PepsiCo(US:PEP)2023-02-08 16:00Business Operations - PepsiCo operates through seven reportable segments, including Frito-Lay North America, Quaker Foods North America, and PepsiCo Beverages North America[18]. - The company has joint ventures with Unilever and Starbucks for ready-to-drink tea and coffee products, respectively[22]. - PepsiCo's products are sold in over 200 countries and territories, showcasing its extensive global reach[17]. - The company utilizes a distributed network of plants and distribution centers, with significant properties owned or leased across multiple regions, ensuring operational capacity[112]. - The company believes its properties are generally in good operating condition and suitable for current operations, supporting its manufacturing and distribution needs[112]. Financial Performance - Consolidated net revenue for 2022 was $86.392 billion, representing a 9% increase from $79.474 billion in 2021[174]. - Operating profit for 2022 was $11.512 billion, a 3% increase from $11.162 billion in 2021, with an operating margin of 13.3%, down from 14.0%[174][175]. - Net income attributable to PepsiCo for 2022 was $8.910 billion, a 17% increase from $7.618 billion in 2021, with diluted earnings per share rising to $6.42 from $5.49[178]. - The annual tax rate for 2022 was 16.1%, down from 21.8% in 2021[178]. - Free cash flow is utilized primarily for acquisitions, debt repayments, dividends, and share repurchases, highlighting its importance in financial strategy[213]. Market Challenges - The company experienced increased commodity, packaging, and input costs in 2022, influenced by factors such as the COVID-19 pandemic and supply chain disruptions[33]. - The ongoing conflict in Ukraine has resulted in suspended operations and increased costs for transportation, energy, and raw materials, impacting global business performance[66]. - Economic conditions such as high inflation and interest rate changes may lead to recessions, impacting the company's business performance[82]. - Labor market challenges, including wage inflation and turnover, could impact the ability to attract and retain a skilled workforce[73]. - Water scarcity poses risks to manufacturing operations, potentially leading to increased costs and operational disruptions[74]. Sustainability Initiatives - The company emphasizes sustainability in its packaging, integrating recyclability and supporting the use of recycled content[33]. - The company aims to reduce its environmental impact, including water use and packaging waste, as part of its sustainability goals[55]. - PepsiCo aims to achieve net-zero emissions by 2040 and become net water positive by 2030, with a goal to double the percentage of beverage servings delivered through reusable models from 10% to 20% by 2030[143]. - PepsiCo's packaging goals include cutting virgin plastic per serving and using more recycled content, potentially eliminating the need for over 200 billion plastic bottles by 2030[143]. - In 2022, PepsiCo elevated partnerships to scale regenerative agriculture across 2 million acres, including collaborations with Archer Daniels Midland Company and MIT[143]. Consumer Trends - Demand for products is influenced by consumer trends, with shifts towards e-commerce and health-conscious choices affecting sales[67]. - The retail landscape is evolving, with significant growth in e-commerce channels, necessitating strong relationships with both traditional and online retailers[75]. - The company is focusing on evolving its product portfolio to include healthier options, reducing added sugars and sodium, and incorporating more diverse ingredients[143]. - The company is adapting to the retail landscape's shift towards e-commerce and digital operations, aiming to enhance its direct-to-consumer business[158]. Regulatory and Compliance Issues - The company is subject to numerous laws and regulations globally, including food safety and environmental protection laws[50]. - The company faces significant costs and challenges in complying with evolving personal data protection and privacy laws across various jurisdictions, which could adversely affect its business[101]. - The company is subject to numerous laws and regulations that could result in higher compliance costs and capital expenditures, particularly in relation to environmental, social, and governance matters[106]. - Brazil and Canada enacted warning labeling requirements in 2022 for pre-packaged food or beverage products high in sugar, sodium, or saturated fat, potentially leading to reduced consumption and negative publicity[99]. - Italy enacted a flat tax on all beverages, including zero-calorie beverages, effective January 1, 2023, at a rate of EUR 0.10 (0.11 U.S. dollars) per liter, which could increase costs and reduce consumption[98]. Shareholder Returns - The Board declared a quarterly dividend of $1.15 per share payable on March 31, 2023, with a 10.0% increase in annualized dividend to $5.06 per share effective June 2023[132]. - The company expects to return approximately $7.7 billion to shareholders in 2023, comprising dividends of approximately $6.7 billion and share repurchases of approximately $1.0 billion[132]. - The company has paid consecutive quarterly cash dividends since 1965, with future dividends subject to Board discretion[132]. - The total number of shares repurchased in the fourth quarter of 2022 was 1.8 million at an average price of $174.04 per share[134]. - The company has a $10 billion repurchase program authorized by the Board, which commenced on February 11, 2022, and will expire on February 28, 2026[136]. Workforce and Training - The company employs approximately 315,000 people worldwide as of December 31, 2022, with about 132,000 in the United States[57]. - As of December 31, 2022, approximately 27% of the global workforce was female, and 44% of management roles were held by women[60]. - In 2022, PepsiCo employees completed over 1 million hours of training[61]. - PepsiCo's global workforce includes approximately 315,000 employees, who are encouraged to engage in community impact through the One Smile at a Time program[143]. Risks and Uncertainties - The company faces risks related to product quality and safety, including potential recalls that could damage reputation and consumer confidence[70]. - Cyber incidents and disruptions to information systems pose significant risks, potentially leading to transaction errors and lost revenues[84]. - The company faces risks in developing and emerging markets, including economic, political, and social conditions that could adversely affect growth[81]. - Fluctuations in exchange rates can adversely impact financial performance due to global operations and currency transactions[96]. - A downgrade in credit ratings could increase borrowing costs and impair access to capital markets, affecting financial performance[97].