability, food safety and quality 5. Retail environment evolving Using scale of our business to drive retail growth Leveraging DSD in traditional trade 6. Commodity inflation and volatility a reality Enhanced brand strength, revenue management skills for pricing power 7. Growing environmental consciousness Sustainability designed into everything we do 8. The talent conundrum Completely revamped talent analytics/ assignment / development processes Selectively brought in key talent 5

6 We re Positioned to Deliver Top-Tier Long-Term Performance Long-Term Goals Top Tier TSR Revenue Growth MSD, mostly Organic Balanced offerings between FFY, BFY, GFY Increased Emerging & Developing Market Footprint Core, Constant Currency EPS HSD Operating Margin bps / year ROIC 50+ bps / year Core MOCF growth = Net Income growth Strong returns to shareholders (dividends and share repurchases) Supporting Fundamentals: Leading Brand Building, Innovation and Design Capability Flexible, Low-Cost Supply Chains That Are Environmentally Sustainable World-Class Talent Development Leveraging Power of One Note - Certain of the above items represent non GAAP financial measures that exclude certain items. Please refer to the Reconciliation of GAAP and Non GAAP Information attachment posted on May 29, 2013 under the "Investors Investor Presentations section on PepsiCo s website at to find disclosure and a reconciliation of the above non GAAP financial measures. 6

7 Today s Agenda: Roadmap to Achieve Revenue Growth Margin and Profit Growth Capital Allocation Talent/ Culture Go Forward Priorities 7

8 We have Terrific Positions in Growing Categories Projected global growth 5% Clear #1 position Leadership in salty snacks; opportunity to target other macrosnack occasions Snacks 51% Beverages 49% Global Nutrition Projected global growth 5% Strong #2 position with leadership in many markets Compete broadly in all LRB categories Note: Snacks/Beverage/Nutrition data is based on 2012 net revenue. Projected global growth >5% Among top global players 8

9 D&E Markets Positioned to Drive Disproportionate Growth D&E as % of Total Net Revenue Consumption Highly Correlated to GDP/Capita Emerging Developed 27% 35% Per Capita Consumption K 20K GDP / Capita Source: Euromonitor 9

10 We ve had Good Success Entering New Markets Example: Uganda Beverages Since 2003 Volume ~20% CAGR Volume market share +25 points Key Initiatives Strengthened bottling partner Go-to-market improvement Locally relevant innovation Capacity investment 10

11 Our Brands are Iconic and Leaders in Their Categories Portfolio of 22 $1Bn Brands Over 40 $250M-$1Bn Brands 11

12 Our Brands are Important to Retailers PepsiCo Has 9 of the Top 40 Trademarks at Retail Weeks Ending Dec 30, 2012, SymphonyIRI Group - Total Store Advantage, Total US MultiOutletC 12

13 Strengthening Our Brands Through Increased Investment and New Capabilities Focusing on 12 global mega brands Increased overall investment Focusing investment on direct consumer-facing media Increasing weight and impact of digital Developing new sub-brand platforms 13

14 Innovation Capability Strengthened Demand Moments framework Increased investments in R&D Created new design-led innovation capability Cross-company visibility enabling lift & shift of ideas Reverse innovation now an opportunity 14

15 Innovation: Recent Successes Trop 50 $200 million in retail sales annually Pepsi Next > $100 million in retail sales in one year Tropicana Farmstand Achieved 80 percent distribution YTD in grocery Doritos Locos Tacos 325 million sold in 9 months Mtn Dew Kickstart Achieved 87 percent distribution in C&G channel in 12 weeks since launch Quaker Real Medleys Voted best new breakfast product in 2012 Innovation as a % of sales projected to steadily increase 15

16 Revenue Management Flexibility Allows Us to Tailor to Channels, Occasions, Cohorts & Needstates Packaging innovation Precision assortment enabled by DSD Maximize price value for different consumers Offer more relevant price points everyday 16

17 Power of One Delivers Unique Top-Line Benefits PepsiCo is the largest branded F&B business in many of our key markets Our presence in beverages supports our snacks growth Snacks and beverages purchased and consumed together Source: IRI, Euromonitor 17

18 Combination of Product and Geographic Portfolios Provides for Balanced Top-Line Growth Category Geography Growth Rate % of Revenue % of Growth Growth Rate % of Revenue % of Growth LSD-MSD LSD-MSD 49% ~1/3 65% ~1/3 MSD Beverages Snacks 51% ~2/3 HSD-LDD Developed Developing & Emerging 35% ~2/3 Mid-Single-Digit Organic Revenue Growth Target Assumes: 3-5 year timeframe, currency neutral, no structural change. Percentage of revenue figures are based on full year 2012 results. Note: Organic revenue is a non-gaap financial measure that excludes certain items. Please refer to the Reconciliation of GAAP and Non-GAAP information attachment posted on May 29, 2013 under Investors-Investor Presentations section on PepsiCo s website at to find disclosure and a reconciliation of the above non-gaap financial metrics. 18

19 Combination of Product and Geographic Portfolios Provides for Balanced Top-Line Growth Category Geography Growth Rate % of Revenue % of Growth Growth Rate % of Revenue % of Growth LSD-MSD LSD-MSD 49% ~1/3 65% ~1/3 MSD Beverages Snacks 51% ~2/3 HSD-LDD Developed Developing & Emerging 35% ~2/3 Delivered MSD Organic Revenue Growth Past 5 Quarters Assumes: 3-5 year timeframe, currency neutral, no structural change. Percentage of revenue figures are based on full year 2012 results. Note: Organic revenue is a non-gaap financial measure that excludes certain items. Please refer to the Reconciliation of GAAP and Non-GAAP information attachment posted on May 29, 2013 under Investors-Investor Presentations section on PepsiCo s website at to find disclosure and a reconciliation of the above non-gaap financial metrics. 19

20 Today s Agenda: Roadmap to Achieve Revenue Growth Margin and Profit Growth Capital Allocation Talent/ Culture Go Forward Priorities 20

21 Our Operating Model Provides Cost Leverage Across the Value Chain Procurement Sustainability 1% Finished Waste Fleet Portfolio Charge Compaction Automation & Technology GTM Strategy 21

22 We ve Strengthened Our Business Systems Leveraging Scale of Our Partners Partners Provide Added System Scale International PEP Beverage Scale RMS to Largest Competitor PEP System Scale ~2x PEP Company Scale Company RMS to largest competitor System RMS to largest competitor Source: Mars & Co System refers to the network by which PepsiCo and non-pepsico beverage products are distributed by us and our partners. Relative market share (RMS) is based on volume. 22

23 Doubled Our Historic Productivity Doubled Annual Productivity ($ million) From: Decentralized, largely supply chain focused Buttressed by periodic management reorganizations 500 1,000 To: Centrally coordinated global best practice driven Supported by multi-regional business restructuring Pre

24 We re Further Leveraging Our Global Enterprise to Deliver Additional Productivity Savings Incremental Productivity Global structure, common standards and greater visibility enabling next generation productivity Changing processes to lower cost R&D focused on reduced-cost design Flexible formulations allow lower cost ingredients New technologies reduce energy use and material waste New business models to fundamentally change work Leveraging best practices Best-in-company benchmarking External benchmarking Rapid deployment of best ideas 24

25 Today s Agenda: Roadmap to Achieve Revenue Growth Margin and Profit Growth Capital Allocation Talent/ Culture Go Forward Priorities 25

26 Our Businesses are Prolific Cash Generators Consistently Delivering ~90% MOCF Conversion from Net Income 90% Note: The item above represents a non-gaap financial measure that excludes certain items. Please refer to the Reconciliation of GAAP and Non GAAP Information attachment posted on May 29, 2013 under the "Investors Investor Presentations section on PepsiCo s website at to find disclosure and a reconciliation of the above non GAAP financial measure. 26

27 We Have a Long, Impressive Record of Returning Cash to Shareholders 53 Cumulative cash returned to shareholders of more than $53B over ten years Dividends Share Repurchase 27

28 Disciplined Capital Allocation to Drive Even Higher Return on Invested Capital and Cash Returns to Shareholders Capital Allocation Priorities Invest in the business Capital spending of no more than 5% of net revenue Pay dividends Increased dividend for 41 consecutive years Strengthen positions through tuck-in acquisitions Generally less than $500 million/year Return additional cash through share repurchases While maintaining access to debt capital markets at attractive rates Target ~50 bps of annual ROIC improvement 28

29 Today s Agenda: Roadmap to Achieve Revenue Growth Margin and Profit Growth Capital Allocation Talent/ Culture Go Forward Priorities 29

30 Strengthening Our Business by Building Talent and Reinforcing Culture Talent Globalizing knowledge Innovation Brand-building R&D Supply Chain Augmenting team with key external talent Culture Reinforced culture of execution Incentives designed to drive value creation Market share Operating profit Cash flow/ ROIC Individual objectives to drive strategic priorities Market place execution Innovation Productivity/sustainability Power of One 30

31 Today s Agenda: Roadmap to Achieve Revenue Growth Margin and Profit Growth Capital Allocation Talent/ Culture Go Forward Priorities 31

32 Our Priorities Developed Market Snacks Defend and grow share of salty snacks Grow organically into broader savory/sweet snacking Leverage beverage business to expand foodservice business dramatically Developed Market Beverages Defend share and grow profitability sustainably Exploit available productivity opportunities Exploit science-based product differentiation Global Nutrition Complementary growth in developed markets Scale-enabled growth in D&E markets D&E Markets Snacks, Beverages, Foods Invest to build strong share position Configure fair share of growing beverage occasions Selectively pursue small tuck-in acquisitions to build scale and footprint 32

33 We re Positioned to Deliver Top-Tier Long-Term Performance Long-Term Goals Top Tier TSR Revenue Growth MSD, mostly Organic Balanced offerings between FFY, BFY, GFY Increased Emerging & Developing Market Footprint Core, Constant Currency EPS HSD Operating Margin bps / year ROIC 50+ bps / year Core MOCF growth = Net Income growth Strong returns to shareholders (dividends and share repurchases) Supporting Fundamentals: Leading Brand Building, Innovation and Design Capability Flexible, Low-Cost Supply Chains That Are Environmentally Sustainable World-Class Talent Development Leveraging Power of One Note - Certain of the above items represent Non GAAP financial measures that exclude certain items. Please refer to the Reconciliation of GAAP and Non GAAP Information attachment posted on May 29, 2013 under the "Investors Investor Presentations section on PepsiCo s website at to find disclosure and a reconciliation of the above non GAAP financial measures. 33

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