leveraging our global scale - pepsico.com · innovation global framework for consumer demand...
TRANSCRIPT
Zein Abdalla President
Leveraging Our Global Scale Barclays Capital Back-to-School Consumer Conference
September 4, 2013
1
Safe Harbor Statement of Terms and Non-GAAP
Information
Safe Harbor Statement
Statements in this communication that are “forward-looking statements,” including our 2013 guidance, 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. 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
All comparisons are on a year-over-year basis unless otherwise noted. Please refer to the “Investors” section of PepsiCo’s web site at
www.pepsico.com under the heading “Events & 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 September 4, 2013
available at www.pepsico.com for the definitions of core, constant currency, organic and certain other terms used herein.
2
Zein Abdalla
President, PepsiCo
PepsiCo Europe CEO
Various PepsiCo general management roles
including: • GM European beverages
• GM Tropicana Europe
• Franchise VP Pakistan and the Gulf Region
Various roles in sales / marketing /
general management at Mars Incorporated
Today
2009 - 2012
1995 - 2009
Pre-1995
3
PEP: Portrait of a consistent, durable CPG
Revenue $65B
Core Operating Margin 15%
10 Year EPS CAGR 9%
10 Year Dividends per Share CAGR 14%
Organic Revenue Growth 5%
Core Net ROIC 15%
10 Year Cumulative Cash returns $53B
Note: All figures are for the year 2012. 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 September 4, 2013 under the "Investors - Investor Presentations” section on PepsiCo’s website at www.pepsico.com to find disclosure and
a reconciliation of the above non-GAAP financial measures.
4
Portfolio of complementary businesses with
expanding global footprint
2012 Net Revenue: $65B
Business
Developing
& Emerging
35%
Developed
65%
Beverages
49% Food
51%
Geography
5
Strong portfolio of iconic brands
22 $1B Brands Over 40 $250MM - $1B Brands
6 PepsiCo Confidential
Our brands have leading global positions
in attractive categories
SALTY
SNACKS
HOT
CEREALS
#1 #1
SPORTS
DRINKS
CARBONATED
SOFT DRINKS
JUICE & JUICE
DRINKS
#1 #2 #2
Source: Euromonitor 2012
7
Our brands cover most of consumer demand
DAYPARTS
COHORTS
NEEDSTATES
OCCASIONS
8
A truly global footprint
Both Snacks only Beverages only No presence
9
Leading positions in key strategic markets
9 PepsiCo Confidential
Source: Euromonitor, 2012 food and beverage retail sales
US Russia Saudi Egypt India UAE
UK Mexico
10
Scale of our partners strengthens our business
Partners Provide Added ‘System’ Scale
PepsiCo Strategic Partnership
Note: “System” refers to the network by which PepsiCo and non-PepsiCo beverage products are distributed by us and our partners.
Source: Euromonitor, 2012 food and beverage retail sales
UK
China
Brazil
11
Portfolio is logical and complementary
Branded, Impulse, High Velocity Categories
Consumers
Customers
Markets
Capabilities
Sh
are
d C
hara
cte
risti
cs
12
Cost
Leverage
Capability
Sharing
Commercial
Benefits
Significant synergies from integrated portfolio
$800 million to $1 billion in annual synergies
13
From
PepsiCo transformation journey
Business
Geography
Culture
Fun-for-You
Decentralized
Developed
market strength
To
Balanced portfolio
including Better-for-You
and Good-for-You
Connected
autonomy
More balanced
global footprint
14
We are focused on 5 priorities,
taking full advantage of our global scale
Increase Cash Returns to Shareholders
To From
Glocal Campaigns Local Campaigns
Refresh, Reframe &
Breakthrough Refresh
Global Best Practices Locally Optimized
Freeing Trapped Dollars Every Penny a Prisoner
Brand Building
Innovation
Execution
Productivity
Cash Returns
1
2
3
4
5
15
Global brand positioning Brand
Building 1
GLOBAL CONSISTENCY
GLOBAL CAMPAIGNS
GLOBAL LEVERAGE
16
Balanced global scorecard Brand
Building 1
Share of voice
Example Metrics
Innovation pipeline
Short Term ROI
Long Term Equity
Inp
uts
O
utp
uts
17
Global framework for consumer demand Innovation 2
EXAMPLE DEMAND SPACES
Prepare
Jump Start
Perform
On-the-go Uplift
Home
Alone
Enjoy & Indulge
Home
Alone
Young & Hungry
Not Home
Alone
Family Fun
18
Benefits Initiatives
Global innovation approach and benefits Innovation 2
Global portfolio pipeline Fewer,
Bigger,
Better
Global platforms
Global stage-gate process
Source: PepsiCo R&D
“Lift & Shift/Adapt”
Scale
Investments
Global capabilities Advantaged
Know-how
1
19
We “lift & adapt” innovations across the world
Lay’s “Do-Us-A-Flavor”
UK – Australia – US
Trop 50
US – Canada – UK
Innovation 2
20
Scalable innovation platforms Innovation 2
21
Quaker Real Medleys
Mtn Dew Kickstart
Doritos Locos Tacos
Tropicana Farmstand
Pepsi Next
Pipeline of innovation successes
TROP 50
Innovation 2
22
Leveraging Scale / Capabilities Across Value Chain Execution 3
Plan/Buy
Global leverage of
procurement scale
Make
Global best
practices via
benchmarking
and process
improvement
Move
Choice of
distribution system
right for category
across DSD,
warehouse, 3PL
Sell
Important partner to
customers given
scale and shared
capabilities/
infrastructure
23
Foods Beverages
#1 Food & Beverage Business in Russia
Russia: Full integration for “Power of One” Execution 3
23 Source: Euromonitor 2012 retail sales
24
#1 Food & Beverage business with >2x scale advantage
vs. nearest competitor
10 of 25 top food & beverage brands – >2x more than
nearest competitor
Power of One drove over $100 million of productivity in
2012
Highest contributor to growth at retail in 2012
Russia: Full integration for “Power of One” Execution 3
Source: Euromonitor, 2012 and Nielsen, 2012
25
China: Bring Happiness Home Execution 3
Chinese New Year Video with 700 million views
26
Expected to Generate ~$1B per annum Productivity 4
Cumulative Productivity
$3B productivity
in 3 years (2012-'14)
~$3B
~$2B
$1B
2014
2013
2012
Opportunity
Operations:
‘driving to zero’
Commodities:
‘innovating for
productivity’
A&M:
‘spending more
and better’
27 PepsiCo Confidential
Proven track record of
returning cash to shareholders
Cash
Returns 5
Cumulative cash returned to
shareholders of more than $53B over ten years
33
2008
31
2007
23
2006
53
2011
47
2010
41
2009
3
17
2005
12
2004
7
2003 2012
Dividends Share Repurchase
28
Driving even higher ROIC and Cash Returns Cash
Returns 5
Target ~50 bps of Annual ROIC Improvement
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 MM/year
Return additional cash through share repurchases ‒ While maintaining access to debt capital markets at attractive rates
1
2
3
4
Capital Allocation Priorities
29
We are positioned to deliver top-tier
long-term performance
Top Tier TSR
• Revenue Growth
MSD, mostly Organic
• Balanced offerings
between FFY, BFY,
GFY
• Increased Developing
& Emerging Market
Footprint
• Leading Brand Building, Innovation and Design Capability
• Flexible, Low-Cost Supply Chains that are Environmentally
Sustainable
• World-Class Talent Development
• Leveraging Power of One
Supporting
Fundamentals:
• Core, Constant
Currency EPS HSD
• Operating Margin
+30-50 bps/year
• ROIC 50+ bps/year
• Core MOCF growth
= Net Income growth
• Strong returns to
shareholders
(dividends and share
repurchases)
Long-Term Goals
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 September 4, 2013 under the "Investors ‐ Investor Presentations” section on PepsiCo’s website at www.pepsico.com to find disclosure and a reconciliation of the
above non‐GAAP financial measures
30
Takeaways from leveraging our global scale
Leverage our global presence and people
without sacrificing execution and entrepreneurial culture
Build global brands and accelerate global innovation
through global positioning, platforms and processes
Drive greater efficiency across the business
with very high capital discipline
Use the Power of One of our complementary F&B portfolio to gain
cost advantage, transfer capability and deliver commercial benefits
Increased Shareholder Value