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Major Restructuring at PepsiCo to Maintain Profitable Growth

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Major Restructuring at PepsiCo to Maintain Profitable Growth

Major Restructuring at PepsiCo to Maintain Profitable Growth
February 10
13:04 2012

With worldwide snacks and beverage volumes rising by 8% and 5% respectively, PepsiCo has increased operating profit by 16% to $9.63 billion on net revenue up 15% to $66.5 million for 2011. Reported net income rose by 2% to $6.46 billion.

The results reflect top-line gains across its worldwide snacks and beverage businesses, the acquisition of Wimm-Bill-Dann in Russia, gains from sales of certain businesses and the favorable impact of an extra reporting week offset by high commodity costs.

“In 2011, we delivered solid top- and bottom-line growth,” says PepsiCo chairman and chief executive Indra Nooyi. “We continued to stimulate strong consumer demand for our products, and our successful pricing and productivity programs partially offset the impacts of inflation. Importantly, in a year characterised by a challenging macroeconomic environment and political turbulence, we took advantage of gains from strategic adjustments to our portfolio to reinvest in key capabilities and markets.”

Full-year worldwide snacks volume increased 2.5% on an organic basis, reflecting broad-based gains in the snacks portfolio. Full-year worldwide beverage volume increased 1% on an organic basis. The volume performance was led by growth in emerging markets, where volume increased 8% in snacks and 3% in beverages on an organic basis.

In Europe, volume increased in double-digits for both snacks and beverages, including the impact of the WBD acquisition. Net revenue increased by 41%, and by 12% excluding the impact of the WBD acquisition. Full-year operating profit advanced by 18%.

PepsiCo chairman and chief executive Indra Nooyi.

To maintain its growth momentum, PepsiCo has unveiled a major restructuring and productivity program with the savings being invested in its brands. Entailing the shedding of about 8,700 jobs or 3% of the global workforce, PepsiCo’s new multi-year productivity program is expected to generate $1.5 billion of incremental cost savings by 2014 through optimisation of operating practices and organisation structure. PepsiCo plans to increase advertising and marketing support behind its global brands by $500-$600 million in 2012, with particular focus on North America. Going forward, it expects to maintain or increase that rate of support as a percentage of revenues.

As a result of the productivity programme, PepsiCo incurred pre-tax non-core restructuring charges of $383 million in the fourth quarter of 2011 and it anticipates additional charges of approximately $425 million in 2012 and another $100 million from 2013 through 2015. These charges resulted in cash expenditures of $30 million in the fourth quarter of 2011, and the company anticipates approximately $550 million of related cash expenditures during 2012, with the balance of approximately $175 million of related cash expenditures in 2013 through 2015.

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