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All over the world, whether it’s Cedar Rapids or Calgary, Shanghai or São Paulo, Mexico City, Moscow or Mumbai, our associates draw strength and inspiration from this shared mission. This year’s annual report brings some of their stories to life. It shows how performance and purpose combine to great effect in everything we do.

When times are tough it is especially important to be clear about your mission. By any measure, 2008 was a year of extremes, an incredibly volatile year.

Easy credit turned into a credit crunch that left many businesses and consumers strapped for cash. The global economy lurched rapidly into recession. Oil prices approached $150 a barrel before returning back below $40. Corn, sugar, oats and other key commodities saw significant price swings throughout the year. Global business was made harder by foreign exchange rates that fluctuated, at times wildly. The Dow Jones Index began 2008 above 13,000 and ended the year below 9,000. That dragged down even the strongest companies’ stock—including PepsiCo shares.

All told, I can’t recall a more eventful or trying year. Not that I think pessimism is in order. The ingenuity of our company showed through again. All our teams of extraordinary people applied their can-do spirit and must-do sense of responsibility to meet the economic and market challenges head on.

As a result, PepsiCo performed slightly better for the year than both the Dow Jones Industrial Average and the S&P 500. I believe that’s because, while we can’t control market volatility, we remained focused on our strategies for growth, and that is why our underlying businesses continued to perform very well in 2008.

We increased our dividend, continued our share repurchase program and positioned ourselves for even stronger performance as economic conditions improve.

  • Net revenue grew 10%.
  • Core division operating profit grew 6%.*
  • Cash flow from operations was $7 billion.
  • Core return on invested capital was 29%.
  • Core EPS grew 9%.*

In PepsiCo Americas Foods we had another year of strong growth to both the top and the bottom lines. That is testament to our strong brands and our efficient go-to-market systems. This year brought unprecedented cost inflation, but we carefully adjusted our pricing and the weights and package formats across our brands to find the right solution for each channel, each market, each customer and each consumer. The year presented some other unexpected problems that we coped with well. Our flagship Quaker plant in Cedar Rapids, Iowa, experienced a major flood but returned to normal production levels by year-end. In Latin America, our Brazil snacks business overcame a fire at one of our major plants to perform really well. We also refreshed the product portfolio. Frito-Lay North America introduced TrueNorth nut snacks and entered a joint venture that offers Sabra refrigerated dips. Some of our established products powered on. The Quaker business and our market-leading Sabritas and Gamesa brands helped us generate tremendous growth. On these strengths, PepsiCo Americas Foods increased revenues by 11 percent and core operating profit by 10 percent.*

PepsiCo Americas Beverages had a difficult year. In North America, our beverage volume was not immune to the overall category weakness triggered by the weak U.S. economy. As a result, PepsiCo Americas Beverages revenues declined by 1 percent and core operating profit fell by 7 percent.* But PepsiCo has proved time and again our skill in anticipating and responding to market changes and consumer preferences. Liquid refreshment beverages in the United States declined in 2008 for the first time in more than 50 years. We acted quickly and decisively to refresh the category. We refreshed the look of our iconic brands Pepsi-Cola, Mtn Dew, Sierra Mist and Gatorade. In Latin America, where we achieved strong results, we introduced SoBe Life, the world’s first beverage made with PureVia™, an all-natural, zero-calorie sweetener; and early in 2009, we launched SoBe Lifewater with PureVia in the United States.

We are investing aggressively to keep our total beverage portfolio relevant to consumers of all ages. In non-carbonated beverages, we are working to deliver the right value for the money, to identify untapped thirst occasions and to deliver even more health benefits. We added vitamins to our Gatorade sublines; and this year we will introduce a new Trop50 orange juice beverage, with half the calories of orange juice, great nutritional benefits and the natural sweetness of PureVia.

We have a great portfolio that gives us all confidence. And we have reexamined how that portfolio connects with today’s world. We have brought two things together—the fun and bubbles of our carbonated beverages that people really love, and the symbols and experiences of today’s online world.

Our re-branding strategy sets an irresistible tone of joy, optimism and energy. Those are three words that I always want to be associated with PepsiCo.  more >


*For a reconciliation to the most directly comparable financial measure in accordance with GAAP, see “Reconciliation of GAAP and Non-GAAP Information.”