Instructions Paper must follow APA Style! Can use different paragraph for each question (Identify the question by stating a title that is meaningful to each question before writing the body). Paper must include at least 10 APA style references in the reference list. Each reference needs to have in text citation in the paper. References can be from scholarly sources and may include video, websites etc also. The minimum word count for this paper is 2000 words (can be more) without including the references. Question: What do marketers "market"? What do you understand by "Holistic Marketing Concept"? Do you think PepsiCo has a thorough understanding of "Holistic Marketing Concept"? Justify your answer with examples preferably* from the first fifteen pages of the attached PepsiCo's Annual Report (Attached). You must also include theories/theoretical concepts etc. to support your examples. You may use theories, theoretical concepts etc. from the text book, journal articles etc. to help support your examples. Entire Annual Report can be used as well Rubric for Paper: BOOK: http://socioline.ru/files/5/283/kotler_keller__marketing_management_14th_edition.pdf Holistic Marketing Concept Information can be found in page 18 of the book ^ GOOD FOR YOU BETTER FOR YOU >>>>> FUN FOR YOU // 2017 ANNUAL REPORT / PERFORMANCE WITH PURPOSE Performing while Transforming In 2017, PepsiCo continued to deliver strong performance and shareholder returns, powered by our portfolio of Fun for You, Better for You and Good for You products.* 2.3% organic revenue growth1 $6.5B cash returned to shareholders through dividends and share repurchases 9% core constant currency EPS growth1 The joint launch of MTN DEW ICE and Doritos Blaze harnessed the power of PepsiCo’s complementary food and beverage brands. $7.3B free cash flow, excluding certain items1 PepsiCo’s distinctive black can Pepsi, with maximum cola taste and zero sugar, expanded to 35+ new markets around the world in 2017. Our selection of low- and zero-calorie beverages and morenutritious foods continued to grow, including Aqua Minerale Water+Juice, new flavors of KeVita Master Brew Kombucha, Quaker 3 Minutos and Off the Eaten Path. ~$1B annual savings enabled by productivity agenda 22.9% core net return on invested capital (ROIC)1 Frito-Lay’s expanded Simply line offers great-tasting snacks with no artificial flavors or colors. 1. Full-year reported net revenue increased 1.2%. Full-year reported EPS declined 23%. Full-year reported EPS results include a $2.5 billion provisional net tax expense ($1.70 per share) associated with the enactment of the U.S. Tax Cuts and Jobs Act. Full-year cash flow from operating activities was $10 billion. Over the past five years, reported net revenue declined at a 1% compound annual growth rate and reported EPS declined an average of 2%. Organic, core and constant currency results, free cash flow, excluding certain items, as well as ROIC and core net ROIC, are non-GAAP financial measures. Please refer to “Reconciliation of GAAP and Non-GAAP Information” beginning on page 147 of this Annual Report for definitions and more information about these results, including a reconciliation to the most directly comparable financial measure in accordance with GAAP. 2017 PepsiCo Annual Report | 1 Indra K. Nooyi PepsiCo Chairman of the Board of Directors and Chief Executive Officer Dear Fellow Shareholders, More than half a century ago, standing before an assembly of civic leaders and citizens in Frankfurt, Germany, President John F. Kennedy — a man who, for so many, embodied the dawning of a new era — articulated his philosophy on progress: “For time and the world do not stand still,” he said. “Change is the law of life. And those who look only to the past or the present are certain to miss the future.” Two years later, in 1965, Frito-Lay and Pepsi-Cola merged to form PepsiCo. And ever since, we have done our best to live up to those words, to the idea of always looking to the future. Throughout our history, we have continually scanned the horizon, strived to identify new and emerging trends, and focused on making the necessary investments and adjustments to navigate them successfully. That is why, decade after decade, we have consistently delivered top-tier returns, outperformed the competition and built a portfolio of iconic brands, while also attracting and developing some of the best and brightest leaders in our industry. *As we evolve our portfolio and expand our offerings, we are continually updating our definitions of our Good for You, Better for You and Fun for You categories, and what products fit within each category. Below are 2017 definitions: GOOD FOR YOU options help consumers meet recommended daily intakes of whole grains, vegetables, fruits, dairy, nuts and seeds with low to no amounts of particular nutrients, such as added sugars, salt or saturated fat. BETTER FOR YOU options can help consumers limit particular nutrients, such as added sugars, salt or saturated fat, when incorporated into a well-balanced diet. These options include beverages with fewer or no calories. In this category, we also include products specifically formulated to provide a functional benefit, such as addressing the performance needs of athletes. FUN FOR YOU options are treats for consumers to enjoy responsibly. Table of Contents Letter to Shareholders 01 Financial Highlights 10 PepsiCo Board of Directors 11 PepsiCo Leadership 12 PepsiCo Form 10-K 13 Reconciliation of GAAP and Non-GAAP Information 147 Forward-Looking Statements 150 Common Stock and Shareholder Information 151 Corporate Information 152 Our commitment to excellence and innovation served us well once again in 2017, unlocking another year of strong operating performance1: • We delivered organic revenue growth of 2.3%. • We expanded core operating margins by 45 basis points. • We grew core constant currency EPS by 9%, exceeding the 8% goal we set at the beginning of 2017. • We generated free cash flow, excluding certain items, of $7.3 billion, which exceeded our goal of approximately $7 billion we set at the beginning of 2017. • Core net ROIC expanded by 140 basis points and now stands at 22.9%. • We met our goal of returning $6.5 billion in cash to shareholders through dividends and share repurchases combined. Our 2017 results build on a strong five-year track record: • Organic revenue grew at a 4% compound rate. • Core operating margin expanded by 220 basis points. • Core constant currency EPS growth averaged more than 9% annually. I have written about some of these megatrends in past letters to shareholders, but what sets this moment apart is not just the perpetuation of these trends, but also their acceleration and the amplification of their impact on our business — and all businesses. A recent study of how companies perform when confronted by industry-wide disruption found that only one-third successfully navigate change and emerge on the other side. I am absolutely confident PepsiCo will be one of those companies, emerging from this period stronger than before — because we have anticipated many of these trends and changes, and invested behind them. The ongoing transformation of our portfolio with more delicious, nutritious choices is helping ensure the health of our business. The power of our retail and foodservice partnerships offers an unmatched advantage in the marketplace. We are differentiating ourselves with worldclass design and capturing growth in eCommerce. Digitalization is empowering us to be more responsive to the needs of customers and consumers, and helping drive greater agility and efficiency, leading to greater productivity. We are minimizing our impact on the planet while reducing costs. And upskilling our associates is helping ensure we have the workforce of the future, while uplifting our communities is helping ensure we are a good neighbor in the markets we serve. • Core net ROIC expanded more than 750 basis points. • Our annualized dividend per share increased by 50%. • We returned $38 billion to shareholders through dividends and share repurchases combined. These are impressive results, particularly in light of all the global megatrends impacting our business, including macroeconomic and political volatility; the continued rebalancing of the economic world; shifting consumer preferences and increasing demand for more nutritious foods and beverages; the disruption of retail; and the emergence of niche brands capturing growth in many markets. One of the other powerful megatrends impacting our business, of course, is the relentless pace of digital innovation. Internetenabled services, automation across the value chain, the rise of Big Data, and pervasive social media–driven consumption are fundamentally transforming how all of us live, work, communicate, shop and do business. Let’s take these, one at a time: More Delicious, Nutritious Choices We are offering consumers a wide array of great-tasting choices, from Fun for You, to Better for You, to Good for You products, and leveraging the power of our distribution system to make them available everywhere consumers want them. In 2017, we continued expanding our selection of low- and zero-calorie beverages, with launches such as Aqua Minerale Water+Juice and new flavors of KeVita Master Brew 2017 PepsiCo Annual Report 2 | 3 Portfolio Transformation Kombucha, while introducing Tropicana Probiotics. And our distinctive black can Pepsi — known as Pepsi Zero Sugar or Pepsi Max — continued to gain ground around the world. Better for You and Good for You products are an increasing percentage of our total portfolio. ~38% ~50% 2006 2017 Fun for You Better for You & Good for You While delivering strong performance, we continued to expand our selection of more nutritious foods and beverages to meet consumers’ shifting preferences and unlock opportunities for growth. We also introduced Quaker 3 Minutos, an affordable, wholegrain, oat-based product that delivers daily nutrition to consumers across Latin America, and Off the Eaten Path, a series of vegetable- and legume-based products like Veggie Crisps, Hummus Crisps and Sweet Potato Crisps available in the U.S. and UK. And we built on the success of the Simply brand with new products like Simply Doritos White Cheddar. These are just a few of the more nutritious products we launched in 2017, building on more than a decade of progress transforming our portfolio. In fact, while in 2006 our Fun for You portfolio was about 70% larger than our Good for You and Better for You portfolios combined, by the end of 2017, they were nearly equal in size. Enabling this shift in our portfolio has been our long-term investment in R&D — from product reformulation to sweetener and ingredient discovery — that has produced foods and beverages with fewer calories, less salt and reduced fat without sacrificing great taste. ~$200M Building Powerful Brands PepsiCo’s premium bottled water brand LIFEWTR generated approximately $200M in estimated annual retail sales in 2017, its first year. Four series of bottles celebrated public art, women in the arts, fashion and arts in education. We continued to engage consumers with cutting-edge design, exciting campaigns and world-class partnerships. SERIES SER ERIES IES 1 SERIES SERIES 2 LIFEWTR PepsiCo’s premium bottled water brand LIFEWTR generated more than $200MM in annualized retail sales in its first year. The ‘Series 2’ bottles celebrated female artists, “Made For This” campaign generating buzz with an high school athletes featured “Art By A Woman” campaign and the hard work behind that included an interactive their greatest moments, art installation in New York underscoring that athletes City. are made for these moments, and Gatorade is made to fuel them. Gatorade’s UEFA Champions League PepsiCo celebrated its second year of partnership with UEFA Champions League, with more than 100 markets activating across some of PepsiCo’s biggest global brands, including Pepsi, Lay’s and Gatorade. SERIES SER ERIES IES 3 SERIES SERIES 4 2017 PepsiCo Annual Report 4 | 5 The strength of our partnerships in the U.S. was reflected in Kantar Retail’s 2017 PoweRanking® survey, where, for the second consecutive year in the 21-year history of Kantar, our retail partners named us the #1, best-in-class manufacturer, with the gap between #1 and #2 widening significantly since 2016. This ranking is a testament to the dedication of our associates and the innovations we continue to bring to market, including our Hello Goodness platform that offers consumers a range of lower-calorie and more-nutritious options. We were also ranked by the Advantage Report™ as the #1 food and beverage supplier in the U.S., and many of our business units are highly ranked in markets such as China, Thailand, Russia, the UK, Poland and Mexico. Based on our reputation for top-tier service and world-class innovation, we forged or extended a number of foodservice partnerships in 2017, increasing distribution and market share. We completed long-term renewals with YUM Brands in the U.S. Hello Goodness vending machines, coolers and racks, offering more nutritious on-the-go snacks and beverages, significantly expanded across the U.S., with nearly 40,000 units sold into the market. R R K AN TA T A IL 201 7 P O Retail partners scored PepsiCo #1 Manufacturer in Kantar Retail’s 2017 PoweRanking® Survey ANKING ER Enabled by our integrated Global Foodservice team, we are leveraging our complementary food and beverage portfolios to drive sales and help support our retail and foodservice partners in the U.S. and across the world. E W Unmatched Retail and Foodservice Partnerships and several international markets, expanded our partnership with Subway to China, France and Colombia, and won new colleges and universities, including Portland State University, the University of Kansas and University of Utah. Differentiating PepsiCo with Design In 2017, our design team helped drive successful launches of new products such as LIFEWTR, while creating meaningful, memorable experiences for customers and consumers at major global events, from Super Bowl LI to Milan Design Week to the UEFA Champions League Final. Recognized with more than 400 awards since 2012, PepsiCo’s design team helps bolster our reputation as one of the world’s leading corporate innovators. New Channels for Growth ~$1B Our investment in digital capabilities and eCommerce helped drive strong results in 2017, particularly in the U.S. and China, positioning us well for future growth. in annualized retail sales from eCommerce Exclusive eCommerce offerings PepsiCo’s eCommerce team developed branded NFL gift packs with team-themed products to help consumers amp up their game-watch parties. USA In China, one of the biggest eCommerce markets in the world, PepsiCo has launched innovative snacks exclusively for online channels, driving revenue gains in the region. CHINA Breakthrough digital engagement PepsiCo Greater China celebrated the 6th year of its “Bring Happiness Home” campaign, with a video that generated more than 1 billion views. 2017 PepsiCo Annual Report 6 | 7 Capturing Growth in eCommerce Our investment in eCommerce across multiple channels helped drive strong results in 2017, particularly in the U.S. and China. We are leveraging Big Data and predictive analytics to shape real-time marketing messages, dynamic merchandising and tailored offers. And we are increasingly collaborating with retail customers to make eCommerce a point of differentiation for PepsiCo, earning awards for eCommerce excellence. In fact, our eCommerce business in 2017 generated approximately $1 billion in annualized retail sales, and we believe we are well-positioned to seize the dynamic future of this space. Digitalizing PepsiCo In the face of rapid technological innovation and accelerating change throughout our industry, we are deploying digital capabilities widely across the company. Frito-Lay North America is using Big Data to help make sure consumers can find their favorite snacks in local stores. In India, we set up a Digital Command Center to analyze links between consumer behavior and business results. In China, we leveraged social media to launch the latest “Bring Happiness Home” Chinese New Year campaign, including a 20-minute video that generated more than 1 billion views. Our increased commitment to digitalization in Latin America drove up our return on investment from advertising and marketing. We are capitalizing on the emerging capabilities of the Internet of Things, from predicting when plant equipment will need maintenance to reducing energy consumption. And we are just getting started. Enhancing Productivity with Greater Agility and Efficiency In 2017, we generated approximately $1 billion in savings, enabled by our productivity agenda. Our productivity has been driven by a relentless continuous-improvement mindset, focused on every aspect of our value chain. We have refined our business model to reduce management layers and accelerate decision-making. We have harnessed leading-edge digital tools to increase manufacturing throughput, curb logistics costs, and improve go-to-market efficiency and effectiveness. And we are sustainably reinvesting in our business, positioning ourselves to capture tomorrow’s growth. Minimizing Our Environmental Impact while Cutting Costs We are accelerating our efforts to minimize PepsiCo’s environmental footprint, enabling us to curb costs and mitigate our operational impact on the communities we serve. In 2017, we teamed up with leading universities, governments and innovators on projects such as developing biodegradable film resins that meet the sustainable flexible packaging needs of our global business — helping advance our goal of designing 100% of our packaging to be recyclable, compostable or biodegradable by 2025. We also continued investing in long-term water security, from Latin America, where we are developing innovative solutions to help public institutions more efficiently manage water, to the Middle East, where we are working with the Jordanian Ministry of Water and Irrigation to replenish water at its source. In fact, through community programs, we returned more water than we consumed in Jordan every year from 2013 to 2015 — more than 600 million liters annually. Upskilling Our Workforce and Uplifting Communities PepsiCo’s success has always rested on our single greatest asset: our people. At a time of sweeping change in our industry, we are helping associates develop the skills they need to grow and our company needs to thrive, from enhancing our Education Assistance Program so frontline associates can build their skills and earn a degree in an area that advances their careers, to expanding PepsiCo University’s course offerings on digital trends. In 2017, our associates completed over 1 million hours of training for the second consecutive year, and more than 3,000 associates attended Learn Together sessions with subject-matter experts to enhance their skills. In 2017, we also renewed our commitment to supporting our associates in other ways. On-site and near-site childcare opened in Purchase and Plano — joining the childcare options already available at or near PepsiCo locations around the world — and we launched our Ready to Return initiative, a 10-week “boot camp” for professionals seeking to refresh their skills after taking time off to care for a loved one. This trend reflects the idea that, in the 21st century, being a great company means being a good company, too. It means focusing not only on the coming quarters, but also the coming years, considering the level, as well as duration of returns. At PepsiCo, we know that prioritizing the short term at the expense of the long term is simply not sustainable, and perpetuates the kinds of boom-splat cycles that are not good for any of our stakeholders. Instead, we have adopted a different approach — advancing both short- and long-term priorities, hand in hand, so we can deliver strong returns that grow consistently over an extended period of time. And we have done so while upholding the highest standards of corporate integrity and responsibility. In fact, PepsiCo is the only food and beverage company to appear on the Ethisphere Institute’s list of the World’s Most Ethical Companies® every year since the list was established twelve years ago. More than a decade into our Performance with Purpose journey, I am more confident than ever that we are on the right path. And we have recommitted to that path with our Performance with Purpose 2025 Agenda, embedding sustainability into everything we do and powering a virtuous cycle that allows us to continue doing well by doing good. Our company has come a long way from our humble roots in a North Carolina apothecary, and so long as we continue heeding what John F. Kennedy called “the law of life”— change — and always look to the future, we will continue climbing higher and crossing new frontiers in 2018 and beyond. All of these efforts reflect a broader commitment to operating in a way that not only generates sustained financial growth and consistently strong returns, but also does so while being responsive to the needs of the world around us. That commitment — what we call Performance with Purpose — is increasingly important to a wide range of stakeholders, from consumers to investors. According to a recent study, assets managed with responsible investment criteria grew from more than $18 trillion in 2014 to nearly $23 trillion in 2016 — a trend expected to gain momentum in the years ahead, as investors under the age of 35 are twice as likely to divest from a company if it is perceived to be unsustainable. Thank you for your support and the confidence you’ve placed in us with your investment. Indra K. Nooyi PepsiCo Chairman of the Board of Directors and Chief Executive Officer 2017 PepsiCo Annual Report 8 | 9 Performance with Purpose Agenda 2025 Since launching our ambitious Performance with Purpose 2025 Agenda, we have made progress across our sustainability goals in each of the Agenda’s three focus areas — Products, Planet and People — strengthening our business and the communities we serve. 6M >260M women and girls assisted through investments in communities around the world servings of nutritious foods and beverages provided to underserved consumers and communities Quaker 3 Minutos, an affordable, whole-grain, oat-based product fortified with vitamins and minerals, is helping consumers in Mexico get the daily nutrition they need. Reduced added sugars, saturated fat and sodium in our food and beverage portfolio ~2.7B PepsiCo is supporting the International Youth Foundation (IYF) to train 1M young women by the end of 2025 through IYF’s successful Passport to Success life skills program. liters of water replenished locally in high-risk watersheds 11M 1M people provided safe water access since 2006 In 2017, PepsiCo placed one of the largest reservations for Tesla, Inc.’s new electric Semi trucks to help reduce fleet emissions and cut down on fuel costs. hours of training completed by our associates in 2017 All of the data presented above is for 2016, unless otherwise noted. For more information on our goals and progress, please see our 2016 Sustainability Report available at www.pepsico.com. 2017 Financial Highlights Mix of Net Revenue Net Revenues North America Beverages 33% Latin America 11% Food 53% Beverage 47% Asia, Middle East and North Africa 10% Quaker Foods North America 4% Europe Sub-Saharan Africa 17% Frito-Lay North America 25% Division Operating Profit North America Beverages 23% Latin America 8% U.S. 58% Outside U.S. 42% Asia, Middle East and North Africa 9% Quaker Foods North America 6% Europe Sub-Saharan Africa 12% Frito-Lay North America 42% PepsiCo, Inc. and Subsidiaries (in millions except per share data; all per share amounts assume dilution) Summary of Operations Net revenue Core total operating profit (b) Reported earnings per share Core earnings per share attributable to PepsiCo (c) Free cash flow, excluding certain items (d) Capital spending Common share repurchases Dividends paid 2017 $63,525 $ 10,789 $ 3.38 $ 5.23 $ 7,293 $ 2,969 $ 2,000 $ 4,472 2016 $62,799 $ 10,393 $ 4.36 $ 4.85 $ 8,055 $ 3,040 $ 3,000 $ 4,227 % Chg (a) 1% 4% -23% 8% -9% -2% -33% 6% (a) Percentage changes are based on unrounded amounts. (b) Excludes the net mark-to-market impact of our commodity derivatives and restructuring and impairment charges in both years. In 2016, also excludes a charge related to the transaction with Tingyi and a pension-related settlement charge. See page 147 “Reconciliation of GAAP and Non-GAAP Information” for a reconciliation to the most directly comparable fi nancial measure in accordance with GAAP. (c) Excludes the net mark-to-market impact of our commodity derivatives and restructuring and impairment charges in both years. In 2017, also excludes the provisional net tax expense related to the TCJ Act. In 2016, also excludes a charge related to the transaction with Tingyi, a charge related to debt redemption and a pension-related settlement charge. See page 52 “Results of Operations — Consolidated Review — Other Consolidated Results” in Management’s Discussion and Analysis of Financial Condition and Results of Operations, and page 147 “Reconciliation of GAAP and Non-GAAP Information” for a reconciliation to the most directly comparable fi nancial measure in accordance with GAAP. (d) Includes the impact of net capital spending, and excludes payments related to restructuring charges and the associated net cash tax benefits, as well as discretionary pension contributions and the associated net cash tax benefits in both years. In 2016, also excludes net cash received related to interest rate swaps and net cash tax benefit related to debt redemption charge. See page 70 “Our Liquidity and Capital Resources” in Management’s Discussion and Analysis of Financial Condition and Results of Operations, and page 147 “Reconciliation of GAAP and Non-GAAP Information” for a reconciliation to the most directly comparable fi nancial measure in accordance with GAAP. 2017 PepsiCo Annual Report 10 | 11 PepsiCo Board of Directors PHOTO LEFT TO RIGHT Cesar Conde, 44 Chairman, NBCUniversal International Group and NBCUniversal Telemundo Enterprises Elected 2016 Robert C. Pohlad, 63 President, Dakota Holdings, LLC Elected 2015 Richard W. Fisher, 68 Former President and Chief Executive Officer, Federal Reserve Bank of Dallas Elected 2015 George W. Buckley, 71 Former Chairman, President and Chief Executive Officer, 3M Company Elected 2012 Darren Walker, 58 President, Ford Foundation Elected 2016 Shona L. Brown, 52 Independent Advisor; Former Senior Advisor, Google Inc. Elected 2009 Alberto Weisser, 62 Former Chairman and Chief Executive Officer, Bunge Limited Elected 2011 Dina Dublon, 64 Former Executive Vice President and Chief Financial Officer, JPMorgan Chase & Co. Elected 2005 Ian M. Cook, 65 Chairman, President and Chief Executive Officer, Colgate-Palmolive Company Elected 2008 Indra K. Nooyi, 62 Chairman of the Board of Directors and Chief Executive Officer, PepsiCo Elected 2001 David C. Page, MD, 61 Director and President, Whitehead Institute for Biomedical Research; Professor, Massachusetts Institute of Technology Elected 2014 William R. Johnson, 69 Operating Partner, Global Retail and Consumer, Advent International Corporation; Former Chairman, President and Chief Executive Officer, H.J. Heinz Company Elected 2015 Daniel Vasella, MD, 64 Former Chairman and Chief Executive Officer, Novartis AG Elected 2002 PepsiCo Leadership PHOTO LEFT TO RIGHT Kirk Tanner President and Chief Operating Officer, North America Beverages Mike Spanos Chief Executive Officer, Asia, Middle East and North Africa Eugene Willemsen Executive Vice President, Global Categories & Franchise Management Silviu Popovici President, Europe Sub-Saharan Africa Ruth Fattori Executive Vice President, Human Resources and Chief Human Resources Officer Laxman Narasimhan Chief Executive Officer, Latin America and Europe Sub-Saharan Africa Hugh F. Johnston Vice Chairman, Executive Vice President and Chief Financial Officer David Yawman Executive Vice President, Government Affairs, General Counsel and Corporate Secretary Ramon Laguarta President Indra K. Nooyi Chairman of the Board of Directors and Chief Executive Officer Vivek Sankaran President and Chief Operating Officer, Frito-Lay North America Jim Andrew Executive Vice President, Corporate Strategy and Chief Venturing Officer Jon Banner Executive Vice President, Communications Dr. Mehmood Khan Vice Chairman, Executive Vice President and Chief Scientific Officer, Global Research and Development Grace Puma Executive Vice President, Global Operations Albert P. Carey Chief Executive Officer, North America Sanjeev Chadha Chairman, Asia, Middle East and North Africa See pages 32–35 of the Form 10-K for a list of PepsiCo Executive Officers subject to Section 16 of the Securities Exchange Act of 1934. 2017 PepsiCo Annual Report 12 | 13 PepsiCo, Inc. Annual Report 2017 Form 10-K For the fiscal year ended December 30, 2017 page intentionally left blank UNITED STATES SECURITIES AND EXCHANGE COMMISSION WASHINGTON, DC 20549 FORM 10-K ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the fiscal year ended December 30, 2017 Commission file number 1-1183 PepsiCo, Inc. (Exact Name of Registrant as Specified in Its Charter) North Carolina (State or Other Jurisdiction of Incorporation or Organization) 700 Anderson Hill Road, Purchase, New York (Address of Principal Executive Offices) 13-1584302 (I.R.S. Employer Identification No.) 10577 (Zip Code) Registrant’s telephone number, including area code: 914-253-2000 Securities registered pursuant to Section 12(b) of the Securities Exchange Act of 1934: Title of each class Common Stock, par value 1-2/3 cents per share 2.500% Senior Notes Due 2022 1.750% Senior Notes Due 2021 2.625% Senior Notes Due 2026 0.875% Senior Notes Due 2028 Name of each exchange on which registered The Nasdaq Stock Market LLC and Chicago Stock Exchange New York Stock Exchange New York Stock Exchange New York Stock Exchange New York Stock Exchange Securities registered pursuant to Section 12(g) of the Securities Exchange Act of 1934: None Indicate by check mark if the registrant is a well-known seasoned issuer, as defined in Rule 405 of the Securities Act. Yes No Indicate by check mark if the registrant is not required to file reports pursuant to Section 13 or 15(d) of the Act. Yes No Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes No Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T (§ 232.405 of this chapter) during the preceding No 12 months (or for such shorter period that the registrant was required to submit and post such files). Yes Indicate by check mark if disclosure of delinquent filers pursuant to Item 405 of Regulation S-K (§ 229.405 of this chapter) is not contained herein, and will not be contained, to the best of registrant’s knowledge, in definitive proxy or information statements incorporated by reference in Part III of this Form 10-K or any amendment to this Form 10-K. Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and “emerging growth company” in Rule 12b-2 of the Exchange Act. Large accelerated filer Non-accelerated filer (Do not check if a smaller reporting company) Accelerated filer Smaller reporting company Emerging growth company If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes No The aggregate market value of PepsiCo, Inc. Common Stock held by nonaffiliates of PepsiCo, Inc. (assuming for these purposes, but without conceding, that all executive officers and directors of PepsiCo, Inc. are affiliates of PepsiCo, Inc.) as of June 16, 2017, the last day of business of our most recently completed second fiscal quarter, was $166.5 billion (based on the closing sale price of PepsiCo, Inc.’s Common Stock on that date as reported on the New York Stock Exchange). The number of shares of PepsiCo, Inc. Common Stock outstanding as of February 6, 2018 was 1,419,908,267. Documents Incorporated by Reference Portions of the Proxy Statement relating to PepsiCo, Inc.’s 2018 Annual Meeting of Shareholders are incorporated by reference into Part III of this Form 10-K. PepsiCo, Inc. Form 10-K Annual Report For the Fiscal Year Ended December 30, 2017 Table of Contents PART I Item 1. Item 1A. Item 1B. Item 2. Item 3. Item 4. Business Risk Factors Unresolved Staff Comments Properties Legal Proceedings Mine Safety Disclosures 2 10 29 30 31 31 PART II Item 5. Market for Registrant’s Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities Item 6. Selected Financial Data Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations Item 7A. Quantitative and Qualitative Disclosures About Market Risk Item 8. Financial Statements and Supplementary Data Item 9. Changes in and Disagreements with Accountants on Accounting and Financial Disclosure Item 9A. Controls and Procedures Item 9B. Other Information 36 39 44 132 132 132 132 133 PART III Item 10. Directors, Executive Officers and Corporate Governance 133 Item 11. Executive Compensation 133 Item 12. Security Ownership of Certain Beneficial Owners and Management and Related 133 Stockholder Matters Item 13. Certain Relationships and Related Transactions, and Director Independence 134 Item 14. Principal Accounting Fees and Services 134 PART IV Item 15. Exhibits and Financial Statement Schedules Item 16. Form 10-K Summary 1 135 136 Forward-Looking Statements This Annual Report on Form 10-K contains statements reflecting our views about our future performance that constitute “forward-looking statements” within the meaning of the Private Securities Litigation Reform Act of 1995 (Reform Act). Statements that constitute forward-looking statements within the meaning of the Reform Act are generally identified through the inclusion of words such as “aim,” “anticipate,” “believe,” “drive,” “estimate,” “expect,” “expressed confidence,” “forecast,” “future,” “goal,” “guidance,” “intend,” “may,” “objective,” “outlook,” “plan,” “position,” “potential,” “project,” “seek,” “should,” “strategy,” “target,” “will” or similar statements or variations of such words and other similar expressions. All statements addressing our future operating performance, and statements addressing events and developments that we expect or anticipate will occur in the future, are forward-looking statements within the meaning of the Reform Act. These forward-looking statements are based on currently available information, operating plans and projections about future events and trends. They inherently involve risks and uncertainties that could cause actual results to differ materially from those predicted in any such forward-looking statement. These risks and uncertainties include, but are not limited to, those described in “Item 1A. Risk Factors” and “Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations – Our Business – Our Business Risks.” Investors are cautioned not to place undue reliance on any such forwardlooking statements, which speak only as of the date they are made. We undertake no obligation to update any forward-looking statement, whether as a result of new information, future events or otherwise. The discussion of risks below and elsewhere in this report is by no means all-inclusive but is designed to highlight what we believe are important factors to consider when evaluating our future performance. PART I Item 1. Business. When used in this report, the terms “we,” “us,” “our,” “PepsiCo” and the “Company” mean PepsiCo, Inc. and its consolidated subsidiaries, collectively. Certain terms used in this Annual Report on Form 10-K are defined in the Glossary included in Item 7. of this report. Company Overview We were incorporated in Delaware in 1919 and reincorporated in North Carolina in 1986. We are a leading global food and beverage company with a complementary portfolio of enjoyable brands, including FritoLay, Gatorade, Pepsi-Cola, Quaker and Tropicana. Through our operations, authorized bottlers, contract manufacturers and other third parties, we make, market, distribute and sell a wide variety of convenient and enjoyable beverages, foods and snacks, serving customers and consumers in more than 200 countries and territories. Our Operations We are organized into six reportable segments (also referred to as divisions), as follows: 1) Frito-Lay North America (FLNA), which includes our branded food and snack businesses in the United States and Canada; 2) Quaker Foods North America (QFNA), which includes our cereal, rice, pasta and other branded food businesses in the United States and Canada; 3) North America Beverages (NAB), which includes our beverage businesses in the United States and Canada; 4) Latin America, which includes all of our beverage, food and snack businesses in Latin America; 5) Europe Sub-Saharan Africa (ESSA), which includes all of our beverage, food and snack businesses in Europe and Sub-Saharan Africa; and 2 6) Asia, Middle East and North Africa (AMENA), which includes all of our beverage, food and snack businesses in Asia, Middle East and North Africa. Our segment net revenue (in millions) and contributions to consolidated net revenue for each of the last three fiscal years were as follows: FLNA QFNA NAB Latin America ESSA AMENA Net Revenue 2017 2016(a) $ 15,798 $ 15,549 $ 2,503 2,564 20,936 21,312 7,208 6,820 11,050 10,216 6,030 6,338 $ 63,525 $ 62,799 $ 2015 14,782 2,543 20,618 8,228 10,510 6,375 63,056 % of Total Net Revenue 2017 2016 2015 25% 25% 23% 4 4 4 33 34 33 11 11 13 17 16 17 10 10 10 100% 100% 100% (a) Our fiscal 2016 results included an extra week of results (53rd reporting week). The 53rd reporting week increased 2016 net revenue by $657 million, including $294 million in our FLNA segment, $43 million in our QFNA segment, $300 million in our NAB segment and $20 million in our ESSA segment. See Note 1 to our consolidated financial statements for financial information about our divisions and geographic areas. See also “Item 1A. Risk Factors” below for a discussion of certain risks associated with our operations, including outside the United States. Frito-Lay North America Either independently or in conjunction with third parties, FLNA makes, markets, distributes and sells branded snack foods. These foods include branded dips, Cheetos cheese-flavored snacks, Doritos tortilla chips, Fritos corn chips, Lay’s potato chips, Ruffles potato chips, Santitas tortilla chips and Tostitos tortilla chips. FLNA’s branded products are sold to independent distributors and retailers. In addition, FLNA’s joint venture with Strauss Group makes, markets, distributes and sells Sabra refrigerated dips and spreads. Quaker Foods North America Either independently or in conjunction with third parties, QFNA makes, markets, distributes and sells cereals, rice, pasta and other branded products. QFNA’s products include Aunt Jemima mixes and syrups, Cap’n Crunch cereal, Life cereal, Quaker Chewy granola bars, Quaker grits, Quaker oat squares, Quaker oatmeal, Quaker rice cakes, Quaker simply granola and Rice-A-Roni side dishes. These branded products are sold to independent distributors and retailers. North America Beverages Either independently or in conjunction with third parties, NAB makes, markets and sells beverage concentrates, fountain syrups and finished goods under various beverage brands including Aquafina, Diet Mountain Dew, Diet Pepsi, Gatorade, Mist Twst, Mountain Dew, Pepsi, Propel and Tropicana. NAB also, either independently or in conjunction with third parties, makes, markets, distributes and sells ready-to-drink tea and coffee products through joint ventures with Unilever (under the Lipton brand name) and Starbucks, respectively. Further, NAB manufactures and distributes certain brands licensed from Dr Pepper Snapple Group, Inc. (DPSG), including Crush, Dr Pepper and Schweppes, and certain juice brands licensed from Dole Food Company, Inc. (Dole) and Ocean Spray Cranberries, Inc. (Ocean Spray). NAB operates its own bottling plants and distribution facilities and sells branded finished goods directly to independent distributors and retailers. NAB also sells concentrate and finished goods for our brands to authorized and independent bottlers, who in turn sell our branded finished goods to independent distributors and retailers in certain markets. 3 Latin America Either independently or in conjunction with third parties, Latin America makes, markets, distributes and sells a number of snack food brands including Cheetos, Doritos, Emperador, Lay’s, Marias Gamesa, Rosquinhas Mabel, Ruffles, Sabritas, Saladitas and Tostitos, as well as many Quaker-branded cereals and snacks. Latin America also, either independently or in conjunction with third parties, makes, markets, distributes and sells beverage concentrates, fountain syrups and finished goods under various beverage brands including 7UP, Diet Pepsi, Gatorade, H2oh!, Manzanita Sol, Mirinda, Pepsi and Toddy. These branded products are sold to authorized bottlers, independent distributors and retailers. Latin America also, either independently or in conjunction with third parties, makes, markets, distributes and sells ready-to-drink tea products through an international joint venture with Unilever (under the Lipton brand name). See Note 1 to our consolidated financial statements for information about the deconsolidation of our Venezuelan subsidiaries, which was effective as of the end of the third quarter of 2015. Europe Sub-Saharan Africa Either independently or in conjunction with third parties, ESSA makes, markets, distributes and sells a number of leading snack food brands including Cheetos, Chipita, Doritos, Lay’s, Ruffles and Walkers, as well as many Quaker-branded cereals and snacks, through consolidated businesses as well as through noncontrolled affiliates. ESSA also, either independently or in conjunction with third parties, makes, markets, distributes and sells beverage concentrates, fountain syrups and finished goods under various beverage brands including 7UP, Diet Pepsi, Mirinda, Pepsi, Pepsi Max and Tropicana. These branded products are sold to authorized bottlers, independent distributors and retailers. In certain markets, however, ESSA operates its own bottling plants and distribution facilities. ESSA also, either independently or in conjunction with third parties, makes, markets, distributes and sells ready-to-drink tea products through an international joint venture with Unilever (under the Lipton brand name). In addition, ESSA makes, markets, distributes and sells a number of leading dairy products including Agusha, Chudo and Domik v Derevne. Asia, Middle East and North Africa Either independently or in conjunction with third parties, AMENA makes, markets, distributes and sells a number of leading snack food brands including Cheetos, Chipsy, Crunchy, Doritos, Kurkure and Lay’s, as well as many Quaker branded cereals and snacks, through consolidated businesses, as well as through noncontrolled affiliates. AMENA also makes, markets, distributes and sells beverage concentrates, fountain syrups and finished goods under various beverage brands including 7UP, Aquafina, Mirinda, Mountain Dew, Pepsi and Tropicana. These branded products are sold to authorized bottlers, independent distributors and retailers. In certain markets, however, AMENA operates its own bottling plants and distribution facilities. AMENA also, either independently or in conjunction with third parties, makes, markets, distributes and sells ready-to-drink tea products through an international joint venture with Unilever (under the Lipton brand name). Further, we license the Tropicana brand for use in China on co-branded juice products in connection with a strategic alliance with Tingyi (Cayman Islands) Holding Corp. (Tingyi). Our Distribution Network Our products are primarily brought to market through direct-store-delivery (DSD), customer warehouse and distributor networks. The distribution system used depends on customer needs, product characteristics and local trade practices. Direct-Store-Delivery We, our independent bottlers and our distributors operate DSD systems that deliver beverages, foods and snacks directly to retail stores where the products are merchandised by our employees or our independent bottlers. DSD enables us to merchandise with maximum visibility and appeal. DSD is especially well-suited 4 to products that are restocked often and respond to in-store promotion and merchandising. Customer Warehouse Some of our products are delivered from our manufacturing plants and warehouses to customer warehouses. These less costly systems generally work best for products that are less fragile and perishable, and have lower turnover. Distributor Networks We distribute many of our products through third-party distributors. Third-party distributors are particularly effective when greater distribution reach can be achieved by including a wide range of products on the delivery vehicles. For example, our foodservice and vending business distributes beverages, foods and snacks to restaurants, businesses, schools and stadiums through third-party foodservice and vending distributors and operators. Our products are also available on a growing number of e-commerce websites and mobile commerce applications as consumer consumption patterns continue to change and retail increasingly expands online. Ingredients and Other Supplies The principal ingredients we use in our beverage, food and snack products are apple, orange and pineapple juice and other juice concentrates, aspartame, corn, corn sweeteners, flavorings, flour, grapefruit, oranges and other fruits, oats, potatoes, raw milk, rice, seasonings, sucralose, sugar, vegetable and essential oils, and wheat. We also use water in the manufacturing of our products. Our key packaging materials include plastic resins, including polyethylene terephthalate (PET) and polypropylene resins used for plastic beverage bottles and film packaging used for snack foods, aluminum used for cans, glass bottles, closures, cardboard and paperboard cartons. Fuel, electricity and natural gas are also important commodities for our businesses due to their use in our and our business partners’ facilities and the vehicles delivering our products. We employ specialists to secure adequate supplies of many of these items and have not experienced any significant continuous shortages that would prevent us from meeting our requirements. Many of these ingredients, raw materials and commodities are purchased in the open market. The prices we pay for such items are subject to fluctuation, and we manage this risk through the use of fixed-price contracts and purchase orders, pricing agreements and derivative instruments, including swaps and futures. In addition, risk to our supply of certain raw materials is mitigated through purchases from multiple geographies and suppliers. When prices increase, we may or may not pass on such increases to our customers. In addition, we continue to make investments to improve the sustainability and resources of our agricultural supply chain, including the development of our initiative to advance sustainable farming practices by our suppliers and expanding it globally. See Note 9 to our consolidated financial statements for additional information on how we manage our exposure to commodity costs. Our Brands and Intellectual Property Rights We own numerous valuable trademarks which are essential to our worldwide businesses, including Agusha, Amp Energy, Aquafina, Aquafina Flavorsplash, Aunt Jemima, Cap’n Crunch, Cheetos, Chester’s, Chipsy, Chokis, Chudo, Cracker Jack, Crunchy, Diet Mist Twst, Diet Mountain Dew, Diet Mug, Diet Pepsi, Diet 7UP (outside the United States), Domik v Derevne, Doritos, Duyvis, Elma Chips, Emperador, Frito-Lay, Fritos, Fruktovy Sad, G2, Gamesa, Gatorade, Grandma’s, H2oh!, Imunele, Izze, J-7 Tonus, Kas, KeVita, Kurkure, Lay’s, Life, Lifewtr, Lifewater, Lubimy, Manzanita Sol, Marias Gamesa, Matutano, Mirinda, Miss Vickie’s, Mist Twst, Mother’s, Mountain Dew, Mountain Dew Code Red, Mountain Dew Kickstart, Mug, Munchies, Naked, Near East, O.N.E., Paso de los Toros, Pasta Roni, Pepsi, Pepsi Max, Pepsi Next, Pepsi Zero Sugar, Propel, Quaker, Quaker Chewy, Rice-A-Roni, Rold Gold, Rosquinhas Mabel, Ruffles, Sabritas, Sakata, Saladitas, Sandora, Santitas, 7UP (outside the United States), 7UP Free (outside the United States), Simba, Smartfood, Smith’s, Snack a Jacks, SoBe, SoBe Lifewater, Sonric’s, Stacy’s, Sting, SunChips, Toddy, 5 Toddynho, Tostitos, Trop 50, Tropicana, Tropicana Farmstand, Tropicana Pure Premium, Tropicana Twister, V Water, Vesely Molochnik, Walkers and Ya. We also hold long-term licenses to use valuable trademarks in connection with our products in certain markets, including Dole and Ocean Spray. We also distribute Rockstar Energy drinks, Muscle Milk protein shakes and various DPSG brands, including Dr Pepper in certain markets, Crush and Schweppes. Joint ventures in which we have an ownership interest either own or have the right to use certain trademarks, such as Lipton, Sabra and Starbucks. Trademarks remain valid so long as they are used properly for identification purposes, and we emphasize correct use of our trademarks. We have authorized, through licensing arrangements, the use of many of our trademarks in such contexts as snack food joint ventures and beverage bottling appointments. In addition, we license the use of our trademarks on merchandise that is sold at retail, which enhances brand awareness. We either own or have licenses to use a number of patents which relate to certain of our products, their packaging, the processes for their production and the design and operation of various equipment used in our businesses. Some of these patents are licensed to others. Seasonality Our businesses are affected by seasonal variations. For instance, our beverage sales are higher during the warmer months and certain food and dairy sales are higher in the cooler months. Weekly beverage and snack sales are generally highest in the third quarter due to seasonal and holiday-related patterns, and generally lowest in the first quarter. However, taken as a whole, seasonality has not had a material impact on our consolidated financial results. Our Customers Our customers include wholesale and other distributors, foodservice customers, grocery stores, drug stores, convenience stores, discount/dollar stores, mass merchandisers, membership stores, hard discounters, ecommerce retailers and authorized independent bottlers, among others. We normally grant our independent bottlers exclusive contracts to sell and manufacture certain beverage products bearing our trademarks within a specific geographic area. These arrangements provide us with the right to charge our independent bottlers for concentrate, finished goods and Aquafina royalties and specify the manufacturing process required for product quality. We also grant distribution rights to our independent bottlers for certain beverage products bearing our trademarks for specified geographic areas. We rely on and provide financial incentives to our customers to assist in the distribution and promotion of our products to the consumer. For our independent distributors and retailers, these incentives include volumebased rebates, product placement fees, promotions and displays. For our independent bottlers, these incentives are referred to as bottler funding and are negotiated annually with each bottler to support a variety of trade and consumer programs, such as consumer incentives, advertising support, new product support, and vending and cooler equipment placement. Consumer incentives include coupons, pricing discounts and promotions, and other promotional offers. Advertising support is directed at advertising programs and supporting independent bottler media. New product support includes targeted consumer and retailer incentives and direct marketplace support, such as point-of-purchase materials, product placement fees, media and advertising. Vending and cooler equipment placement programs support the acquisition and placement of vending machines and cooler equipment. The nature and type of programs vary annually. Changes to the retail landscape, including increased consolidation of retail ownership, the rapid growth of sales through e-commerce websites and mobile commerce applications, the integration of physical and digital operations among retailers, as well as the growth in hard discounters, and the current economic environment continue to increase the importance of major customers. In 2017, sales to Walmart Inc. (Walmart), including Sam’s Club (Sam’s), represented approximately 13% of our consolidated net revenue. Our top five retail customers represented approximately 33% of our 2017 net revenue in North America, with Walmart (including 6 Sam’s) representing approximately 19%. These percentages include concentrate sales to our independent bottlers, which were used in finished goods sold by them to these retailers. See “Off-Balance-Sheet Arrangements” in “Our Financial Results – Our Liquidity and Capital Resources” in Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations for more information on our independent bottlers. Our Competition Our beverage, food and snack products are in highly competitive categories and markets and compete against products of international beverage, food and snack companies that, like us, operate in multiple geographies, as well as regional, local and private label manufacturers, economy brands and other competitors. In many countries in which our products are sold, including the United States, The Coca-Cola Company is our primary beverage competitor. Other beverage, food and snack competitors include, but are not limited to, DPSG, Kellogg Company, The Kraft Heinz Company, Mondel z International, Inc., Monster Beverage Corporation, Nestlé S.A., Red Bull GmbH and Snyder’s-Lance, Inc. Many of our food and snack products hold significant leadership positions in the food and snack industry in the United States and worldwide. In 2017, we and The Coca-Cola Company represented approximately 23% and 20%, respectively, of the U.S. liquid refreshment beverage category by estimated retail sales in measured channels, according to Information Resources, Inc. However, The Coca-Cola Company has significant carbonated soft drink (CSD) share advantage in many markets outside the United States. Our beverage, food and snack products compete primarily on the basis of brand recognition and loyalty, taste, price, value, quality, product variety, innovation, distribution, advertising, marketing and promotional activity, packaging, convenience, service and the ability to anticipate and effectively respond to consumer preferences and trends, including increased consumer focus on health and wellness and the continued acceleration of e-commerce and other methods of distributing and purchasing products. Success in this competitive environment is dependent on effective promotion of existing products, effective introduction of new products and reformulations of existing products, the effectiveness of our advertising campaigns, marketing programs, product packaging, pricing, increased efficiency in production techniques, new vending and dispensing equipment and brand and trademark development and protection. We believe that the strength of our brands, innovation and marketing, coupled with the quality of our products and flexibility of our distribution network, allows us to compete effectively. Research and Development We engage in a variety of research and development activities and invest in innovation globally with the goal of meeting changing consumer demands and preferences and accelerating sustainable growth. These activities principally involve: development of new ingredients, flavors and products; reformulation and improvement in the quality and appeal of existing products; improvement and modernization of manufacturing processes, including cost reduction; improvements in product quality, safety and integrity; development of, and improvements in, dispensing equipment, packaging technology, package design and portion sizes; efforts focused on identifying opportunities to transform, grow and broaden our product portfolio, including by developing products with improved nutrition profiles that reduce added sugars, sodium or saturated fat, including through the use of sweetener alternatives and flavor modifiers and innovation in existing sweeteners, and by offering more products with positive nutrition including whole grains, fruits and vegetables, dairy, protein and hydration; investments in building our capabilities to support our global e-commerce business; and improvements in energy efficiency and efforts focused on reducing our impact on the environment. Our research centers are located around the world, including in Brazil, China, India, Ireland, Mexico, Russia, the United Arab Emirates, the United Kingdom and the United States, and leverage nutrition science, food 7 science, engineering and consumer insights to meet our strategy to continue to develop nutritious and convenient beverages, foods and snacks. In 2017, we continued to refine our beverage, food and snack portfolio to meet changing consumer demands by reducing added sugars in many of our beverages and sodium and saturated fat in many of our foods and snacks, and by developing a broader portfolio of product choices, including: continuing to expand our beverage options that contain no high-fructose corn syrup and that are made with natural flavors; expanding our state-of-the-art food and beverage healthy vending initiative to increase the availability of convenient, affordable and enjoyable nutrition; further expanding our portfolio of nutritious products by building on our important nutrition platforms and brands — Quaker (grains), Tropicana (juices, lemonades, fruit and vegetable drinks), Gatorade (sports nutrition for athletes), Naked Juice (cold-pressed juices and smoothies) and KeVita (probiotics, tonics and fermented teas); further expanding our whole grain products globally; and further expanding our portfolio of nutritious products in growing categories, such as dairy, hummus and other refrigerated dips, and baked grain snacks. In addition, we continued to make investments to reduce our impact on the environment, including: efforts to conserve raw materials and energy, such as by working to achieve reductions in greenhouse gas emissions across our global businesses, by helping to protect and conserve global water supply especially in high-water-risk locations (including replenishing watersheds that source our operations in high-water-risk locations and promoting the efficient use of water use in our agricultural supply chain), and by incorporating into our operations, improvements in the sustainability and resources of our agricultural supply chain; efforts to reduce waste generated by our operations and disposed of in landfills; efforts to support increased packaging recovery and recycling rates; efforts to increase energy efficiency, including the increased use of renewable energy and resources; efforts to support sustainable agriculture by expanding best practices with our growers and suppliers; and efforts to optimize packaging technology and design to make our packaging increasingly recoverable or recyclable with lower environmental impact, including continuing to invest in developing compostable and biodegradable packaging. Research and development costs were $737 million, $760 million and $754 million in 2017, 2016 and 2015, respectively, and are reported within selling, general and administrative expenses. Consumer research is excluded from such research and development costs and included in other marketing costs. Regulatory Matters The conduct of our businesses, including the production, storage, distribution, sale, display, advertising, marketing, labeling, content, quality, safety, transportation, disposal, recycling and use of our products, as well as our occupational health and safety practices and protection of personal information, are subject to various laws and regulations administered by federal, state and local governmental agencies in the United States, as well as to laws and regulations administered by government entities and agencies in the more than 200 other countries and territories in which our products are made, manufactured, distributed or sold. It is our policy to abide by the laws and regulations around the world that apply to our businesses. The U.S. laws and regulations that we are subject to include: the Federal Food, Drug and Cosmetic Act and various state laws governing food safety; the Food Safety Modernization Act; the Occupational Safety and Health Act; various federal, state and local environmental protection laws, as discussed below; the Federal Motor Carrier Safety Act; the Federal Trade Commission Act; the Lanham Act; various federal and state laws and regulations governing competition and trade practices; various federal and state laws and regulations governing our employment practices, including those related to equal employment opportunity, such as the Equal Employment Opportunity Act and the National Labor Relations Act and those related to overtime compensation, such as the Fair Labor Standards Act; customs and foreign trade laws and regulations; laws regulating the sale of certain of our products in schools; and laws relating to the payment of taxes. We are also required to comply with the Foreign Corrupt Practices Act and the Trade Sanctions Reform and Export Enhancement Act. We are also subject to various state and local statutes and regulations, including state consumer protection laws such as Proposition 65 in California, which requires that a specific warning appear 8 on any product that contains a substance listed by the State of California as having been found to cause cancer or birth defects, unless the amount of such substance in the product is below a safe harbor level. We are also subject to numerous similar and other laws and regulations outside the United States, including but not limited to laws and regulations governing food safety, occupational health and safety, competition, anti-corruption and data privacy. In many jurisdictions, compliance with competition laws is of special importance to us due to our competitive position in those jurisdictions, as is compliance with anti-corruption laws, including the U.K. Bribery Act. We rely on legal and operational compliance programs, as well as inhouse and outside counsel and other experts, to guide our businesses in complying with the laws and regulations around the world that apply to our businesses. In addition, certain jurisdictions have either imposed, or are considering imposing, new or increased taxes on the manufacture, distribution or sale of our products, ingredients or substances contained in, or attributes of, our products or commodities used in the production of our products. These taxes vary in scope and form: some apply to all beverages, including non-caloric beverages, while others apply only to beverages with a caloric sweetener (e.g., sugar). Similarly, some measures apply a single tax rate per liquid ounce while others apply a graduated tax rate depending upon the amount of added sugar in the beverage and some apply a flat tax rate on beverages containing a particular substance or ingredient. In addition, certain jurisdictions have either imposed, or are considering imposing, product labeling or warning requirements or other limitations on the marketing or sale of certain of our products as a result of ingredients or substances contained in such products or the audience to whom products are marketed. These types of provisions have required that we provide a label that highlights perceived concerns about a product or warns consumers to avoid consumption of certain ingredients or substances present in our products. It is possible that similar or more restrictive requirements may be proposed or enacted in the future. Regulators may also restrict consumers’ ability to use benefit programs, such as the Supplemental Nutrition Assistance Program in the United States, to purchase certain beverages and foods. In addition, legislation has been enacted in certain U.S. states and in certain other countries where our products are sold that requires collection and recycling of containers or that prohibits the sale of our beverages in certain non-refillable containers, unless a deposit, ecotax or other fee is charged. It is possible that similar or more restrictive requirements may be proposed or enacted in the future. We are also subject to national and local environmental laws in the United States and in foreign countries in which we do business, including laws related to water consumption and treatment, wastewater discharge and air emissions. In the United States, our facilities must comply with the Clean Air Act, the Clean Water Act, the Comprehensive Environmental Response, Compensation and Liability Act, the Resource Conservation and Recovery Act and other federal and state laws regarding handling, storage, release and disposal of wastes generated on-site and sent to third-party owned and operated off-site licensed facilities and our facilities outside the United States must comply with similar laws and regulations. In addition, continuing concern over climate change may result in new or increased legal and regulatory requirements (in or outside of the United States) to reduce or mitigate the potential effects of greenhouse gases, or to limit or impose additional costs on commercial water use due to local water scarcity concerns. Our policy is to abide by all applicable environmental laws and regulations, and we have internal programs in place with respect to our global environmental compliance. We have made, and plan to continue making, necessary expenditures for compliance with applicable environmental laws and regulations. While these expenditures have not had a material impact on our business, financial condition or results of operations to date, changes in environmental compliance requirements, and any expenditures necessary to comply with such requirements, could adversely affect our financial performance. In addition, we and our subsidiaries are subject to environmental remediation obligations arising in the normal course of business, as well as remediation and related indemnification obligations in connection with certain historical activities and contractual obligations, including those of businesses acquired by us or our subsidiaries. While these environmental remediation and indemnification 9 obligations cannot be predicted with certainty, such obligations have not had, and are not expected to have, a material impact on our capital expenditures, earnings or competitive position. In addition to the discussion in this section, see also “Item 1A. Risk Factors.” Employees As of December 30, 2017, we and our consolidated subsidiaries employed approximately 263,000 people worldwide, including approximately 113,000 people within the United States. In certain countries, our employment levels are subject to seasonal variations. We or our subsidiaries are party to numerous collective bargaining agreements. We expect that we will be able to renegotiate these collective bargaining agreements on satisfactory terms when they expire. We believe that relations with our employees are generally good. Available Information We are required to file annual, quarterly and current reports, proxy statements and other information with the U.S. Securities and Exchange Commission (SEC). The public may read and copy any materials that we file with the SEC at the SEC’s Public Reference Room at 100 F Street, N.E., Washington, D.C. 20549. Information on the operation of the Public Reference Room may be obtained by calling the SEC at 1-800SEC-0330. In addition, the SEC maintains an Internet site that contains reports, proxy and information statements, and other information regarding issuers that file electronically with the SEC at http://www.sec.gov. Our Annual Reports on Form 10-K, Quarterly Reports on Form 10-Q, Current Reports on Form 8-K, proxy statements and amendments to those documents filed or furnished pursuant to Section 13(a) or 15(d) of the Securities Exchange Act of 1934, as amended (Exchange Act), are also available free of charge on our Internet site at http://www.pepsico.com as soon as reasonably practicable after such reports are electronically filed with or furnished to the SEC. Investors should note that we currently announce material information to our investors and others using filings with the SEC, press releases, public conference calls, webcasts or our corporate website (www.pepsico.com), including news and announcements regarding our financial performance, key personnel, our brands and our business strategy. Information that we post on our corporate website could be deemed material to investors. We encourage investors, the media, our customers, consumers, business partners and others interested in us to review the information we post on these channels. We may from time to time update the list of channels we will use to communicate information that could be deemed material and will post information about any such change on www.pepsico.com. The information on our website is not, and shall not be deemed to be, a part hereof or incorporated into this or any of our other filings with the SEC. Item 1A. Risk Factors. You should carefully consider the risks described below in addition to the other information set forth in this Annual Report on Form 10-K. Any of the factors described below could occur or continue to occur and could have a material adverse effect on our business, financial condition, results of operations or the price of our publicly traded securities. The risks below are not the only risks we face. Additional risks and uncertainties not currently known to us, or that we currently deem to be immaterial, may occur or become material in the future and may also adversely affect our business, reputation, financial condition, results of operations or the price of our publicly traded securities. Therefore, historical operating results, financial and business performance, events and trends may not be a reliable indicator of future operating results, financial and business performance, events or trends. 10 Demand for our products may be adversely affected by changes in consumer preferences or any inability on our part to innovate, market or distribute our products effectively, and any significant reduction in demand could adversely affect our business, financial condition or results of operations. We are a global food and beverage company operating in highly competitive categories and markets. To generate revenues and profits, we rely on continued demand for our products and therefore must understand our customers and consumers and sell products that appeal to them in the sales channel in which they prefer to shop or browse for such products. In general, changes in consumption in our product categories or consumer demographics could result in reduced demand for our products. Demand for our products depends in part on our ability to anticipate and effectively respond to shifts in consumer trends and preferences, including increased demand for products that meet the needs of consumers who are concerned with: health and wellness (including products that have less added sugars, sodium and saturated fat); convenience (including responding to changes in in-home and on-the-go consumption patterns and methods of distribution of our products to customers and consumers); or the location of origin or source of the ingredients and products (including the environmental impact related to the production of our products). Consumer preferences have been evolving, and are expected to continue to evolve, due to a variety of factors, including: changes in consumer demographics, including the aging of the general population and the emergence of the millennial and younger generations who have differing spending and consumption habits; consumer concerns or perceptions regarding the nutrition profile of certain of our products, including the presence of added sugar, sodium and saturated fat in certain of our products; growing demand for organic or locally sourced ingredients, or consumer concerns or perceptions (whether or not valid) regarding the health effects of ingredients or substances present in certain of our products, such as 4-MeI, acrylamide, artificial flavors and colors, artificial sweeteners, aspartame, caffeine, furfuryl alcohol, high-fructose corn syrup, partially hydrolyzed oils, saturated fat, sodium, sugar, trans fats or other product ingredients, substances or attributes, including genetically engineered ingredients; taxes or other restrictions, including labeling requirements, imposed on our products; consumer concerns or perceptions regarding packaging materials, including their environmental impact; changes in package or portion size; changes in social trends that impact travel, vacation or leisure activity patterns; changes in weather patterns or seasonal consumption cycles; the continued acceleration of e-commerce and other methods of purchasing products; negative publicity (whether or not valid) resulting from regulatory actions, litigation against us or other companies in our industry or negative or inaccurate posts or comments in the media, including social media, about us, our employees, our products or advertising campaigns and marketing programs; perception of social media posts or other information disseminated by us or our employees and agents, customers, suppliers, bottlers, distributors, joint venture partners or other third parties; perception of our employees, agents, customers, suppliers, bottlers, distributors, joint venture partners or other third parties or the business practices of such parties; product boycotts; or a downturn in economic conditions. Any of these factors may reduce consumers’ willingness to purchase our products and any inability on our part to anticipate or react to such changes could result in reduced demand for our products and erosion of our competitive and financial position and could adversely affect our business, reputation, financial condition or results of operations. Demand for our products is also dependent in part on product quality, product and marketing innovation and production and distribution, including our ability to: maintain a robust pipeline of new products; improve the quality of existing products; extend our portfolio of products in growing markets and categories; respond to cultural differences and regional consumer preferences (whether through developing or acquiring new products that are responsive to such preferences); monitor and adjust our use of ingredients (including to respond to applicable regulations); develop or acquire a broader portfolio of product choices, including by continuing to increase non-carbonated beverage offerings and other alternatives to traditional carbonated beverage offerings and, in some cases, reformulations of our traditional carbonated beverage offerings; develop sweetener alternatives and innovation; improve the production, packaging and distribution of our 11 products; respond to competitive product and pricing pressures and changes in distribution channels, including in the rapidly growing e-commerce channel; and implement effective advertising campaigns and marketing programs, including successfully adapting to a rapidly changing media environment through the use of social media and online advertising campaigns and marketing programs. Although we devote significant resources to the items mentioned above, there can be no assurance as to our continued ability to develop, launch, maintain or distribute successful new products or variants of existing products in a timely manner (including to correctly anticipate or effectively react to changes in consumer preferences) or to develop and effectively execute advertising and marketing campaigns that appeal to customers and consumers. Our failure to make the right strategic investments to drive innovation or successfully launch new products or variants of existing products or effectively distribute our products could decrease demand for our existing products by negatively affecting consumer perception of our existing brands and may result in inventory write-offs and other costs that could adversely affect our business, financial condition or results of operations. Changes in, or failure to comply with, laws and regulations applicable to our products or our business operations could adversely affect our business, financial condition or results of operations. The conduct of our business is subject to various laws and regulations administered by federal, state and local governmental agencies in the United States, as well as government entities and agencies outside the United States, including laws and regulations relating to the production, storage, distribution, sale, display, advertising, marketing, labeling, content, quality, safety, transportation, disposal, recycling and use of our products, as well as our employment and occupational health and safety practices and protection of personal information. In addition, in many jurisdictions, compliance with competition laws is of special importance to us due to our competitive position in those jurisdictions, as is compliance with anti-corruption laws. Many of these laws and regulations have differing or conflicting legal standards across the various markets where our products are made, manufactured, distributed or sold and, in certain markets, such as developing and emerging markets, may be less developed or certain. For example, products containing genetically engineered ingredients are subject to varying regulations and restrictions in the jurisdictions in which our products are made, manufactured, distributed or sold. In addition, these laws and regulations and related interpretations may change, sometimes dramatically and unexpectedly, as a result of a variety of factors, including political, economic or social events. Such changes may include changes in: food and drug laws; laws related to product labeling, advertising and marketing practices; laws and treaties related to international trade, including laws regarding the import or export of our products or ingredients used in our products and tariffs; laws and programs restricting the sale and advertising of certain of our products, including restrictions on the audience to whom products are marketed; laws and programs aimed at reducing, restricting or eliminating ingredients or substances in, or attributes of, certain of our products; laws and programs aimed at discouraging the consumption or altering the package or portion size of certain of our products, including laws imposing restrictions on the use of government funds or programs, such as the Supplemental Nutrition Assistance Program (included within the Farm Bill in the United States), to purchase certain of our products; increased regulatory scrutiny of, and increased litigation involving product claims and concerns (whether or not valid) regarding the effects on health of ingredients or substances in, or attributes of, certain of our products, including without limitation those found in energy drinks; state consumer protection laws; laws regulating the protection of personal information; cyber-security regulations; regulatory initiatives, including the imposition or proposed imposition of new or increased taxes or other measures impacting the manufacture, distribution or sale of our products; accounting rules and interpretations; employment laws; privacy laws; laws regulating the price we may charge for our products; laws regulating water rights and access to and use of water or utilities; environmental laws, including laws relating to the regulation of water treatment and discharge of wastewater and air emissions and laws relating to the disposal, recovery or recycling of our products and their packaging. Changes in regulatory requirements, and competing regulations and standards, where our 12 products are made, manufactured, distributed or sold, may result in higher compliance costs, capital expenditures and higher production costs, which could adversely affect our business, reputation, financial condition or results of operations. The imposition by any jurisdiction in the United States or outside the United States of new laws, regulations or governmental policy and their related interpretations, or changes in any of the foregoing, including taxes, labeling, product or production requirements or other limitations on, or pertaining to, the sale or advertisement of certain of our products, ingredients or substances contained in, or attributes of, our products or commodities used in the production of our products, may further alter the way in which we do business and, therefore, may continue to increase our costs or liabilities or reduce demand for our products, which could adversely affect our business, financial condition or results of operations. If one jurisdiction imposes or proposes to impose new requirements or restrictions, other jurisdictions may follow and the requirements or restrictions, or proposed requirements or restrictions, may also result in adverse publicity (whether or not valid). For example, if one jurisdiction imposes a tax on sugar-sweetened beverages or foods, or imposes a specific labeling or warning requirement, other jurisdictions may impose similar or other measures that impact the manufacture, distribution or sale of our products. The foregoing may result in decreased demand for our products, adverse publicity or increased concerns about the health implications of consumption of ingredients or substances in our products (whether or not valid). In addition, studies (whether or not scientifically valid) are underway by third parties purporting to assess the health implications of consumption of certain ingredients or substances present in certain of our products, such as 4-MeI, acrylamide, caffeine, furfuryl alcohol, added sugars, sodium and saturated fat. Third parties have also published documents or studies claiming (whether or not valid) that taxes can address consumer consumption of sugar-sweetened beverages and other foods high in sugar, sodium or saturated fat. If, as a result of these studies and documents or otherwise, there is an increase in consumer concerns (whether or not valid) about the health implications of consumption of our products, an increase in the number of jurisdictions that impose taxes on our products, or an increase in new labeling, product or production requirements or other restrictions on the manufacturing, sale or display of our products, demand for our products could decline, or we could be subject to lawsuits or new regulations that could affect sales of our products, any of which could adversely affect our business, financial condition or results of operations. Although we have policies and procedures in place that are designed to promote legal and regulatory compliance, our employees, suppliers, or other third parties with whom we do business could take actions, intentional or not, that violate these policies and procedures or applicable laws or regulations or could fail to maintain required documentation sufficient to evidence our compliance with applicable laws or regulations. Violations of laws or regulations could subject us to criminal or civil enforcement actions, including fines, penalties, disgorgement of profits or activity restrictions, any of which could result in adverse publicity or affect our business, financial condition or results of operations. In addition, regulatory authorities under whose laws we operate may have enforcement powers that can subject us to actions such as product recall, seizure of products or assets or other sanctions, which could have an adverse effect on the sales of products in our portfolio or could lead to damage to our reputation. In addition, we and our subsidiaries are party to a variety of legal and environmental remediation obligations arising in the normal course of business, as well as environmental remediation, product liability, toxic tort and related indemnification proceedings in connection with certain historical activities and contractual obligations, including those of businesses acquired by us or our subsidiaries. Due to regulatory complexities, uncertainties inherent in litigation and the risk of unidentified contaminants on current and former properties of ours and our subsidiaries, the potential exists for remediation, liability and indemnification costs to differ materially from the costs we have estimated. We cannot guarantee that our costs in relation to these matters 13 will not exceed our estimates or otherwise have an adverse effect on our business, financial condition or results of operations. The imposition or proposed imposition of new or increased taxes aimed at our products could adversely affect our business, financial condition or results of operations. Certain jurisdictions in which our products are made, manufactured, distributed or sold have either imposed, or are considering imposing, new or increased taxes on the manufacture, distribution or sale of our products, ingredients or substances contained in, or attributes of, our products or commodities used in the production of our products. These taxes vary in scope and form: some apply to all beverages, including non-caloric beverages, while others apply only to beverages with a caloric sweetener (e.g., sugar). Similarly, some measures apply a single tax rate per liquid ounce while others apply a graduated tax rate depending upon the amount of added sugar in the beverage and some apply a flat tax rate on beverages containing a particular substance or ingredient. For example, effective January 2018, the City of Seattle, Washington in the United States enacted a per-ounce surcharge on all sugar-sweetened beverages. By contrast, the United Kingdom enacted a graduated tax, effective April 2018, in which the per-ounce tax rate is tied to the amount of added sugar present in the beverage: the higher the amount of added sugar, the higher the per-ounce tax rate and Saudi Arabia enacted, effective June 2017, a flat tax rate of 50% on the retail price of carbonated soft drinks. These tax measures, whatever their scope or form, could increase the cost of our products, reduce overall consumption of our products, lead to negative publicity (whether based on scientific fact or not) or leave consumers with the perception (whether or not valid) that our products do not meet their health and wellness needs. Such factors could adversely affect our business, financial condition or results of operations. Significant additional labeling or warning requirements or limitations on the marketing or sale of our products may reduce demand for such products and could adversely affect our business, financial condition or results of operations. Certain jurisdictions in which our products are made, manufactured, distributed or sold have either imposed, or are considering imposing, product labeling or warning requirements or limitations on the marketing or sale of certain of our products as a result of ingredients or substances contained in such products. These types of provisions have required that we provide a label that highlights perceived concerns about a product or warns consumers to avoid consumption of certain ingredients or substances present in our products. For example, in California in the United States, Proposition 65 requires a specific warning on or relating to any product that contains a substance listed by the State of California as having been found to cause cancer or birth defects or other reproductive harm, unless the level of such substance in the product is below a safe harbor level established by the State of California. In addition, a number of jurisdictions, both in and outside the United States, have imposed or are considering imposing labeling requirements, including color-coded labeling of certain food and beverage products where colors such as red, yellow and green are used to indicate various levels of a particular ingredient, such as sugar, sodium or saturated fat. The imposition or proposed imposition of additional product labeling or warning requirements could reduce overall consumption of our products, lead to negative publicity (whether based on scientific fact or not) or leave consumers with the perception (whether or not valid) that our products do not meet their health and wellness needs. Such factors could adversely affect our business, financial condition or results of operations. Changes in laws and regulations relating to packaging or disposal of our products could continue to increase our costs and reduce demand for our products or otherwise have an adverse impact on our business, reputation, financial condition or results of operations. Certain of our products are sold in packaging designed to be recoverable for recycling but not all packaging 14 is recovered, whether due to low value, lack of infrastructure or otherwise. The United States and many other jurisdictions have imposed or are considering imposing regulations or policies designed to encourage recycling, including requiring that deposits or certain taxes or fees be charged in connection with the sale, distribution, marketing and use of certain packaging; extended producer responsibility policies which makes brand owners responsible for the costs of recycling products after consumers have used them; and adopting or extending product stewardship policies which could require brand owners to plan for and, if necessary, pay for the recycling or disposal of packaging after consumers have used them. In addition, these jurisdictions may elect to impose regulations or policies to ban the use of certain packaging, such as plastic beverage bottles. Compliance with these laws and regulations could continue to affect our costs or require changes in our distribution model, which could adversely affect our business, financial condition or results of operations. Further, our reputation could be damaged if we or others in our industry do not act, or are perceived not to act, responsibly with respect to packaging or disposal of our products. Our business, financial condition or results of operations could suffer if we are unable to compete effectively. Our beverage, food and snack products are in highly competitive categories and markets and compete against products of international beverage, food and snack companies that, like us, operate in multiple geographies, as well as regional, local, and private label manufacturers, economy brands and other competitors. In many countries in which our products are sold, including the United States, The Coca-Cola Company is our primary beverage competitor. Other beverage, food and snack competitors include, but are not limited to, DPSG, Kellogg Company, The Kraft Heinz Company, Mondel z International, Inc., Monster Beverage Corporation, Nestlé S.A., Red Bull GmbH and Snyder’s-Lance, Inc. Our beverage, food and snack products compete primarily on the basis of brand recognition and loyalty, taste, price, value, quality, product variety, innovation, distribution, advertising, marketing and promotional activity, packaging, convenience, service and the ability to anticipate and effectively respond to consumer preferences and trends, including increased consumer focus on health and wellness and the continued acceleration of ecommerce and other methods of distributing and purchasing products. If we are unable to effectively promote our existing products or introduce new products, if our advertising or marketing campaigns are not effective or if we are otherwise unable to effectively respond to pricing pressure or compete effectively (including in distributing our products effectively and cost efficiently through all existing and emerging channels of trade, including through e-commerce and hard discounters), we may be unable to grow or maintain sales or category share or we may need to increase capital, marketing or other expenditures, which may adversely affect our business, financial condition or results of operations. Our business, financial condition or results of operations could be adversely affected as a result of political conditions in the markets in which our products are made, manufactured, distributed or sold. Political conditions in the markets in which our products are made, manufactured, distributed or sold may be difficult to predict and may adversely affect our business, financial condition and results of operations. The results of elections, referendums or other political conditions in the markets in which our products are made, manufactured, distributed or sold could create uncertainty regarding how existing laws and regulations may change, including with respect to sanctions, climate change regulation, taxes, the movement of goods, services and people between countries and other matters, and could result in exchange rate fluctuation, volatility in global stock markets and global economic uncertainty. For example, there is continued uncertainty surrounding the United Kingdom’s pending withdrawal from the European Union, including how the United Kingdom will interact with other European Union countries following its departure. Any changes in, or the imposition of new laws, regulations or governmental policy and their related interpretations due to elections, 15 referendums or other political conditions could have an adverse impact on our business, financial conditions and results of operations. Our business, financial condition or results of operations could be adversely affected if we are unable to grow our business in developing and emerging markets. Our success depends in part on our ability to grow our business in developing and emerging markets, including Mexico, Russia, the Middle East, Brazil, China and India. However, there can be no assurance that our existing products, variants of our existing products or new products that we make, manufacture, distribute or sell will be accepted or be successful in any particular developing or emerging market, due to local or global competition, product price, cultural differences, consumer preferences or otherwise. The following factors could reduce demand for our products or otherwise impede the growth of our business in developing and emerging markets: unstable economic, political or social conditions; acts of war, terrorist acts, and civil unrest; increased competition; volatility in the economic growth of certain of these markets and the related impact on developed countries who export to these markets; volatile oil prices and the impact on the local economy in certain of these markets; our inability to acquire businesses, form strategic business alliances or to make necessary infrastructure investments; our inability to complete divestitures or refranchisings; imposition of new or increased labeling, product or production requirements, or other restrictions; imposition of new or increased sanctions against, or other regulations restricting contact with, certain countries in these markets, or imposition of new or increased sanctions against U.S. multinational corporations operating in these markets; actions, such as removing our products from shelves, taken by retailers in response to U.S. trade sanctions or other governmental action or policy; foreign ownership restrictions; nationalization of our assets or the assets of our suppliers, bottlers, distributors, joint venture partners or other third parties; imposition of taxes on our products or the ingredients or substances used in our products; governmentmandated closure, or threatened closure, of our operations or the operations of our suppliers, bottlers, distributors, joint venture partners, customers or other third parties; restrictions on the import or export of our products or ingredients or substances used in our products; regulations relating to the repatriation of funds currently held in foreign jurisdictions to the United States; highly-inflationary economies, devaluation or fluctuation, such as the devaluation of the Egyptian pound, Turkish lira, Pound sterling, Argentine peso and the Mexican peso, or demonetization of currency; regulations on the transfer of funds to and from foreign countries, currency controls or other currency exchange restrictions, which result in significant cash balances in foreign countries, from time to time, or could significantly affect our ability to effectively manage our operations in certain of these markets and could result in the deconsolidation of such businesses; the lack of well-established or reliable legal systems; increased costs of doing business due to compliance with complex foreign and U.S. laws and regulations that apply to our international operations, including the Foreign Corrupt Practices Act, the U.K. Bribery Act and the Trade Sanctions Reform and Export Enhancement Act; and adverse consequences, such as the assessment of fines or penalties, for any failure to comply with these laws and regulations. If we are unable to expand our businesses in developing and emerging markets, effectively operate, or manage the risks associated with operating, in these markets, or achieve the return on capital we expect from our investments...
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