Human Sustainability

As one of the world's largest food and beverage companies, we believe it is our responsibility to understand the diet and nutrition needs of populations around the globe.

More than ever, consumers want products that are safe, affordable, great-tasting and healthy. They are increasingly looking closely at the nutritional content of the products they consume and purchase for their families, such as salt content and saturated fat, because they want to eat well and improve their overall health. They want options that offer nutritional benefits to meet the differing needs of various life stages, from childhood through late adulthood. Consumers are also managing specific health conditions, such as diabetes and high cholesterol, and expect on-pack health claims to be grounded in credible science. Understanding these health needs and attitudes is vital to our business, but the global market is even more dynamic and complex.

Today, more than one billion adults are overweight or obese while at the same time, more than one billion adults and children are undernourished — in both developing and developed countries. Often these overweight and undernourished individuals live side by side in the same cities and communities, a paradox that has never been observed to this scale in the history of mankind. The projected rise of global obesity and global hunger presents a tremendous challenge to the health and viability of individuals and communities.

We're mindful of the way the world is changing. How we choose to respond to these societal challenges is critical to the future of our business and to our planet. This is why we are changing the way we innovate at PepsiCo.

In 2008, we expanded our global research and development capability to address these challenges. Our network of senior leaders includes world-renowned clinical scientists and experts in science, technology, nutrition, food science and safety, public health, epidemiology, product development, behavioral medicine and health policy. These experts give PepsiCo a unique understanding of individual human physiology and the nutrition needs of populations. These global R&D teams are developing products rooted in rigorous, science-based nutrition standards and produced to the highest standards of quality, with the promise of satisfying a diverse global palette.

The hub of this work is eight regional research centers, each focused on leveraging nutrition science and knowledge to develop convenient foods and beverages that can improve overall diets and positively impact health. Three centers are located in the United States: Valhalla, N.Y.; Plano, Tex; and Barrington,Ill. Other centers are in Leicester, United Kingdom; Monterrey and Mexico City, Mexico; Shanghai, China; and New Delhi, India; with "satellite" centers in Thailand, Brazil and Australia. In addition, we're broadening our open innovation efforts through new research partnerships with leading institutions, including: Yale University, Dresden University, Westfälische Wilhelms-Universität Münster, and several universities in India.

We're introducing products with more whole grains, fiber, fruits and vegetables, and are reformulating some of our existing products by reducing trans fats to negligible levels while also reducing total fat, saturated fat, salt and added sugar. We're dedicated to ensuring the integrity of our health claims, all of which are reviewed by qualified nutrition and regulatory experts following strict procedures and standards.

Across our global portfolio, we are offering consumers smaller portion sizes. In fact, in the United Kingdom, a greater proportion of our sales come from smaller portion sizes. Over 80% of Walkers Crisps sales are from 25 gram bags purchased in multipacks; 2% of sales are from 50 gram bags. Our goal is to continue to develop products that are affordable and accessible. We do not charge a premium for our zero sugar/zero calorie varieties, for instance.

We're helping consumers make smart choices more easily by providing easy-to-understand nutrition labeling. We also understand the importance of being a responsible marketer. PepsiCo believes that industry-wide voluntary action continues to be the best way to address our responsibilities. We endorse the International Council of Beverages Associations' guidelines on marketing to children—a landmark industry initiative which does not permit marketing or advertising of beverages, other than water, fruit juice, and dairy-based beverages to children under 12 years old.

We are committed to helping reduce the terrible burden of hunger everywhere we do business. PepsiCo has efforts under way to help support the United Nations' Millennium Development Goals, including the goal to eradicate extreme poverty and hunger by 2015. In addition to funding, we are providing experts who offer counsel in many areas—from product development to building distribution networks—in such countries as India, South Africa and Nigeria. In addition, we'll have the opportunity to leverage any new discoveries to create affordable products for low-income consumers in developed countries around the world.

We know the importance of establishing partnerships with key stakeholders to help make a positive contribution to the world's nutrition needs. Our leaders contribute to initiatives led by the World Health Organization (WHO), the National Institutes of Health, Global Alliance for Improved Nutrition, the Pan American Health Organization and the Alliance for a Healthier Generation. For example, we are among the nine leading food and beverage companies to commit to the goals of the "Global Commitment to Action on the Global Strategy on Diet, Physical Activity and Health" and to report on our progress, annually, at the World Health Assembly. We intend to continue measuring and reporting on our progress so that our consumers and other industry leaders can share in the lessons we're learning.

At PepsiCo, we're privileged to use the lessons gained from our global vantage point not only to improve our business, but to contribute to our common goal of finding solutions to some of the world's most persistent social challenges.

PepsiCo continues to evolve its approach to systematically obtaining policy and scientific advice. An intensive review of PepsiCo's external health and wellness advisory structure was completed in late 2008 by the University of Toronto's McLaughlin-Rotman Centre for Global Health and Director of Ethics and Policy. Based on its recommendation, PepsiCo is refining its approach to policy, science and bioethics as follows:

The PepsiCo Blue Ribbon Advisory Board (BRAB) will be reshaped in 2009 to become the PepsiCo Policy Advisory Committee. Reporting to and appointed by the CEO, it provides high-level policy advice that is global in scope and addresses the diversity of health and environmental issues that impinge on PepsiCo's work. Complementary policy advisory committees now exist in all regions and in most major markets and focus on issues of direct relevance to their regions. The regional committees report to the president of the regional and/or national business and will be represented in an annual global meeting to assure coherence of approaches.

In addition to our Human Sustainability Leadership Team, led by our CSO and leaders from R&D, Global Nutrition, Public Policy, Legal, Communications and Marketing, the Board of Directors, PepsiCo's chairman and senior executive leaders are informed on health and wellness initiatives and issues on a quarterly basis.

Divisions of PepsiCo also leverage experts to help promote science-based understanding of food and beverage choices and their impact on health. For example: the Quaker/Tropicana Breakfast Research Institute (BRI) established in late 2006 is now a web-based institute devoted to promoting a science-based understanding of the role of breakfast in the diet and the health implications of its consumption as part of a healthy lifestyle. The BRI is comprised of scientists prominent in their fields, and is led by renowned cardiologist Dr. James Rippe.

More information about the BRI

Internationally, advisory boards in China, the U.K., Mexico, Brazil and India help to guide our efforts in health and wellness, food safety, regulatory compliance and innovation.

The development of the Global R&D structure and appointment of our first CSO has led to an upgrading of our relationships with leading academic and research-based organizations on a global basis.

In addition to these experts, PepsiCo has created the International Food Safety and Nutrition Network (IFSAN). This is a global network of PepsiCo R&D and food science professionals. They have established specific priorities and codes of practice for PepsiCo regarding such things as food safety policy and promotional insert policies. They also work with outside opinion leaders and agencies to provide advice and the PepsiCo perspective as needed.

PepsiCo focuses on keeping its brands strong and locally relevant in all of its markets. In emerging markets, PepsiCo has built innovation and R&D processes that have both local relevance and a global foundation. For example, PepsiCo has R&D centers in all the key regions of the world—Mexico, the U.K., China, Thailand and two "satellite" centers in Brazil and Australia, as well as the flagship R&D centers in the U.S. In markets around the world, our R&D teams support our growth by turning our global brands into local favorites. We work closely with local master chefs who understand the preferred tastes and consumption patterns of people in specific regions and cultures. These insights then inspire us to extend our existing brands and invent new categories and flavors.

In Asia, we learned that people strongly prefer beverages that contain natural ingredients. We responded by introducing Pepsi Raw with pure sugar cane. We also experimented with local flavor combinations to create Tropicana Guo Bin Fen, a new category of exotic mixed juices. This non-carbonated beverage, available in Honey Melon & Jasmine and Orange & Honeysuckle, became PepsiCo International's largest and most successful new product in 2008, and helped us grow our market share in China's major cities. The business dynamic is similar in other Asian markets as well, where we have reshaped our product portfolios significantly to address local tastes and needs.

In Latin America, we are adding capacity to our R&D centers in Mexico and Brazil, allowing for 70% to 80% more innovation utilization. We also launched new locally specific brands and flavors in 2008, including Passion Fruit H2Oh! in Brazil and watermelon flavored Be-Light (flavored water) in Mexico. For our fountain beverages found in select restaurant chains, we will execute consumer trials for three new beverage flavors, Tamarind, Hibiscus and Lime. We are also increasing acquisitions in the region to add some locally relevant brands to our portfolio.

In Europe, we use local flavors like paprika, shashlik and red caviar. We have also developed local products; for example, Hrusteam is a bread-like product exclusive to Russia (Russian brand, Russian packaging, Russian flavor).

We support programs that use simple steps to encourage people to get active:

• In Latin America, Vive Saludable Escuelas is a proven initiative that teaches children how to add physical activity to their daily lives. A physical education routine, designed by Mexico's Sports Commission, is being used by teachers in participating schools. To date, the program has touched more than one million children in 4,000 schools.
• In India, our Get Active program reaches 70,000 students in 120 schools and promotes an active lifestyle through an energy balance curriculum.
• In the U.S., we continue to work with the YMCA, the largest provider of fitness programs, to support Activate America, a public health initiative that helps make healthy living a reality for millions of Americans.
• In Poland, we have collaborated with several multi-national food corporations and the Polish Government on a "Keep Fit" program for teens.
• In Canada, we're working with the Canadian Association for Health, Physical Education, Recreation, and Dance to support a national initiative to educate children on simple ways to be more active and eat more healthfully.
• In South Africa, our Simba business supports physical activity and energy balance for a healthy lifestyle for children through its Ready, Steady, Go program at schools.
• In China, PepsiCo introduced a Sports and Music promotion to encourage people to participate in sports, and the U.S.-based Gatorade Sport Science Institute established a branch in China to help Chinese athletes improve performance through scientific research.

We care about the health of consumers. We want them to enjoy our products and we want to help make healthful food choices the easier choice.

Product Labeling
PepsiCo is committed to providing safe, wholesome products and to protecting equity in our brands, trademarks and goodwill. Our business divisions have implemented policies related to food safety, labeling, product integrity and quality.

PepsiCo complies with all legally required nutrition labeling. Our policies cover food safety, sanitation, recalls and allergens, and require that our products are coded, labeled, identifiable, and traceable. PepsiCo is in full compliance with required nutrition labeling and has voluntarily led the industry in "full container labeling" on products where consumers may be reasonably expected to eat or drink the full container on one occasion.

Our compliance systems include website training, monitoring, preventative measures and readiness for corrective action. We have regular management reviews of our procedures and activities regarding our products.

On a global basis, we label all ingredient information on the back of the product package and provide any other relevant nutrition information in compliance with local country guidelines. PepsiCo is committed to providing clear and useful nutrition labeling that helps consumers make nutritionally informed choices.

A key way we do this is through our own nutrition labeling. In the U.S., we were the first in the industry to introduce a symbol that makes it easier for consumers to identify which of our products contribute to a healthier lifestyle. Our Smart Spot symbol—the symbol of Smart Choices Made Easy—is a simple labeling system that explains why each product is a smart choice.

PepsiCo is also a founding member of the U.S. Keystone Food and Nutrition Roundtable, a multi-stakeholder group that seeks to drive improvements in the American diet.

The Keystone Roundtable is a consensus forum of industry, academia, the public health community and government, working collaboratively to create an easy-to-understand and uniform front-of-pack nutrition labeling program to help consumers make healthier choices among all packaged food and beverages products in the U.S.

In Europe, we introduced front-of-pack nutritional labeling across our brands in partnership with other food and beverage companies. The labels help consumers understand the percentage of the "Guideline Daily Amount" (GDA) of calories, sugars, saturates, fat and salt contained in a portion of food or drink. By year-end 2008, 100 percent of our snacks, foods, and beverages carried the GDA labeling on pack in the EU.

Daily Intake Guide (percent DI labeling) has been voluntarily introduced for our carbonated beverages, multi-pack snacks and larger "sharing" packs as part of the industry-wide food labeling changes in Australia and New Zealand. This labeling gives information on the calories and content of a range of key nutrients per serving to assist consumers in making informed food and beverage choices. It was rolled out across the entire product range in Australia and New Zealand.

One of the five Vive Saludable strategic pillars is the responsible selling and marketing of our products and the promotion of healthy lifestyles among consumers. This includes the clear and responsible labeling of ingredients and health benefits, the creation of an icon system to communicate and educate consumers on nutrition benefits, ensuring responsible communication and publicity of the health/ nutrition benefits of our products, and promoting active lifestyles and healthy eating among schools and consumers. The following countries currently have products with the Vive Saludable logo: Mexico, Guatemala, El Salvador, Honduras, Nicaragua, Panama, Chile, Argentina, Ecuador, and Peru.

On a global basis, we label all ingredient information on the back of the product package and provide any other relevant nutrition information in compliance with local country guidelines.

We understand the importance of being a responsible marketer. We believe that industry-wide voluntary action continues to be the best way to address our responsibilities.

PepsiCo recognizes that, as a multinational food and beverage company with global brands that touch millions of consumers every day, our communications carry a special responsibility. We are committed to responsible marketing practices, including changing the balance of foods and beverages advertised to children. We are also committed to ensuring that healthy choices are offered in schools. We believe this will help children, parents, and schools make their dietary choices that support a healthy lifestyle.

PepsiCo has already made several global, national, and sector-driven commitments regarding responsible marketing to children and product placement in schools.

We announced our full support of the International Council of Beverages Associations' guidelines on marketing to children--a landmark initiative supported by industry. The guidelines permit no marketing or advertising of beverages,, other than water, fruit juice and dairy-based beverages,, to children under 12 years old. The guidelines were fully implemented on a global basis by January 2009. We were a founding member of a voluntary U.S. food and beverage industry initiative that redefined how the industry markets products to children under 12. Today, 100% of our advertising to children is devoted exclusively to products that meet defined nutrition criteria or provide a functional benefit. We have committed to similar guidelines in Canada, the European Union, Mexico, Thailand, South Africa, Australia and New Zealand.

Our global marketing policy is just the beginning of an ongoing effort to expand the commitment toward responsible marketing globally. PepsiCo has joined the food and beverage industry in adopting Pledges in Australia, Canada, the EU, South Africa, Thailand and the U.S., and work is under way to introduce similar pledge programs and/or self-regulatory initiatives in other countries and regions, including Brazil, Russia, Turkey, the Middle East, China, South Africa, the Philippines, and Latin America.

PepsiCo has a long-standing policy on the kinds of television programs that can carry our advertising messages. We're committed to high standards in all our advertising, including the environment in which our advertising appears. We avoid advertising during excessively violent programs, programs that may be distasteful as judged by contemporary society, and those that may be offensive to large groups of people. We also attempt to avoid programs containing material inconsistent with or adverse to our products. We seek to avoid programs featuring exceptionally controversial or potentially inflammatory discussions. Children are a special audience, and we take particular care in developing marketing practices and evaluating programs that carry messages to children.

We joined with the Alliance for a Healthier Generation and other leaders in the U.S. food and beverage industries to adopt voluntary guidelines for the products we offer to grade schools in the U.S. As part of the commitment, we agreed to remove full-calorie soft drinks from K-12 schools over three years. Since 2004, we have seen a nearly 60% drop in the calories of beverages shipped to these schools. We are the only food and beverage company to have signed both a beverage and snacks agreement for U.S. schools.

We proactively lead and engage in private-public partnerships with key external experts and stakeholders in the global health policy and science/nutrition communities to help improve diets and deliver substantial improvements in our products. Our leaders actively participate in global health policy initiatives including those led by the World Health Organization, the National Institutes of Health, Wellcome Trust, the Pan American Health Organization and the Alliance for a Healthier Generation, among others.

We are among nine leading food and beverage companies to sign the "Global Commitment to Action on the Global Strategy on Diet, Physical Activity and Health," a commitment addressed to the World Health Organization. We agreed to five key global commitments to action that will take place over the next five years. We will report our progress in delivering these goals at the annual World Health Assembly meeting.

We also support the Global Alliance for Improved Nutrition (GAIN), a Swiss foundation that seeks to fight malnutrition by mobilizing partners to deliver improved nutrition to vulnerable populations.

In the U.S., we're working with the American Dietetic Association, the nation's largest organization of food and nutrition professionals, to develop educational programs and engage in frequent dialogues that will make a positive difference in public health through improved product choices and adoption of active lifestyles.

PepsiCo also calls upon the strategic and practical insights of our health and wellness advisory boards comprised of top science, nutrition and policy experts in the U.K., U.S., and Brazil, among other countries.

The PepsiCo Foundation's investment strategy in the global health portfolio is to protect and make available proper, nutritious food,; improve complete health,; and increase health-promoting behaviors through proper nutrition and energy balance.

Save the Children
Save the Children became one of PepsiCo Foundation's newest grantees within the global health portfolio in November 2008 with a $5 million grant for a program aimed at decreasing newborn and child mortality and malnutrition in India and Bangladesh. Save the Children proposes to work with community health educators to provide thousands of families among these countries' poorest with important information about health, nutrition, water, sanitation, and hygiene. The combined global resources of PepsiCo Foundation and Save the Children will help make a profound difference in the lives of 650,000 children under the age of five, along with mothers and pregnant and lactating women in these two countries.

Oxford Health Alliance
The Oxford Health Alliance is a global organization that works to reduce the burden of chronic diseases in the United Kingdom, Mexico, China and India. Working with the PepsiCo Foundation, the Community Interventions for Health program was implemented to reduce chronic disease by targeting three risk factors: diet, physical activity level and tobacco use.

Family Health Self-Empowerment Project
The University of Florida and its Family Health Self-Empowerment Project is a multiyear research and intervention program that investigates approaches to reduce the incidence of obesity in low-income and ethnic families.

World Food Programme (WFP)
Working with the PepsiCo Foundation Service Corps, this project will enhance the humanitarian aid capabilities of WFP and leverage the core competencies of PepsiCo in line with Performance with Purpose. The program will work to identify where PepsiCo?s performance culture and supply chain expertise can be applied to WFP logistical operations and will provide enhanced tools, metrics and training to facilitate this. As a result, WFP will be able to provide better and more efficient assistance to those at greatest risk of hunger and hunger-related diseases due to extreme poverty and natural and man-made disasters around the world.

Healthy Food, Healthy Moves: Chicago Communities in Schools and the Consortium to Lower Obesity in Chicago Children (CLOCC) are collaborating on the Healthy Food, Healthy Moves: Inform Chicago initiative to test and deliver a health promotion program in six Chicago schools. The three-year pilot project has mobilized a broad network of community organizations, government officials, educators, public health professionals and families in a citywide effort to raise awareness of how to achieve healthy lifestyles.

Food Safety
PepsiCo, like many consumer product goods companies, sources ingredients from around the globe to ensure that we use the freshest, best tasting, and highest quality ingredients available for our products. Food safety is at the top of our priority list as we select these materials, and we have an excellent record in providing safe, wholesome and nutritious products to our consumers. To ensure that PepsiCo provides safe products with the highest quality, we only use foods, ingredients, and packaging materials that have been deemed safe by scientific consensus and regulatory review. The health and safety of our consumers is of the highest importance to us.

PepsiCo shares and actively supports its customers' interests in food safety, and believes customers have a right to relevant information about the food they buy so that they can make informed purchasing decisions. PepsiCo, however, believes that the U.S. Food and Drug Administration, and other national and international regulatory authorities who are charged with protecting the health and safety of the public and the environment, are the proper entities, rather than a manufacturer like PepsiCo, to evaluate and make judgments about the labeling and sale of genetically engineered products. PepsiCo takes its lead from national and international food-safety and regulatory authorities, and supports their efforts to take whatever steps are necessary, based on sound scientific principles, to ensure that any new food technology is safe for consumers and the environment. While maintaining our own high internal food safety standards, PepsiCo complies with all government food labeling regulations.

Genetically Modified Ingredients
PepsiCo is dedicated to producing the highest quality, greatest tasting food and beverage products in every part of the world. PepsiCo ensures all products meet or exceed stringent safety and quality standards and uses only ingredients that are safe and approved by applicable government and regulatory authorities. Approval of genetically modified foods differs from country to country regarding both use and labeling. For this reason, PepsiCo adheres to all relevant regulatory requirements regarding the use of genetically modified food crops and food ingredients within the countries in which it operates. Where legally approved, individual business units may choose to use or not use genetically modified ingredients based on regional preferences.

Organic Foods
In North America, PepsiCo currently offers certified organic products from Quaker. Two varieties of Quaker Instant Oatmeal are certified organic. Organic Quaker Instant Oatmeal is made with at least 95% organically produced ingredients. Every ingredient in the Maple & Brown Sugar Quaker Organic Instant Oatmeal is natural, and is designated "100% Natural." Certification follows the USDA certification program known as the National Organics Program (NOP) and follows the National Organics Standards (NOS), established in October 2002. All PepsiCo certified organic products are certified by the USDA-accredited certifier Oregon Tilth.

PepsiCo serves the needs of two important groups:

• The consumers who purchase and consume our products
• The retailer and bottler customers who purchase and resell these items

PepsiCo has several methods in place for measuring and improving consumer and customer relations.

Consumers
Consumers are a key stakeholder for our business. All PepsiCo divisions conduct regular qualitative and quantitative research to understand our consumers' needs. Our North America divisions conduct over 100 custom and standard studies per year. These studies range from small focus groups (to learn from individual consumers), to telephone or online surveys (to gain statistically significant insights). Consumer insights are translated into product improvements, new product ideas, and communication tactics.

In the U.S., our packages carry a toll-free number and web address to allow consumers easy access to PepsiCo if they have questions or comments regarding the company or one of its products. Each business has a Consumer Relations Department that serves as the first point of contact for all communications and correspondence received from our consumers. Should consumers need to contact us after hours, they can dial our toll-free number and a message will be activated offering them an emergency line number. A special team of Consumer Relations professionals are available 24 hours a day, 7 days a week; and they can be contacted through our emergency line and will immediately return a call to a consumer or one of our field representatives.

In 2008, PepsiCo call centers measured consumer satisfaction and service levels across all of their North America businesses. The tools used covered a range of key consumer metrics including response rate, representative knowledge/professionalism, satisfaction with resolution, service level, and willingness to recommend products to family/friend.

For example, our Pepsi-Cola Company call center operates at an over 99% service level. This indicates that the center answers and handles calls to the toll-free number without hold time for over 99% of calls, well above industry standard. When the consumer provides feedback or input via the call center, this input is funneled to the correct business owner and addressed as appropriate.

Customers
PepsiCo's key customers are retailers and bottlers. PepsiCo commissions retail customer surveys that measure customer satisfaction, including such things as target setting and strategic planning. Dedicated PepsiCo customer teams work across our divisions to provide the highest level of service to our major customers. These individuals work closely to assure that all customer feedback is understood and addressed as quickly as possible.

In addition to the day-to-day management of customer feedback, PepsiCo has established forums to solicit feedback. One such forum is PepsiCo's Innovation Summits, which are held annually with our major customers. These summits take place in the early spring to late summer and preview innovation for the following year and beyond. Customers are shown PepsiCo's proposed new products and are asked to provide verbal and written feedback. This feedback is forwarded to the R&D and commercialization teams, often resulting in changes to final product. In addition to Innovation Summits, PepsiCo will also be conducting Supply Chain Summits with our top customers to build a strategic agenda around in-store conditions, cost removal and sustainability.

PepsiCo has created Centers of Excellence (COEs) to ensure a high quality of customer service. One of our most active COEs is focused on customer insights, helping to quantify and provide innovative solutions for our customer's most challenging issues, including consumer shopping habits, macro consumption trends, and retailer competitive dynamics.

Additionally, PepsiCo has a COE dedicated to Customer Supply Chain and Logistics, and focused on go-to-market capabilities. It addresses customer supply issues and enables rapid resolution of situations as they occur. Ultimately, the COE enables a more flexible and adaptive supply chain for our individual retail customers. PepsiCo has also instituted a regular Supply Chain scorecard process. The scorecard sets targets and measures results on metrics such as on-time delivery and consistent service.

Bottler Engagement
In the U.S., our Pepsi-Cola businesses work closely with our independent bottlers to assure the seamless production and delivery of our products. There are several formal processes for soliciting bottler feedback. Strategic planning is conducted in collaboration with our largest bottlers, as well as an annual bottler meeting which communicates Pepsi's Annual Operating Plan to the entire bottling system.

Consumer Privacy
Consumer privacy is important to PepsiCo, and we make every effort to ensure that consumers understand our policies. Each division maintains its own marketing website and these are accessible by consumers. Brand-specific websites and promotion-specific microsites are also maintained, where consumers can voluntarily provide personal information to participate in online programs and promotions. On each website, a privacy policy is conspicuously posted that outlines the types of information collected by each division on that site and how the information is used and protected. We comply with applicable laws, rules and regulations. Also, personal information received through the Consumer Relations toll-free number is kept confidential.