Presented By: Aaron Czerkies Jonathan Barki Amin Rizwan Chris Tsoulakas Frank Damian December 6, 2011 PepsiCo, Inc. NYSE:PEP

Introduction PepsiCo, Inc. is a global food, snack and beverage company founded in 1919. The Company's brands include Quaker Oats, Tropicana, Gatorade, Lay's, Pepsi, Walkers, Gamesa and Sabritas. Market capitalisation: $100.68bn Approximately around 294,000 employees worldwide. December 5th 2011 closing price: $64.40 52-week range: $58.50-$71.89

(5 Year) Stock Market Performance Blue line – iShares S&P Global Consumer Staples (KXI) Red line – PepsiCo Green – S&P 500 index Yahoo Finance

Technical Analysis 20 and 200 day moving average over a 5-year time horizon Yahoo Finance

20 and 200 day moving average over a 2-year time horizon Yahoo Finance

Ownership Above 10 holders comprise 22.27% of shareholders’ ownership. Shares (millions) % Held The Vanguard Group Inc. 66.24 4.39% State Street Global Advisors 58.69 3.85% BlackRock Fund Advisors 57.82 3.74% Capital Research Global Investors 38.60 1.83% Wellington Management Co. LLP 31.56 1.62% Banc of America Securities LLC 24.92 1.61% Northern Trust Investments 22.96 1.43% T. Rowe Price Associates, Inc. 21.98 1.33% Yacktman Asset Management Co., Inc 18.11 1.25% Fidelity Management & Research Co. 15.34 1.22% Above 10 holders comprise 22.27% of shareholders’ ownership. Data as of 30th September, 2011, Financial Times

Macroeconomic Analysis Consumer spending:  IBIS World estimates 2.6% compound growth in consumer spending from 2011 to 2016 http://clients.ibisworld.com/bed/default.aspx?bedid=363 Image: http://clients.ibisworld.com/charts/bed/1_1_363_BEDScores.png

Industry Analysis Soda Production in the US: ~$17bn revenue, $2.5bn profit Performance Industry has been suffering recently with an annual 7.1% decline from 2006 to 2011 Outlook IBIS World project a negative annual growth rate of -2.0% for 2011 to 2016 Major Players The Coca-Cola Company - Market Share: 41.2% PepsiCo Inc. - Market Share: 33.6% Dr Pepper Snapple Group Inc. - Market Share: 15.4% http://clients.ibisworld.com/industryus/default.aspx?indid=285

Industry Analysis (cont.) Snack Food Production in the US ~$28.4bn revenue, $5.9bn profit Performance Steady growth with an annual rate of 4.2% from 2006 to 2011 Outlook IBIS World project an annual growth rate of 2.1% for 2011 to 2016 Major Players Frito Lay North America - Market Share: 48.4% Kraft Foods Inc. - Market Share: 5.2% General Mills Inc. - Market Share: 5.1% http://clients.ibisworld.com/industryus/default.aspx?indid=271

Industry Analysis (cont.) Juice Production in the US ~$27bn revenue, $6.1bn profit Performance Recent performance has been strong with annual growth rates of 10.4% from 2006 to 2011 Outlook IBIS World project an annual growth rate of 0.5% for 2011 to 2016 Major Players PepsiCo Inc. - Market Share: 38.4% The Coca-Cola Company - Market Share: 21.5% Dr Pepper Snapple Group Inc. - Market Share: 6.1%  http://clients.ibisworld.com/industryus/default.aspx?indid=287

Product Segments Source: Barclays “BTS” Consumer Conference, Sep 2011 http://www.pepsico.com/Download/Barclays_BTS_Presentation.pdf

2010 Revenue Breakdown Source: Annual Report, Dec 2010

Global Markets Exposure About $20 billion or 31% of Revenue from emerging markets in 2010 Focus on growth in Central Asia and Eastern Europe 70% growth of sales in Russia over last 2 years Robust economic indicators, low debt ratios, good foreign exchange reserves Wimm-Bill-Dann acquisition 66% at $3.8 B total ownership to 77% 15 Aug 2011, ‘squeeze-out demand’ for other 23% 3,883.70 Russian rubles per share Source: Q3 Earnings Release, Oct 2011

Financial Performance 24% 5-year CAGR High operating margins and potential for growth 5-year Compounded Annual Growth Rates: 12% in Net Revenue 10% Operating Profit $29 B in Dividend and Share repurchases in the last 5 yrs 9% EPS 8% Operating Cash Flow

Savory Snacks Frito Lay’s World’s largest Food Brand $9.4bn Doritos $4 B, Cheetos $3.1 B, Ruffles $2.6bn, Tositos $1.7bn, Fritos $1.3bn Transnational expansion strategy through balance between: Localization Maintaining consistent quality standards and cooking processes 5-year CAGR: 3% Volume 8% Revenue 8% NOPBT Source: Q3 Earnings Release, Oct 2011

Beverages Source: Barclays “BTS” Consumer Conference, Sep 2011 http://www.pepsico.com/Download/Barclays_BTS_Presentation.pdf

Carbonated Soft Drinks Sustain powerhouse brands Sierra Mist, +7% in volume Mountain Dew, +2.5% in volume Pepsi Max, +93% in volume Focused advertising & marketing campaigns Pepsi Max Diet Pepsi Pepsi Social media exposure Continue innovating products Pepsi Next Develop Occasion-based marketing On-the-Go Refreshment Special Occasion and Celebrations Meal-time and Snacking Source: Q3 Earnings Release, Oct 2011

Hydration & Nourishment Gatorade 11% Sales growth 77.3% Sports Drink market share Tropicana About 50% Sales TTM growth $150 MM Source: Q3 Earnings Release, Oct 2011 Barclays “BTS” Consumer Conference, Sep 2011 http://www.pepsico.com/Download/Barclays_BTS_Presentation.pdf

Nutrition Top 3 globally in Nutrition, aiming to be $30B business by 2020 Huge growth potential, 5-year double-digit revenue CAGR Strong demographic and consumer interest in health and wellness Aging population seeking healthy and tasty foods On-the-Go consumers and their demand for convenience Source: Q3 Earnings Release, Oct 2011 Barclays “BTS” Consumer Conference, Sep 2011 http://www.pepsico.com/Download/Barclays_BTS_Presentation.pdf

Recent Challenges and Concerns 2012 Pricing Strategy Commodity inflation and Demand elasticity Margins & Cost cutting measures Currency exposure Investors appealing for a split of Snacks and Beverages Strong growth in snacks business Strong growth with Tropicana and Gatorade Weak CSD strategy and culture has impacted PepsiCo’s overall stock performance While Coke has increased by about 50% Over-spending in marketing and advertising Kraft and Sara Lee example Source: “Don’t Rule Out a Pepsi Breakup Yet”, Barron’s, 11/19/2011 Q3 Earnings Release, Oct 2011

The Power of One Two powerful businesses worth $31B each Consumption: Planned together Bought together Consumed together Synergies unique to PepsiCo that lead to selling & service advantages and efficient operations: Common Merchandising Convenience Store Channel Demographics Broad Price Points Prime-time Merchandising Distribution Networks New NFL 10 Year Deal Source: Q3 Earnings Release, Oct 2011

Public Comparable Analysis Quaker/Nutrition SWX:NESN Nestlé S.A. Business areas include Food and Beverage, Nestle Waters and Nestle Nutrition. NYSE:KFT Kraft Foods Inc. Manufactures and markets packaged food products, including biscuits, confectionery, beverages, cheese, convenient meals and various packaged grocery products. NYSE:BGS B&G Foods Inc. B&G Foods, Inc. (B&G Foods) manufactures, sells and distributes a diverse portfolio of branded shelf-stable food products.  NYSE:GIS General Mills, Inc. Global manufacturer and marketer of consumer foods. products categories in the US include cereals, refrigerated yogurt, soups, shelf stable and frozen vegetables, dough products, dessert and baking mixes, grain, fruit and savory snacks, and a variety of organic products.

Public Comparable Analysis - Quaker Range: 66.49 to 73.73 Median: 71.06 Price: 8.36

Public Comparable Analysis (cont.) Soft Drinks NYSE:KO The Coca-Cola Company Produce over 3,500 beverages. Notable brands include: Coca-Cola, Powerade, Fanta, Sprite, Dasani and Vitamin Water NYSE:COT Cott Corporation Products: Red Rooster, Blue Charge NYSE:DPS Dr Pepper Snapple Group, Inc. Products: Dr Pepper, 7UP, Canada Dry, RC Cola Deja Blue NasdaqGS:FIZZ National Beverage Corp. Products: Shasta, Faygo, Everfresh

Public Comparable Analysis – Soft Drinks Range: 5029 to 81.79 Median: 56.40 Price: 24.00

Public Comparable Analysis (cont.) Frito-Lay NasdaqGS:LNCE Snyder's-Lance, Inc. Manufacturer and distributer of snack food products, including pretzels, crackers, kettle chips, cookies, potato chips and tortilla chips. NasdaqGS:DMND Diamond Foods, Inc. Products: Kettle Brand Potato Chips, NYSE:CAG ConAgra Foods, Inc. Consumer Foods producer. Brands include Banquet, David Seeds, Egg Beaters, Healthy Choice, Hebrew National, Pam and Snack Pack. NYSE:HSY Hershey Co. Snacks

Public Comparable Analysis – Frito-Lay Range: 21.52 to 67.22 Weight: 55.00 Other multiples low so used closer to P/E Price: 15.17

Public Comparable Analysis (cont.) Tropicana NasdaqGS:HANS Hansen Natural Corporation Develops, sells and distributes beverages. Brands include Monster Energy, Peace Tea, Hansen's, Hansen's Natural Sodas, Junior Juice, Blue Sky, X-Presso Monster, Vidration, Hubert's, Rumba, Samba and Tango. NYSE:CQB Chiquita Brands International Inc. Products: Chiquita Fruit juices

Public Comparable Analysis - Tropicana Range: 70.11 to 148.88 Median: 109.49 Price: 19.78

Recommendation DCF value: $65.93 Comps value: $67.31 Current market price (12/06/2011): $64.40 Current recommendation: Watch List, but would love to buy on a pullback below $60