Across the world, we continue to deliver innovative new designs that reduce the amount of packaging material used, as we strive to reduce packaging weight by 350 million pounds and avoid one billion pounds of landfill waste over the five-year term of this goal.

As part of this effort, PepsiCo has "cracked the code" to develop the world's first 100 percent plant-based PET bottle made from fully renewable sources. This latest development effectively surpasses existing industry technology and enables PepsiCo to manufacture a PET bottle that looks and feels like, and protects our products in exactly the same way as petroleum-based PET bottles do, but with a significantly reduced carbon footprint. The significant difference between this and other competitive bottles is that our bottle can be introduced into existing municipal recycling streams.

PepsiCo remains focused on packaging innovation, and we continue to advance technologies to determine the full potential of green PET bottles as a cost-effective packaging solution in our portfolio.

Reduce

PepsiCo has worked for years to make our beverage containers lighter by designing the lightest-possible packaging that still meets government specifications for strength and safety.

In the U.S., the Aquafina water bottle is a case in point. The bottle weighed 24 grams in 2001 before it was reduced to 19 grams in 2003. In 2005, we began using 15-gram bottle preforms in our plants and further reduced the preform to 13.2 grams in 2008. Beginning in 2009, our Eco-Fina bottle, at 10.9 grams, was introduced.

Those changes have resulted in an estimated reduction of nearly 30 million pounds of polyethylene terephthalate (PET) since 2008. The Eco-Fina bottle is made with 50 percent less plastic than the half-liter Aquafina bottles produced in 2003. In addition to light-weighting the half-liter bottle, Aquafina is driving additional environmental benefits by producing the Eco-Fina bottle on location where Aquafina is produced and filled. This initiative eliminates the use of cardboard base pads from Eco-Fina bottle 24-packs, saving 20 million pounds of corrugate. Our Propel and Gatorade bottles and closure have undergone significant light-weighting as well, removing almost 73 million pounds of resin in two years, equivalent to over 960 million new 20-ounce Gatorade bottles with closure.

In Europe, package light-weighting initiatives have reduced bottle waste by nearly 9 million pounds. These reductions have occurred across our carbonated soft-drink bottles, as well as Tropicana and Punica bottles.

Short-Neck Closures Reduce Package Weight Around the World

We continued our progress in light-weighting in 2010 with the rollout of 1881 short-neck and lightweight closures for beverage packaging in sizes ranging from 355ml to 2L. By the end of the year, about 60 percent of our system, used in the U.S. and Canada, converted to the new lighter-weight design. Consequently, we reduced total packaging weight by more than 40 million pounds. Conversion is expected to be completed by the end of 2011.

By leveraging key learning from the U.S. market execution of 1881 short-neck finish and lighter-weight designs, packaging-weight reductions for beverage packaging across a variety of sizes (ranging from 500ml to 2.25L) were achieved in Mexico, Peru and Argentina. As a result, we reduced plastic resin use by an estimated nine million pounds.

Key markets in Asia also introduced the lighter-weight 1881 neck finish preforms and closures for beverage applications, resulting in significant weight reductions and reduced plastic resin use amounting to about 3.2 million pounds. The same is true for the Middle East and Africa, where plastic resin use was reduced by approximately 1.1 million pounds.

Meanwhile, we implemented lighter overall packaging for our 500ml-size noncarbonated beverage brands in North America (U.S. & Canada). In 2011, Gatorade is transitioning to a 28-gram package, which translates to a weight reduction of eight grams per bottle. We also eliminated the use of corrugate trays in 2010 for the Naked juice brand, a saving of about 12 million trays, which reduces corrugate material by over one million pounds.

Streamlining Food Packaging

Efforts to reduce food packaging are also achieving solid results internationally. In 2010, in Colombia and Ecuador, we successfully down-gauged the film used for packaging our Frito-Lay and Doritos snack products, which reduced corrugate use by 414,000 pounds. And in China we down-gauged snack film and lowered material content in carton structures, reducing packaging material use by around 170,000 pounds.

Reducing Food-Product Waste

At Frito-Lay North America, the efficiencies are not just being achieved in the packaging. Starch, a by-product of slicing potatoes, was being relegated to the sewer system, costing the company about $2 million for processing. Today, however, the company is recovering the starch and selling it for about $9 million a year, where it is used in paper-making, pharmaceuticals, food manufacturing and other uses. This practice was replicated from our Walkers facility in the U.K., where they have been recovering the starch for years, and now process it to food-grade for reuse in their own recipes.

Recycle

We are committed to increasing the recyclability of our packaging, increasing recycling of post-industrial packaging related to our products, and making sure our containers utilize materials that are compatible with accessible recycling systems. We continue to lead the industry by incorporating on average between 5 to 10 percent post-consumer recycled polyethylene terephthalate (rPET) in our primary soft-drink containers in the U.S., and are expanding the use of rPET across key international markets.

In 2009, Naked juice became the first U.S. nationally distributed brand to transition to a 100 percent post-consumer recycled plastic (or rPET) bottle in the 32-ounce size. The Naked reNEWabottle embodies Naked juice's commitment to creating a more earth-conscious juice. In 2010, we began to transition the 10-ounce, 15.2-ounce and 64-ounce package size to the 100 percent post-consumer recycled PET material.

PepsiCo would use 100 percent recycled materials in all of our qualified bottles if the supply of food-grade rPET were available, which is why we strongly promote bottle recycling.

In Guatemala, meanwhile, in partnership with our bottling partner Mariposa (Cabcorp) and the NGO FUNDES, we have developed an innovative model to close the loop on material recycling. We do this by promoting recycling as an income-generating activity, collecting the PET from communities through reverse logistics and, finally, reinserting that recycled PET in our bottles.

Consistent with our commitment to expand the use of post-consumer recycled PET in international markets, we introduced carbonated and noncarbonated soft-drink packaging that incorporated up to 15 percent recycled materials, which amounts to 16.3 million pounds of recycled PET into beverage packaging.

The food business in Mexico recycled scrap film material to create point-of-sale displays. Both Mexico and SAF offer innovative recycling programs that turn obsolete packaging films into trays for our products. Together, these programs prevented 250,000 pounds of material from ending up in landfill.

Dream Machine Initiative Promotes Beverage Container Recycling

In 2009, PepsiCo made a commitment to form strategic partnerships to help increase the U.S. beverage container recycle rate to 50 percent by 2018. The PepsiCo Dream Machine recycling initiative, launched on Earth Day 2010, is designed to provide Americans with on-the-go access to a convenient and rewarding recycling solution for plastic and aluminum beverage containers.

Since the launch of the program, we have installed 5,000 static bins and electronic kiosks, and created recycling programs in more than 900 schools, in 42 states. As a result of these efforts, and recycling efforts at PepsiCo industrial locations, approximately 200 million plastic bottles and aluminum cans have been diverted from landfills.

Dream Machine kiosks are computerized receptacles that include a personal reward system allowing consumers to earn points for every bottle or can they recycle. Points are redeemed for local discounts on entertainment, dining and travel. In addition, the more bottles and cans people recycle in Dream Machines, the more support PepsiCo will provide to the Entrepreneurship Bootcamp for Veterans with Disabilities (EBV), a national non-profit program offering free, experiential training in entrepreneurship and small business management to post-9/11 U.S. veterans with disabilities.

Additional program information can be found at www.PepsiCoRecycling.com

Renew

PepsiCo focuses its innovation teams to develop and discover creative packaging solutions, which include the use of renewable or biodegradable packaging sources for our snacks, foods and beverages businesses.

Remove

We are working to reduce the amount of environmentally sensitive materials that could potentially enter the waste stream.

Beginning in 2008, we reduced CO₂ emissions by replacing the PVC (polyvinyl chloride) tamper-band film with a PLA corn-based biopolymer film on all 18-ounce Quaker oatmeal and grits canisters. Since then, this change has removed 262.5 tons of PVC from the waste stream, which is equivalent to the CO₂ emissions generated from 127,026 gallons of gasoline. This PLA film is made from a renewable resource and is certified to be compostable and biodegradable under certain conditions.

In 2010, our Latin American region focused on removing PVC from the packaging portfolio. The Mexico foods team developed PET- and PETG-based packaging solutions to replace PVC in confectionary packaging. Their efforts eliminated approximately 33,000 pounds of PVC. Several other markets either did not use, or had already removed PVC in previous years. As a result, we reduced the amount of environmentally sensitive materials that could potentially enter the waste stream.

Reuse

PepsiCo supports reusing primary and secondary packaging components where feasible. Reusable or refillable glass bottles are responsible for a significant volume of beverages in international markets. In 2010, we delivered 20 percent of our international beverage volume in reusable glass packages.

And we continue to successfully reuse a number of our secondary and transport packaging components, such as plastic shells, pallets and corrugate boxes for shipping food and, particularly, our beverage products. In fact, products from PepsiCo's Gatorade, Quaker Foods and Tropicana business units in Canada are now shipped on reusable and recyclable plastic pallets. In 2010, Frito-Lay purchased approximately 154 million returnable cases. This does not include the copackaging locations. Annually, Frito-Lay consumes 150,000 tons less paperboard simply by reusing its shipping cartons up to six times.