PepsiCo Inc.

Company Overview

Business Model: PepsiCo, Inc. is a leading global beverage and convenient food company that makes, markets, distributes, and sells a wide variety of beverages and convenient foods. The Company operates through its own operations, authorized bottlers, contract manufacturers, and other third parties, serving customers and consumers in more than 200 countries and territories. Its complementary portfolio includes brands such as Lay’s, Doritos, Cheetos, Gatorade, Pepsi-Cola, Mountain Dew, Quaker, and SodaStream.

Market Position: PepsiCo, Inc. holds significant leadership positions in the convenient food industry globally. In the U.S. liquid refreshment beverage category, PepsiCo, Inc. represented approximately 16% of estimated retail sales in measured channels in 2025, compared to The Coca-Cola Company's approximately 20%. The Company competes primarily on brand recognition, taste, price, value, quality, product variety, innovation, and distribution, with a focus on anticipating and responding to evolving consumer preferences, including health and wellness, sustainability, and e-commerce.

Recent Strategic Developments:

• Operating Model Transformation: Shifted its operating model at the start of 2025 to enhance agility, simplicity, and unification, including streamlining processes and launching a new corporate brand identity.
• North America Business Focus: Prioritizing reigniting its North America business through operational integration where beneficial and strategic investments in brands.
• International Expansion: Aiming to increase the size, presence, and scale of its International business, with a focus on capturing growth in large and developing markets.
• Away-from-Home Growth: Expanding its away-from-home business into new occasions, exemplified by the successful Walking Taco platform and marketing campaigns like "Food Deserves Pepsi" and "Pepsi Zero Sugar Taste Challenge."
• Portfolio Reshaping (pep+): Continuing its pep+ (PepsiCo Positive) transformation, now in its fifth year, by reducing added sugar, sodium, and saturated fat in core brands (e.g., Lay’s, Gatorade), removing artificial colors and flavors (e.g., Lay’s, Cheetos, Doritos), and introducing new products with functional benefits (e.g., Pepsi Prebiotic Cola).
• Strategic Acquisitions: Acquired poppi, a prebiotic soda business, for $1.95 billion in cash and $0.2 billion in contingent consideration in May 2025. Acquired Siete, a Mexican-American foods business, for $1.2 billion in cash in January 2025. Acquired the remaining 50% ownership in Sabra Dipping Company, LLC from Strauss Group for $241 million in cash in December 2024, making Sabra a wholly-owned subsidiary.
• Technology and AI Integration: Investing in technology and artificial intelligence to build smarter systems, enhance consumer insights, improve operating efficiencies, reimagine its go-to-market model, and empower sales teams.
• Partnerships: Entered an agreement with Celsius Holdings, Inc. in August 2025 to be the exclusive distributor for the Alani Nu brand in certain channels in the United States and Canada. Shifted its alcoholic beverage business in 2024 to a trademark licensing and flavor sales model.

Geographic Footprint: PepsiCo, Inc. serves customers and consumers in more than 200 countries and territories. Its largest operations are in the United States, Mexico, Russia, Canada, China, the United Kingdom, Brazil, and South Africa.

• United States: $53,951 million (57.4% of total revenue)
• Mexico: $6,947 million (7.4% of total revenue)
• Russia: $4,768 million (5.1% of total revenue)
• Canada: $3,729 million (4.0% of total revenue)
• China: $2,621 million (2.8% of total revenue)
• United Kingdom: $2,142 million (2.3% of total revenue)
• Brazil: $1,782 million (1.9% of total revenue)
• South Africa: $1,767 million (1.9% of total revenue)

Financial Performance

Revenue Analysis

Profitability Metrics:

• Gross Margin: 54.1% (2025) vs. 54.6% (2024)
• Operating Margin: 12.2% (2025) vs. 14.0% (2024)
• Net Margin: 8.8% (2025) vs. 10.4% (2024)

Investment in Growth:

• R&D Expenditure: $0.84 billion (0.9% of revenue) in 2025, compared to $0.81 billion in 2024.
• Capital Expenditures: $4.42 billion in 2025, compared to $5.32 billion in 2024.
• Strategic Investments:
  • Acquisition of poppi: $1.95 billion in cash and $0.2 billion in contingent consideration.
  • Acquisition of Siete: $1.2 billion in cash.
  • Acquisition of remaining 50% ownership in Sabra Dipping Company, LLC: $241 million in cash.
  • Investment in Celsius Holdings, Inc. Series B convertible preferred shares: $585 million.

Business Segment Analysis

PepsiCo Foods North America (PFNA)

Financial Performance:

• Revenue: $21.36 billion (+0.3% YoY)
• Operating Profit: $6.17 billion (-7.0% YoY)
• Key Growth Drivers: Revenue growth was primarily driven by the favorable impact of acquisitions and effective net pricing, partially offset by a 2% decrease in organic volume. The decline in operating profit reflects operating cost increases, including strategic initiatives, higher restructuring charges, and the decrease in organic volume, partially offset by productivity savings and a favorable impact from prior-year charges related to the Quaker Recall.

Product Portfolio: PFNA makes, markets, distributes, and sells convenient foods including cereals, chips, dips, granola bars, oatmeal, pasta, rice, and syrups and mixes under brands such as Cheetos, Doritos, Fritos, Lay’s, Pearl Milling Company, Quaker, Ruffles, and Tostitos. In December 2024, Sabra Dipping Company, LLC, which makes refrigerated dips and spreads, became a wholly-owned subsidiary. In January 2025, PepsiCo, Inc. acquired Siete, a Mexican-American foods business.

Market Dynamics: Unit volume declined 2%, driven by a 3% decrease in savory snacks volume.

PepsiCo Beverages North America (PBNA)

Financial Performance:

• Revenue: $24.91 billion (+1.5% YoY)
• Operating Profit: $1.52 billion (-53.7% YoY)
• Key Growth Drivers: Revenue growth was primarily driven by effective net pricing, partially offset by a 3% organic volume decline. The significant decrease in operating profit primarily reflects impairment charges related to the Rockstar brand, operating cost increases, acquisition and divestiture-related charges from the poppi acquisition, the organic volume decline, and a 5-percentage-point impact of higher commodity costs (including a 6-percentage-point impact from tariffs). These negative impacts were partially offset by a favorable impact of prior-year impairment and other charges related to the Tropicana Beverages Group investment and Juice Transaction-related receivables, effective net pricing, productivity savings, and lower advertising and marketing expenses.

Product Portfolio: PBNA makes, markets, and sells beverage concentrates, fountain syrups, and finished goods under brands including Aquafina, Bubly, Diet Mountain Dew, Diet Pepsi, Gatorade, Mountain Dew, Pepsi, and Propel. It also sells concentrate and finished goods to authorized and independent bottlers. PBNA distributes ready-to-drink tea and coffee products through joint ventures with Unilever (Lipton) and Starbucks, respectively. Additionally, PBNA manufactures and distributes certain brands licensed from Keurig Dr Pepper Inc. (Crush, Dr Pepper, Schweppes) and juice brands licensed from Dole Food Company, Inc. and Ocean Spray Cranberries, Inc. PBNA also distributes brands owned by Celsius Holdings, Inc. (Celsius, Alani Nu, Rockstar) in certain channels and acts as the exclusive distributor for Tropicana Beverages Group's portfolio for small-format and foodservice customers with chilled direct-store-delivery.

Market Dynamics: Unit volume declined 3%, driven by a 6% decline in non-carbonated beverage volume and a slight decline in CSD volume.

International Beverages Franchise (IB Franchise)

Financial Performance:

• Revenue: $4.99 billion (+2.4% YoY)
• Operating Profit: $1.77 billion (+21.0% YoY)
• Key Growth Drivers: Revenue growth primarily reflects effective net pricing. Operating profit increased due to a favorable impact of a prior-year indirect tax reserve, net revenue growth, and lower advertising and marketing costs, partially offset by an impairment charge related to the Rockstar brand.

Product Portfolio: IB Franchise makes, markets, and sells beverage concentrates to authorized and independent bottlers under brands including 7UP, Aquafina, Gatorade, Mirinda, Mountain Dew, Pepsi, Pepsi Black, Pepsi Zero Sugar, and Sting Energy. It also manufactures and distributes SodaStream sparkling water makers and related products and sells ready-to-drink tea products through an international joint venture with Unilever (Lipton).

Market Dynamics: Unit volume grew 1.5%, primarily reflecting growth in the Middle East, China, and Pakistan.

Europe, Middle East and Africa (EMEA)

Financial Performance:

• Revenue: $18.00 billion (+8.0% YoY)
• Operating Profit: $2.14 billion (+7.0% YoY)
• Key Growth Drivers: Revenue growth was primarily driven by effective net pricing and a 2.5-percentage-point impact of favorable foreign exchange translation, partially offset by an organic volume decline. Operating profit increased due to effective net pricing, productivity savings, a favorable impact of prior-year impairment and other charges related to the Tropicana Beverages Group investment and Juice Transaction-related receivables, and a 5-percentage-point impact of favorable foreign exchange translation. These positive impacts were partially offset by operating cost increases, a 22-percentage-point impact of higher commodity costs (primarily dairy, potatoes, and cooking oil), an impairment charge related to the Rockstar brand, and higher restructuring charges.

Product Portfolio: EMEA makes, markets, distributes, and sells convenient food brands including Cheetos, Chipsy, Doritos, Lay’s, Quaker, Sasko, Spekko, Walkers, and White Star. It also sells beverage brands including 7UP, Adrenaline Rush, Aquafina, Lubimy, Mirinda, Pepsi, and Pepsi Zero Sugar, and dairy products including Agusha, Chudo, and Domik v Derevne. EMEA also sells ready-to-drink tea products through an international joint venture with Unilever (Lipton).

Market Dynamics: Convenient food unit volume declined 5%, primarily reflecting a decline in South Africa. Beverage unit volume grew slightly, primarily reflecting growth in the Middle East, Germany, Poland, and Turkey, partially offset by declines in South Africa and Russia.

Latin America Foods (LatAm Foods)

Financial Performance:

• Revenue: $10.44 billion (+0.2% YoY)
• Operating Profit: $1.77 billion (-2.0% YoY)
• Key Growth Drivers: Revenue was slightly impacted by a 5-percentage-point impact of unfavorable foreign exchange translation, partially offset by effective net pricing. Operating profit decreased due to operating cost increases, a 6-percentage-point impact each of higher commodity costs and unfavorable foreign exchange translation, and an unfavorable impact of an indirect tax audit settlement, partially offset by productivity savings and effective net pricing.

Product Portfolio: LatAm Foods makes, markets, distributes, and sells convenient food brands including Cheetos, Doritos, Emperador, Lay’s, Marias Gamesa, Quaker, Ruffles, Sabritas, Saladitas Gamesa, and Tostitos.

Market Dynamics: Unit volume grew 1%, primarily reflecting growth in Brazil, Peru, Colombia, and Argentina, partially offset by a decline in Mexico.

Asia Pacific Foods

Financial Performance:

• Revenue: $4.99 billion (+2.4% YoY)
• Operating Profit: $0.46 billion (-2.0% YoY)
• Key Growth Drivers: Revenue growth primarily reflects organic volume growth, partially offset by unfavorable net pricing. Operating profit decreased due to operating cost increases, an impairment charge related to the Be & Cheery brand, and unfavorable net pricing. These impacts were partially offset by productivity savings, organic volume growth, lower advertising and marketing costs, and a 5-percentage-point impact of lower commodity costs.

Product Portfolio: Asia Pacific Foods makes, markets, distributes, and sells convenient food brands including BaiCaoWei, Cheetos, Doritos, Kurkure, Lay’s, Quaker, and Smith’s.

Market Dynamics: Unit volume grew 4%, primarily reflecting growth in India, Thailand, and Australia, partially offset by a decline in China.

Capital Allocation Strategy

Shareholder Returns:

• Share Repurchases: $1.00 billion in 2025, compared to $1.00 billion in 2024. Approximately 1.6 million shares were repurchased in the fourth quarter of 2025.
• Dividend Payments: $7.64 billion in 2025, compared to $7.23 billion in 2024.
• Future Capital Return Commitments: PepsiCo, Inc. expects to return approximately $8.9 billion to shareholders in 2026, comprising $7.9 billion in dividends and $1.0 billion in share repurchases. A new share repurchase program for up to $10 billion was authorized in February 2026, replacing the previous program and expiring on February 28, 2030. The annualized dividend was increased by 4% to $5.92 per share from $5.69 per share, effective with the dividend expected to be paid in June 2026.

Balance Sheet Position:

• Cash and Equivalents: $9.16 billion as of December 27, 2025, compared to $8.51 billion as of December 28, 2024.
• Total Debt: $49.18 billion as of December 27, 2025 ($6.86 billion short-term, $42.32 billion long-term), compared to $44.31 billion as of December 28, 2024 ($7.08 billion short-term, $37.22 billion long-term).
• Net Cash Position: -$40.02 billion (net debt) as of December 27, 2025, compared to -$35.80 billion (net debt) as of December 28, 2024.
• Debt Maturity Profile: Includes notes maturing from 2026 to 2060 with weighted-average effective interest rates ranging from 2.1% to 5.0%. Approximately 11% of total debt was subject to variable rates in 2025.

Cash Flow Generation:

• Operating Cash Flow: $12.09 billion in 2025, a decrease from $12.51 billion in 2024, primarily reflecting increased cash payments for restructuring and acquisition/divestiture-related charges.
• Free Cash Flow: $8.20 billion in 2025, an increase from $7.53 billion in 2024.
• Cash Conversion Metrics: Working capital needs are influenced by seasonality, with sales generally highest in the third quarter and lowest in the first quarter.

Operational Excellence

Production & Service Model: PepsiCo, Inc.'s products are primarily brought to market through Direct-Store-Delivery (DSD), customer warehouse, and third-party distributor networks. Products are also sold directly to consumers via e-commerce platforms and retailers. DSD systems are utilized for frequent restocking and in-store promotion, while customer warehouse delivery is a less costly method for certain products.

Supply Chain Architecture:

• Key Suppliers & Partners: Principal ingredients include acesulfame potassium, aspartame, cocoa products, corn, corn sweeteners, flavorings, flour, juice concentrates, nuts, oats, potatoes, raw milk, rice, seasonings, sucralose, sugar, vegetable and essential oils, and wheat. Key packaging materials include plastic resin (PET, polyethylene, polypropylene), aluminum, glass, closures, cardboard, and paperboard cartons. Fuel, electricity, and natural gas are also important commodities. The Company mitigates supply risk through purchases from multiple geographies and suppliers and manages price fluctuations using fixed-price contracts, purchase orders, pricing agreements, and derivative instruments.
• Supply Chain Finance: Maintains voluntary supply chain finance agreements with global financial institutions, allowing suppliers to sell their accounts receivable with PepsiCo, Inc. to these institutions.

Facility Network: PepsiCo, Inc. utilizes a network of owned or leased manufacturing, processing, bottling, and production plants, warehouses, distribution centers, storage facilities, offices, and research and development facilities. This network is supplemented by facilities owned or leased by contract manufacturers, co-packers, strategic alliances, and joint ventures.

• Manufacturing: Key locations include Cedar Rapids, Iowa (PFNA); Lehavim, Israel (IB Franchise); Leicester, United Kingdom, Kashira, Russia, and Moscow, Russia (EMEA); Celaya, Mexico and Vallejo, Mexico (LatAm Foods).
• Research & Development: Research centers are located globally, including in Brazil, China, India, Ireland, Mexico, Russia, South Africa, the United Kingdom, and the United States (Plano, Texas for PFNA; Valhalla, New York for PBNA).
• Distribution: A highly distributed network supports DSD, customer warehouse, and third-party distributor models.

Operational Metrics: The Company's 2019 Multi-Year Productivity Plan, expanded through 2030, aims to simplify, harmonize, and automate processes, re-engineer go-to-market and information systems, and optimize manufacturing and supply chain footprint to achieve a lower cost structure and improve efficiency.

Market Access & Customer Relationships

Go-to-Market Strategy:

• Distribution Channels: PepsiCo, Inc. employs a multi-channel approach, including Direct-Store-Delivery (DSD) for direct merchandising, customer warehouse delivery for efficiency, and third-party distributor networks for broader reach (e.g., foodservice and vending).
• Digital Platforms: Products are sold directly to consumers through company-owned and third-party e-commerce websites and mobile commerce applications, with a focus on strengthening omnichannel capabilities.

Customer Portfolio:

• Enterprise Customers: The customer base includes wholesale and other distributors, foodservice customers, grocery stores, drug stores, convenience stores, discount/dollar stores, mass merchandisers, membership stores, hard discounters, e-commerce retailers, and authorized independent bottlers.
• Customer Concentration: Sales to Walmart Inc. and its affiliates (including Sam’s Club) represented approximately 14% of PepsiCo, Inc.'s consolidated net revenue in 2025. The loss of this customer would have a material adverse effect on the PFNA and PBNA segments.

Geographic Revenue Distribution:

• United States: 57.4% of total revenue
• Mexico: 7.4% of total revenue
• Russia: 5.1% of total revenue
• Canada: 4.0% of total revenue
• China: 2.8% of total revenue
• United Kingdom: 2.3% of total revenue
• Brazil: 1.9% of total revenue
• South Africa: 1.9% of total revenue
• All other countries: 19.1% of total revenue

Competitive Intelligence

Market Structure & Dynamics

Industry Characteristics: PepsiCo, Inc. operates in highly competitive global beverage and convenient food categories. The market is characterized by continuous evolution in consumer preferences, intense competition from international, regional, local, and private label manufacturers, and the increasing influence of e-commerce and micro-brands. Factors driving competition include brand recognition, taste, price, value, quality, product variety, innovation, distribution, and marketing effectiveness.

Competitive Positioning Matrix:

Direct Competitors

Primary Competitors: The Coca-Cola Company is the primary beverage competitor in many countries, including the United States, and holds a significant carbonated soft drink share advantage outside the U.S. Other Competitors: The Campbell’s Company, Conagra Brands, Inc., Hormel Foods Corporation, Keurig Dr Pepper Inc., The Kraft Heinz Company, Link Snacks, Inc., Mars, Incorporated, Mondelēz International, Inc., Monster Beverage Corporation, Nestlé S.A., Primo Brands Corporation, Red Bull GmbH, and Utz Brands, Inc.

Emerging Competitive Threats: Includes smaller companies developing and selling micro-brands directly to consumers through e-commerce platforms or retailers focused on locally-sourced products.

Competitive Response Strategy: PepsiCo, Inc. leverages the strength of its brands, innovation, and marketing, coupled with product quality and a flexible distribution network. Its strategy includes effective promotion of existing products, introduction of new products and reformulations, increased efficiency in production, incorporation of technology and digital tools, and effective advertising and pricing strategies.

Risk Assessment Framework

Strategic & Market Risks

• Market Dynamics: Risks include reduced demand due to shifts in consumer preferences (e.g., diet changes, increased use of weight-loss drugs, e-commerce growth, AI shopping agents), pricing pressures (tariffs, taxes), affordability concerns leading to shifts to private label products, and negative consumer sentiment from geopolitical events or brand image issues.
• Technology Disruption: Increased cybersecurity risks from the rapid evolution and adoption of artificial intelligence technologies, including generative AI, which can augment threat actors' sophistication. Inability to effectively digitalize operations or adopt new technologies can erode competitive advantage.
• Customer Concentration: Sales to Walmart Inc. and its affiliates represent approximately 14% of consolidated net revenue. The loss of this customer would have a material adverse effect on the PFNA and PBNA segments.

Operational & Execution Risks

• Supply Chain Vulnerabilities: Disruptions in manufacturing and supply chain due to raw material sourcing from politically unstable regions, natural disasters, extreme weather, limited supplier availability, and price volatility in commodities (e.g., agricultural products, fuel, packaging materials). Labor shortages, strikes, and tariffs also pose risks to input costs and product availability.
• Geographic Concentration: Operations in Russia accounted for 5% of consolidated net revenue and 20% of consolidated cash and cash equivalents in 2025. Volatile economic, political, social, and geopolitical conditions in markets like Argentina, Brazil, China, Mexico, the Middle East, Russia, Turkey, and Ukraine can impact operations, including currency fluctuations, sanctions, and potential asset loss.
• Capacity Constraints: While the Company is modernizing its warehousing and distribution capacity, disruptions to manufacturing or sourcing could increase costs and interrupt product supply.

Financial & Regulatory Risks

• Market & Financial Risks: Fluctuations in foreign exchange rates (e.g., Mexican peso, Turkish lira, Russian ruble) can adversely impact financial performance. Potential credit rating downgrades could increase borrowing costs and impair access to capital and credit markets. Uncertain or unfavorable economic conditions, such as high inflation and interest rates, can reduce consumer discretionary spending and shift demand to lower-priced alternatives.
• Regulatory & Compliance Risks: New or increased taxes on products (e.g., sugar taxes in Mexico) or packaging (e.g., plastic taxes, extended producer responsibility laws) can increase costs and reduce consumption. Limitations on marketing or sale of products due to ingredients (e.g., artificial colors, "ultra-processed" foods) or packaging (e.g., single-use plastics bans, warning labels in Texas) can reduce demand and damage reputation. Evolving personal data protection and privacy laws (e.g., CCPA, GDPR) impose significant compliance costs and risks of litigation.

Geopolitical & External Risks

• Geopolitical Exposure: Political, social, and geopolitical conditions, including wars (e.g., Ukraine, Venezuela), civil unrest, and trade tensions, can lead to exchange rate fluctuations, credit market limitations, economic uncertainty, and heightened employee safety risks. Risks include nationalization or expropriation of assets and restrictions on trade.
• Trade Relations: Imposition of new, expanded, or retaliatory tariffs (e.g., U.S. tariffs on China, EU, Canada, Mexico) can increase input costs and impact supply chains.

Innovation & Technology Leadership

Research & Development Focus: PepsiCo, Inc. invests in global innovation to meet customer and consumer needs and accelerate growth.

• Core Technology Areas: Focus areas include developing new technologies, ingredients, flavors, and substrates for consumer-preferred products; improving manufacturing processes to reduce costs and environmental footprint; reformulating products to reduce added sugars, sodium, and saturated fat; offering products with functional benefits (e.g., fiber, whole grains, protein, hydration); developing sustainable packaging (recyclable, compostable, biodegradable, reusable, recycled content); developing marketing, merchandising, and dispensing equipment; expanding the "beyond the bottle" portfolio (e.g., SodaStream); and investing in technology and digitalization, including artificial intelligence and data analytics, to enhance consumer insights and omnichannel capabilities.
• Innovation Pipeline: Includes new product development such as Pepsi Prebiotic Cola.

Intellectual Property Portfolio: PepsiCo, Inc. owns numerous valuable trademarks globally, including Adrenaline Rush, Agusha, Aquafina, Bubly, Cheetos, Doritos, Gatorade, Lay’s, Mountain Dew, Pepsi, Quaker, Ruffles, Sabra, Sabritas, SodaStream, and Walkers. It also holds long-term licenses for trademarks like Ocean Spray and distributes brands such as Celsius, Alani Nu, Rockstar, Dr Pepper, Crush, and Schweppes. The Company owns or licenses patents related to products, packaging, production processes, and equipment.

Technology Partnerships: Collaborates with cutting-edge technology providers to utilize artificial intelligence for reimagining its go-to-market model, enhancing customer support, and empowering sales teams.

Leadership & Governance

Executive Leadership Team

Leadership Continuity: The Company focuses on attracting, developing, and retaining a high-quality workforce and has succession plans in place for leadership positions.

Board Composition: The Board of Directors and its Committees provide oversight on human capital management, corporate culture, pay equity, health and safety, training and development, compensation and benefits, and the integrated risk management framework, including direct oversight over cybersecurity matters.

Human Capital Strategy

Workforce Composition:

• Total Employees: Approximately 306,000 people worldwide as of December 27, 2025.
• Geographic Distribution: Approximately 125,000 employees are located in the United States.
• Skill Mix: The Company emphasizes attracting, retaining, developing, and motivating highly skilled personnel, including those with key capabilities in e-commerce, digital marketing, artificial intelligence, and data analytics.

Talent Management:

• Acquisition & Retention: PepsiCo, Inc. continually strives to improve the attraction, retention, and advancement of associates to sustain a high-caliber talent pipeline.
• Retention Metrics: The labor market has experienced wage inflation, labor shortages, and increased employee turnover, which can impact the Company's ability to attract and retain talent.
• Employee Value Proposition: The Company believes its culture is a competitive advantage that fuels innovation and strengthens its reputation. It invests in protecting the safety, health, and well-being of its associates.

Diversity & Development:

• Development Programs: Supports and develops associates through global training and development programs, including career development plans, mentoring, and in-house online learning resources (MyLearning and Schoox). In 2025, employees completed over 2.8 million hours of training.
• Culture & Engagement: A strong culture is considered a competitive advantage, fostering innovation and enhancing talent attraction and retention.

Environmental & Social Impact

Environmental Commitments: PepsiCo, Inc.'s pep+ (PepsiCo Positive) transformation is central to its strategy, aiming to create value while making a positive impact on communities and the planet.

• Climate Strategy: Stepped up efforts in regenerative agriculture and water use efficiency in 2025. The Company is subject to new or increased legal and regulatory requirements to reduce emissions to mitigate greenhouse gas effects.
• Supply Chain Sustainability: Investing to improve the sustainability and resources of its agricultural supply chain, including advancing sustainable farming practices by suppliers.

Social Impact Initiatives:

• Community Investment: The pep+ strategy guides efforts to do what is right for communities.
• Product Impact: Reshaping its portfolio to reduce added sugar, sodium, and saturated fat in core brands, removing artificial colors and flavors, and offering products with functional benefits.

Business Cyclicality & Seasonality

Demand Patterns: PepsiCo, Inc.'s businesses are affected by seasonal variations. Beverage and convenient food sales are generally highest in the third quarter due driven by seasonal and holiday-related patterns and generally lowest in the first quarter. However, seasonality has not had a material impact on consolidated financial results.

Economic Sensitivity: Consumer demand for products can be impacted by uncertain or unfavorable economic conditions, such as high inflation and adverse changes in interest rates, leading consumers to reduce discretionary spending or switch to lower-priced or private-label products.

Planning & Forecasting: The Company's ability to anticipate and effectively respond to consumer preferences and trends, coupled with efforts to modernize warehousing and distribution capacity, helps manage demand patterns.

Regulatory Environment & Compliance

Regulatory Framework: PepsiCo, Inc. is subject to extensive laws and regulations in over 200 countries and territories, covering product production, storage, distribution, sale, advertising, labeling, content, quality, safety, packaging, disposal, and recycling, as well as employment, occupational health and safety, environmental, and data privacy practices.

• Industry-Specific Regulations: Includes the Federal Food, Drug and Cosmetic Act, Food Safety Modernization Act, Occupational Safety and Health Act, various environmental protection laws, Federal Motor Carrier Safety Act, Federal Trade Commission Act, Lanham Act, competition and trade practices laws (e.g., Robinson-Patman Act, Clayton Act), employment laws, data privacy laws (e.g., California Consumer Privacy Act, GDPR, China’s Personal Information Protection Act), customs and foreign trade laws, and specific product regulations (e.g., Proposition 65 in California, Food (Promotion and Placement) (England) Regulations).
• International Compliance: Compliance with competition and anti-corruption laws (e.g., Foreign Corrupt Practices Act, U.K. Bribery Act) is particularly important due to the Company's global competitive position.

Trade & Export Controls: Subject to customs and foreign trade laws, including import/export restrictions, tariffs, and sanctions (e.g., Trade Sanctions Reform and Export Enhancement Act).

Legal Proceedings: PepsiCo, Inc. is party to litigation asserting claims for public nuisance and deceptive acts or practices related to plastic pollution in New York, Baltimore, Los Angeles, and the U.S. Virgin Islands. Management believes the final outcome of these matters will not have a material adverse effect on financial condition, results of operations, or cash flows.

Tax Strategy & Considerations

Tax Profile:

• Effective Tax Rate: 19.0% in 2025, compared to 19.4% in 2024. The decrease primarily reflects the release of federal interest accruals.
• Geographic Tax Planning: The annual tax rate is based on income, statutory tax rates, and tax structure, including transfer pricing arrangements, in various jurisdictions. PepsiCo, Inc. intends to reinvest approximately $12 billion of undistributed international earnings outside the United States for the foreseeable future.
• Tax Reform Impact: The mandatory transition tax liability under the Tax Cuts and Jobs Act was $965 million as of December 27, 2025, with the final payment due in 2026. The OECD model rules for a global minimum tax rate of 15%, expected to be widely implemented by the end of 2026, will increase taxes and negatively impact the provision for income taxes as legislation becomes effective. The One Big Beautiful Bill Act did not materially impact the 2025 effective tax rate and is not expected to materially impact 2026.

Insurance & Risk Transfer

Risk Management Framework: PepsiCo, Inc. employs an integrated risk management framework to identify, assess, prioritize, address, manage, monitor, and communicate risks across its operations. The Board of Directors provides oversight, with specific committees tasked with managing categories of risk (e.g., Audit Committee for financial and compliance risks, Sustainability and Public Policy Committee for ESG risks). The PepsiCo Risk Committee (PRC), comprising cross-functional senior management, meets regularly to address top strategic, financial, operating, compliance, safety, and reputational risks.

Insurance Coverage: The Company maintains insurance coverage to address costs associated with certain aspects of product recalls and cyber incidents and information systems failures.

Risk Transfer Mechanisms: PepsiCo, Inc. manages commodity price, foreign exchange, and interest rate risks through productivity initiatives, global purchasing programs, and hedging strategies, including the use of derivative instruments such as swaps, futures, and forward contracts. Non-derivative debt instruments are also used for net investment hedges.