Great People

The last competitive advantage of PepsiCo I'll mention is less tangible, but every bit as fundamental to our success.

It involves people and values.

I believe that, as a company, we are defined by our relationships with you — our employees, our partners, our customers, our consumers and, of course, our shareholders. Our destinies are very directly linked: As we grow, you should grow as well.

We are going to grow as long as we continue to attract, develop and retain world-class people. As part of this effort to have a world-class team, we strive to foster a diverse and inclusive work environment — one that allows all our employees to achieve professional growth and fulfillment, without regard to gender, ethnicity or other differences. That provides two very important benefits. It helps us attract bright, talented people from a wide range of backgrounds. It also helps us serve an increasingly diverse population of customers and consumers.

This is so important to our future that we've made it part of our compensation system. Part of our executives' compensation is linked to the achievement of diversity goals — related to hiring, promotion and turnover — within the context of each operating unit's Affirmative Action Plans. And, in fact, our divisions achieved all their diversity goals in 2001.

With business partners, we try to engage in relationships that are mutually beneficial. We'll achieve sustainable success only if our partners — our bottlers, for instance — succeed alongside us.

Our retail customers — from the multinational supermarket chain to the single unit convenience store — should be able to earn a fair and reasonable profit selling our products, and we should provide them with the best opportunities for sales and profit growth.

And our consumers, the people who eat and drink what we make, should get great quality and value every time they buy our brands.

Reflections

This coming May, Jack Murphy will retire after 18 years on our board of directors. Jack has been an outstanding director and adviser to four generations of PepsiCo leaders. I count myself very fortunate to have benefited from his advice, and I want to thank him for his great contribution.

We also added a new director in February 2002: Dr. Daniel Vasella, chairman and CEO of Basel, Switzerland-based Novartis, one of the world's largest pharmaceutical companies. Dan is a respected leader whose scientific and medical background will be particularly valuable as we offer more "functional" foods and drinks.

I am very pleased to welcome Bob Morrison to the PepsiCo family. He brought a well-managed Quaker team to our new company and has done a superb job in leading the integration of our businesses into one new PepsiCo.

Indra Nooyi, in her new role as our president, had a very successful year. Among her many responsibilities, she was instrumental in leading us through the challenging regulatory approval process required for our merger.

I am very proud of our division presidents. They all distinguished themselves during this past year by achieving record-breaking results while leading their teams through the many changes that were required by the merger. We are a stronger company and a stronger executive team as a result of this year's challenges.

It is a great privilege to assume leadership of the company from Roger Enrico. The third CEO in PepsiCo's history, Roger distinguished himself as a leader, like his predecessors Don Kendall and Wayne Calloway. I have had the privilege of learning from all three of these remarkable leaders, and every one has changed my life in very important ways. Each had his own style of leadership, but all were bound together by a set of values that makes PepsiCo a very special company.

"Growth with Integrity" is an idea that binds us all together, and it certainly was a hallmark of Roger's tenure. He made many contributions to our company during his 30 years. However, none was as significant as his leadership during the past five years, as he reshaped PepsiCo for the new millennium. As Roger retires from the company this year, he leaves with the deepest respect and best wishes of the entire PepsiCo team and particularly the Reinemund family.

Looking forward, PepsiCo is stronger than ever. We're focused and beautifully positioned to grow. And we continue to close in on our ultimate goal of being the world's very best consumer products company. I am proud of the entire PepsiCo team and look forward to the growth challenge ahead.

Steve Reinemund
Chairman of the Board and
Chief Executive Officer