A Study on the Performance of the Hospitality Industry.

Submitted in Partial fulfillment of the requirement for the award of the Degree of Bachelor of Business Management Of Christ University

By SUMIT SUMAN LAKRA Under the guidance of Dr.Leena James

Department of Management Studies Christ University 2010-2013

DECLARATION I declare that this project report titled A Study on the Performance of the Hospitality Industry is a record of bonafide research carried out by me under the supervision of Mrs. Leena James Department of Management Studies, Christ University, Bangalore. I further declare that this has not previously formed the basis of the award of any degree, diploma or similar title of recognition.

Date

Place- Christ University, Bangalore SUMIT SUMAN LAKRA 1011635

GUIDE CERTIFICATE This is to certify that this project report titled Study on the performance of the Hospitality Industry submitted to the Christ University in partial fulfillment of the requirement for the award of the degree of Bachelor of Business Management is a record of the original and independent work carried out by SUMIT LAKRA under my guidance and supervision. This has not previously formed the basis of the award of any degree, diploma or similar title of recognition.

Place: Bangalore Date:

Dr.Leena James

ACKNOWLEDGEMENT I would like to express my profound gratitude to all those who have been instrumental in the preparation of this project report. I wish to place on records, my deep gratitude to my project guide, Lakshmi Karthikeyan, a highly esteemed and distinguished guide, for her expert advice and help. I would like to thank Dr. Fr. Thomas C Mathew, Vice Chancellor, and Dr. Jain Mathew, HOD, for their support. Lastly I would like to thank God, parents and friends for their constant support and help.

Sumit suman lakra 1011635 Date :

Place:

TABLE OF CONTENTS
Page No. Chapter I- Introduction to Industry Evolution/History Major Players and their market shares Industry growth rate and turnover Govt. Regulations/Policies

Chapter II-Company Profile History/ Founders profile Product profile Client profile Organization structure Present market share Future strategies Financial Information Achievements

Chapter III-Research Methodology Objectives Scope Methodology of data collection Limitations

Chapter IV- Comparative Analysis SWOT McKinseys 7S Model

Chapter V- Conclusion Bibliography and References

A Study on the Performance of the Hospitality Industry. Submitted in Partial fulfillment of the requirement for the award of the Degree of Bachelor of Business Management Of Christ University

By SUMIT SUMAN LAKRA Under the guidance of Dr.Leena James

Department of Management Studies Christ University 2010-2013

DECLARATION I declare that this project report titled A Study on the Performance of the Hospitality Industry is a record of bonafide research carried out by me under the supervision of Mrs. Leena James Department of Management Studies, Christ University, Bangalore. I further declare that this has not previously formed the basis of the award of any degree, diploma or similar title of recognition.

Date

Place- Christ University, Bangalore SUMIT SUMAN LAKRA 1011635

GUIDE CERTIFICATE

This is to certify that this project report titled Study on the performance of the Hospitality Industry submitted to the Christ University in partial fulfillment of the requirement for the award of the degree of Bachelor of Business Management is a record of the original and independent work carried out by SUMIT LAKRA under my guidance and supervision. This has not previously formed the basis of the award of any degree, diploma or similar title of recognition.

Place: Bangalore Date:

Dr.Leena James

ACKNOWLEDGEMENT I would like to express my profound gratitude to all those who have been instrumental in the preparation of this project report. I wish to place on records, my deep gratitude to my project guide, Lakshmi Karthikeyan, a highly esteemed and distinguished guide, for her expert advice and help. I would like to thank Dr. Fr. Thomas C Mathew, Vice Chancellor, and Dr. Jain Mathew, HOD, for their support. Lastly I would like to thank God, parents and friends for their constant support and help.

Sumit suman lakra 1011635 Date :

Place:

TABLE OF CONTENTS

Page No. Chapter I- Introduction to Industry Evolution/History Major Players and their market shares Industry growth rate and turnover Govt. Regulations/Policies

Chapter II-Company Profile History/ Founders profile Product profile Client profile Organization structure Present market share Future strategies Financial Information Achievements

Chapter III-Research Methodology Objectives Scope Methodology of data collection Limitations

Chapter IV- Comparative Analysis SWOT McKinseys 7S Model

Chapter V- Conclusion Bibliography and References

FOOD AN BEVERAGE COMPANY PEPSI

INTRODUCTION

Pepsi is a carbonated soft drink that is produced and manufactured by PepsiCo. Invented in 1898 and introduced as "Brad's Drink", it was later renamed as Pepsi-Cola on June 16, 1903. Pepsi was first introduced as "Brad's Drink" in New Bern, North Carolina, United States, in 1898 by Caleb Bradham, who made it at his home where the drink was sold. It was later named Pepsi Cola, possibly due to the digestive enzyme pepsin and kola nuts used in the recipe. Bradham sought to create a fountain drink that was delicious and would aid in digestion and boost energy.

HISTORY In 1903, Bradham moved the bottling of Pepsi-Cola from his drugstore to a rented warehouse. That year, Bradham sold 7,968 gallons of syrup. The next year, Pepsi was sold in six-ounce bottles, and sales increased to 19,848 gallons. In 1909, automobile race pioneer Barney Oldfield was the first celebrity to endorse Pepsi-Cola, describing it as "A bully drink...refreshing, invigorating, a fine bracer before a race." The advertising theme "Delicious and Healthful" was then used over the next two decades In 1926, Pepsi received its first logo redesign since the original design of 1905. In 1929, the logo was changed again. In 1931, at the depth of the Great Depression, the Pepsi-Cola Company entered bankruptcy in large part due to financial losses incurred by speculating on wildly fluctuating sugar prices as a result of World War I. Assets were sold and Roy C. Megargel bought the Pepsi trademark. Eight years later, the company went bankrupt again. Pepsi's assets were then purchased by Charles Guth, the President of Loft Inc. Loft was a candy manufacturer with retail stores that contained soda fountains. He sought to replace Coca-Cola at his stores' fountains after Coke refused to give him a discount on syrup. Guth then had Loft's chemists reformulate the Pepsi-Cola syrup formula. On three separate occasions between 1922 and 1933, the Coca-Cola Company was offered the opportunity to purchase the Pepsi-Cola company and it declined on each occation.

ORIGIN AN BACKGROUND OF PEPSI Pepsi made its first appearance in the world in 1890s. Pharmacist Calrb Bradham of New Bern, North California, is the man to be credited with the production of this drink. He introduced the drink in the name of Brads Drink. Later, it came to be known as Pepsi, probably due to the use of digestive enzymes, such as peps and kola nuts in its preparation. The product got its trademark on June 16, 1903. Bradham shifted the bottling of the drink from his drugstore to a rented warehouse in the year 1903. Since then, the product has never looked back. It got its first official logo in 1905, which was eventually changed in 1926 and

then again in 1929. In 1909, Pepsi was introduced to the whole world through its first celebrity endorser, Barney Oldfield. In the year 1931, due to the disastrous effect of World War I, there was sudden fluctuation in the price of sugar, which led Pepsi-Cola Company into bankruptcy. Pepsi managed to stand once again, against the pressures of the Great Depression. In 1936, 12-ounce bottles of the soft drink were re-introduced, which were originally priced at 10 cents each. This found fewer sales for itself and then the producers thought of bringing the rate down to 5 cents. This brought a boost to the company, which it badly required at this point of time. They aired an advertising campaign on the radio as well, with a beautiful jingle. This campaign did wonders for the drowning Pepsi Company and eventually doubled the Pepsi-Colas profit. Pepsi started growing as a world brand due to the well-planned and systematically organized marketing and campaigns. In 1940s, Walter Mack was appointed the new President of PepsiCola, who found the missing strategy in the advertising campaigns of Pepsi. He discovered that the advertising somehow missed the African Americans, who could contribute to a major share in the popularity of the brand. He, therefore, appointed Hennah Smith, an advertising persona from the African American community, to focus a sales team upon the blacks. The effort had to be discontinued in the middle, owing to the onset of World War II. However, in 1947, Mack came back with the same goal and appointed Edward F. Boyd for the same. This worked as a positive effort in making Pepsis foothold strong in these unexplored regions. The year 1975 saw open challenge between Pepsi-Cola and the rival Coca-Cola. The public voted in favor of Pepsi, which was telecasted through the media. This further encouraged the growth and popularity of the drink. Several marketing campaigns were followed through the years, which boosted the sale of Pepsi to unimaginable heights. The company kept on redesigning the Pepsi cans and in the year 2007, the can was changed for the fourteenth time. Pepsi sponsored many international cricket games, which certainly gave another platform for the company to reach globally. Today, it uses such slogans that make it recognizable in every part of the world. Slogans like Yeh Dil Mange More and My Pepsi My Way keep the brand rocking everywhere.

TRADEMARK OF THE COMPANY The original trademark application for Pepsi-Cola was filed on September 23, 1902 with registration approved on June 16, 1903. In the application's statement, Caleb Bradham describes the trademark as an, "arbitrary hyphenated word "PEPSI-COLA," and indicated that the mark was in continuous use for his business since August 1, 1901. The Pepsi-Cola's description is a flavouring-syrup for soda water. The trademark expired on April 15, 1994. A second Pepsi-Cola trademark is on record with the USPTO. The application date submitted by Caleb Bradham for the second trademark is Saturday, April 15, 1905 with the successful registration date of April 15, 1906, over three years after the original date. Curiously, in this application, Caleb Bradham states that the trademark had been continuously used in his business and those from whom title is derived since in the 1905 application the description submitted to the USPTO was for a tonic beverage. The federal status for the 1905 trademark is registered and renewed and is owned by PEPSI CO Inc.Purchase,New York. The Board of Directors and Shareholders PepsiCo, Inc.: We have audited the accompanying Consolidated

Balance Sheets of PepsiCo, Inc. and subsidiaries (PepsiCo, Inc. or the Company) as of December 26, 2009 and December 27, 2008, and the related Consolidated Statements of Income, Cash Flows and Equity for each of the fiscal years in the three-year period ended December 26, 2009. We also have audited PepsiCo, Inc.s internal control over financial reporting as of December 26, 2009, based on criteria established in Internal Control Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission (COSO). PepsiCo, Inc.s management is responsible for these consolidated financial statements, for maintaining effective internal control over financial reporting, and for its assessment of the effectiveness of internal control over financial reporting, included in the accompanying Managements Report on Internal Control over Financial Reporting. Our responsibility is to express an opinion on these consolidated financial statements and an opinion on the Companys internal control over financial reporting based on our audits. We conducted our audits in accordance with the standards of the Public Company Accounting Oversight Board (United States). Those standards require that we plan and perform the audits to obtain reasonable assurance about whether the financial statements are free of material misstatement and whether effective internal control over financial reporting was maintained in all material respects. Our audits of the consolidated financial statements included examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements, assessing the accounting principles used and significant estimates made by management, and evaluating the overall financial statement presentation. Our audit of internal control over financial reporting included obtaining an understanding of internal control over financial reporting, assessing the risk that a material weakness exists, and testing and evaluating the design and operating effectiveness of internal control based on the assessed risk. Our audits also included performing such other procedures as we considered necessary in the circumstances. We believe that our audits provide a reasonable basis for our opinions. A companys internal control over financial reporting is a process designed to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles. A companys internal control over financial reporting includes those policies and procedures that (1) pertain to the maintenance of records that, in reasonable detail, accurately and fairly reflect the transactions and dispositions of the assets of the company; (2) provide reasonable assurance that transactions are recorded as necessary to permit preparation of financial statements in accordance with generally accepted accounting principles, and that receipts and expenditures of the company are being made only in accordance with authorizations of management and directors of the company; and (3) provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use, or disposition of the companys assets that could have a material effect on the financial statements. Because of its inherent limitations, internal control over financial Reporting may not prevent or detect misstatements. Also, projections of any evaluation of effectiveness to future periods are subject to the risk that controls may become inadequate because of changes in conditions, or that the degree of compliance with the policies or procedures may deteriorate. In our opinion, the consolidated financial statements referred to Above present fairly, in all material respects, the financial position of PepsiCo, Inc. as of December 26, 2009 and December 27, 2008, and the results of its operations and its cash flows for each of the fiscal years in the three-year period ended December 26, 2009, in conformity with U.S. generally accepted accounting principles. Also in our opinion, PepsiCo, Inc. maintained, in all material respects, effective internal control over financial reporting as of December 26, 2009, based on criteria established in Internal Control Integrated Framework issued by COSO.As discussed in Note 2 to the consolidated financial

statements ,the Company changed its method of accounting for business combinations and non controlling interests in 2009.

RISE IN COMPANY TRADE

During the Great Depression, Pepsi gained popularity following the introduction in 1936 of a 12-ounce bottle. Initially priced at 10 cents, sales were slow, but when the price was slashed to five cents, sales increased substantially. With a radio advertising campaign featuring the jingle "Pepsi-Cola hits the spot / Twelve full ounces, that's a lot / Twice as much for a nickel, too / Pepsi-Cola is the drink for you," arranged in such a way that the jingle never ends. Pepsi encouraged price-watching consumers to switch, obliquely referring to the CocaCola standard of six ounces per bottle for the price of five cents (a nickel), instead of the 12 ounces Pepsi sold at the same price.Coming at a time of economic crisis, the campaign succeeded in boosting Pepsi's status. From 1936 to 1938, Pepsi-Cola's profits doubled. Pepsi's success under Guth came while the Loft Candy business was faltering. Since he had initially used Loft's finances and facilities to establish the new Pepsi success, the nearbankrupt Loft Company sued Guth for possession of the Pepsi-Cola company. A long legal battle, Guth v. Loft, then ensued, with the case reaching the Delaware Supreme Court and ultimately ending in a loss for Gutt.

MARKETING STRATEGY

From the 1930s through the late 1950s, "Pepsi-Cola Hits the Spot" was the most commonly used slogan in the days of old radio, classic motion pictures, and later television. Its jingle (conceived in the days when Pepsi cost only five cents) was used in many different forms with different lyrics. With the rise of television, Pepsi utilized the services of a young, up-and-coming actress named Polly Bergen to promote products, oftentimes lending her singing talents to the classic "...Hits The Spot" jingle. Through the intervening decades, there have been many different Pepsi theme songs sung on television by a variety of artists, from Joanie Summers to The Jacksons to Britney Spears. (See Slogans) In 1975, Pepsi introduced the Pepsi Challenge marketing campaign where PepsiCo set up a blind tasting between Pepsi-Cola and rival Coca-Cola. During these blind taste tests the majority of participants picked Pepsi as the better tasting of the two soft drinks. PepsiCo took

great advantage of the campaign with television commercials reporting the results to the public. In 1976 Pepsi, RKO Bottlers in Toledo, Ohio hired the first female Pepsi salesperson, Denise Muck, to coincide with the United States bicentennial celebration. In 1996, PepsiCo launched the highly successful Pepsi Stuff marketing strategy. By 2002, the strategy was cited by Promo Magazine as one of 16 "Ageless Wonders" that "helped redefine promotion marketing." In 2007, PepsiCo redesigned their cans for the fourteenth time, and for the first time, included more than thirty different backgrounds on each can, introducing a new background every three weeks. One of their background designs includes a string of repetitive numbers, "73774". This is a numerical expression from a telephone keypad of the word "Pepsi." In late 2008, Pepsi overhauled their entire brand, simultaneously introducing a new logo and a minimalist label design. The redesign was comparable to Coca-Cola's earlier simplification of their can and bottle designs. Also in 2008 Pepsi teamed up with Google/YouTube to produce the first daily entertainment show on YouTube, Pop tub. This daily show deals with pop culture, internet viral videos, and celebrity gossip. Pop tub is updated daily from Pepsi. In 2009, "Bring Home the Cup," changed to "Team Up and Bring Home the Cup." The new instalment of the campaign asks for team involvement and an advocate to submit content on behalf of their team for the chance to have the Stanley Cup delivered to the team's hometown by Mark Messier. Pepsi has official sponsorship deals with three of the four major North American professional sports leagues: the National Football League, National Hockey League and Major League Baseball. Pepsi also sponsors Major League Soccer. It also has the naming rights to the Pepsi Center, an indoor sports facility in Denver, Colorado. Pepsi also has sponsorship deals in international cricket teams. The Pakistan cricket team is one of the teams that the brand sponsors. The team wears the Pepsi logo on the front of their test and ODI test match clothing. On July 6, 2009, Pepsi announced it would make a $1 billion investment in Russia over three years, bringing the total Pepsi investment in the country to $4 billion. In July 2009, Pepsi started marketing itself as Pepsi in Argentina in response to its name being mispronounced by 25% of the population and as a way to connect more with all of the population. In October 2008, Pepsi announced that it would be redesigning its logo and re-branding many of its products by early 2009. In 2009, Pepsi, Diet Pepsi and Pepsi Max began using all lower-case fonts for name brands, and Diet Pepsi Max was re-branded as Pepsi Max. The brand's blue and red globe trademark became a series of "smiles," with the central white band arcing at different angles depending on the product until 2010. Pepsi released this logo in U.S. in late 2008, and later it was released in 2009 in Canada (the first country outside of the United States for Pepsi's new logo), Brazil, Bolivia, Guatemala, Nicaragua, Honduras, El Salvador, Colombia, Argentina, Puerto Rico, Costa Rica, Panama, Chile, Dominican

Republic, the Philippines and Australia. In the rest of the world the new logo has been released in 2010. India now is the only country where Pepsi is still using its old logo. The old logo has been phased out most recently in France and Mexico. The UK started to use the new Pepsi logo on cans in an order different from the US can. In mid-2010, all Pepsi variants, regular, diet, and Pepsi Max, have started using only the medium-sized "smile" Pepsi Globe. Pepsi and Pepsi Max cans and bottles in Australia now carry the localized version of the new Pepsi Logo. The word Pepsi and the logo are in the new style, while the word "Max" is still in the previous style. Pepsi Wild Cherry finally received the 2008 Pepsi design in March 2010. In 2011, for New York Fashion Week, Diet Pepsi introduced a "skinny" can that is taller and has been described as a "sassier" version of the traditional can that Pepsi says was made in "celebration of beautiful, confident women." The company's equating of "skinny" and "beautiful" and "confident" is drawing criticism from brand critics, consumers who do not back the "skinny is better" ethos, and the National Eating Disorders Association, which said that it takes offense to the can and the company's "thoughtless and irresponsible" comments. PepsiCo Inc. is a Fashion Week sponsor. This new can was made available to consumers nationwide in March. In April 2011, Pepsi announced that customers will be able to buy a complete stranger a soda at a new "social" vending machine, and even record a video that the stranger would see when they pick up the gift. In May 2011, the week before Memorial Day, Pepsi launched a limited edition flavour called "Memorial Day Pepsi", with blueberry and cherry flavours added to the cola. A companys internal control over financial reporting is a process designed to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles. A companys internal control over financial reporting includes those policies and procedures that (1) pertain to the maintenance of records that, in reasonable detail, accurately and fairly reflect the transactions and dispositions of the assets of the company; (2) provide reasonable assurance that transactions are recorded as necessary to permit preparation of financial statements in accordance with generally accepted accounting principles, and that receipts and expenditures of the company are being made only in accordance with authorizations of management and directors of the company; and (3) provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use, or disposition of the companys assets that could have a material effect on the financial statements. Because of its inherent limitations, internal control over financial reporting may not prevent or detect misstatements. Also, projections of any evaluation of effectiveness to future periods are subject to the risk that controls may become inadequate because of changes in conditions, or that the degree of compliance with the policies or procedures may deteriorate. In our opinion, the consolidated financial statements referred to above present fairly, in all material respects, the financial position of PepsiCo, Inc. as of December 27, 2008 and December 29, 2007, and the results of its operations and its cash flows for each of the fiscal years in the three-year period ended December 27, 2008, in conformity with U.S. generally accepted accounting principles. Also in our opinion, PepsiCo, Inc. maintained, in all material

respects, effective internal control over financial reporting as of December 27, 2008, based on criteria established in Internal control Integrated Framework issued by COSO.

CONSUMER CHOICE The choices consumers make, and the PepsiCo products they buy, reflect not just who and where they are, but also what they enjoy throughout the day. After all, when they eat better, they feel better. Thats why our portfolio offers diverse choices that deliver convenience, affordability and great taste. For years, weve been working to provide healthier snack and food choices for every occasion. Frito-Lay led the industry as the first to remove trans fats from all its snack chip products. Today, whether its Quaker Oatmeal or Lays potato chips, consumers around the world can choose products that are right for them and good for their families. Parents can send their kids to school without Quaker Chewy Bar, a nutritious wholegrain snack that contains no high fructose corn syrup. For an afternoon snack, a Quaker Galletas de Avena cookie deliversen joyment with wholesome ingredients.For dinner, Near East Pearled Couscous gives families the casual elegance of a chef-made, budget-friendly meal while dining at home. And for daytime snack sor late-night gatherings, new Grain Waves with wholesome corn, wheat and oats gives adults a healthier option. Choices like thesealong with active lifestylesmake it easier for consumers to enjoy the foods they like and achieve the energy balance they need to lead active lifestyles. Our global brands win consumers trust with their quality and taste. We further deepen our relationships with consumers through our local brands that appeal to their unique cultural norms, tastes and aspirations. In Russia, we established our relationship with consumers 50 years ago when we introduced them to Pepsi. At the start of 2009, we added to our success in Russia with the launch of Lays red-caviar-flavored chips, which presented a uniquely Russian flavor thats a traditional symbol of the New Year holidays. In the vibrant markets east of the Middle East, we brought enjoyment, freshness and nutrition to family tea time with Aliva, a new biscuit that combines wheat and lentils with the authentic local savory or sweet flavors that families in India prefer. We also introduced Nimbooz lemon drink, our own version of Indias homemade Nimbu Pani, allowing consumers of all ages to enjoy the goodness of lemon juice with no fizz, no artificial flavors and the trustworthiness of our local brand. Much of this innovation stems from the work of our local research teams, which draw on their social, cultural and nutritional knowledge to extend product lines and create new ones. PepsiCo also created platforms for future innovation of more nutritious, locally relevant products. In 2009, we established a joint venture with Calbee Foods, Japans leading snack company, and we acquired Amacoco, Brazilslargest coconut water company.

FIANCIAL ANALYSIS OF THE COMPANY

The PepsiCo is the leader in the whole for the distribution and production foods, snacks, and beverages which has the total revenue of $39 billion as well as having the total employees of 185, 000 employees. The company consists of PepsiCo Americas Beverage, PepsiCo Americas Foods, and PepsiCo International (PepsiCo Corporate Website, 2008). The PepsiCos measurement for its financial statement is the aide of the significant relationships as well as the identification for the changes and the existing trends. Most of the broadly used techniques which adopted by the company are dollar and percentage changes, the ration as it expresses to the relationship f the financial statement for the competitor, the components percentage and the trend percentage. There is also the accompaniment for the comparison of the companys past performance and to the industry standard (Williams, et. al, 2008, p.632. MAINTAING STRONG CONTROL OVER FINANCIAL REPORTING The system of internal control is based on the control criteria framework of the Committee of Sponsoring Organizations of the Treadway Commission published in their report titled Internal Control Integrated Framework. The system is designed to provide reasonable assurance that transactions are executed as authorized and accurately recorded; that assets are safeguarded; and that accounting records are sufficiently reliable to permit the preparation of financial statements that conform in all material respects with accounting principles generally accepted in the U.S. We maintain disclosure controls and procedures designed to ensure that information required to be disclosed in reports under the Securities Exchange Act of 1934 is recorded, processed, summarized and reported within the specified time periods. We monitor these internal controls through self-assessments and an ongoing program of internal audits. Our internal controls are reinforced through our Worldwide Code of Conduct, which sets forth our commitment to conduct business with integrity, and within both the letter and the spirit of the law.

COMPANY RATIOS The financial ratios are significant in the analyzation of the financial statement because of the permission in comparing the information and the financial statement for the other companys financial statement. In this case, the PepsiCo Companys Ratios are interpreted in the benchmark for its ultimate competitor which is the Coca Cola Company. The PepsiCo has the ratio of 89.80 percent for the current liabilities as was compared to its current assets. The company has also the 22.3 % P/E ratio for 2007 with 18.7% in the year 2006 which signifies that is profitable this year as compared to the last year. The company has also the Price/Book ratio of 7.1 in the year 2007 and 6.7 for the previous year. Its price/sales ration had reached for 3.2% as compared to last years 3.0 which signifies huge sales. It cash flow sales to its prices is 18.2 as compared to 17.2 which only reflects that the

company is doing its best to allocate much resources and achieve its goal (Quick Take, 2008). It has also the PE ratio of 16.2 for the current year with the dividend yield of 2.5 %. The company also has the 4.34B increase for the year 2007 to previous year which reflects the 10.99% of the net sales/revenue ratio. This signifies that it has the huge gross profit of 10.13% for the two consecutive years (Google Finance, 2008). In order to compare the financial ratio of PepsiCo to its competitor, it is only important to use one of its major competitors as the Coca Coca Company. The Coca Cola Company has the current asset and the current liabilities estimated ratio of 0.91 or 91 percent higher in its current liabilities vs. the current asset for the year 2007 vs. 2006. This figure only signifies that the Coca-Cola is still a little bit profitable for having 25.1% as the operating margin which is better as compared to the Pepsi which has only 18.2%. The company also has the 0.94 or the 94% higher to its liabilities as it compared to current assets. Additionally, the company also has the earnings per share of 19 percent vs. the $2.16 for the year 2006 and to the $2.57 for the year 2007. On the price to earnings ratio analysis, the company has the actual PE Ratio of 19.72 and the previous year was recorded of having 19. The dividend yield of the company is 2.58% for the year 2007 (Coca-Cola Corporate Website, 2008).

TREND PERCENTAGE OF THE COMPANY The trend percentage is commonly use fro analyzing the changes in the items in the financial statement that starts from the base year and to the upcoming year so that it can show the direction of the changes (Williams, et. al, 2008, p. 634). The trend percentage for PepsiCo is given below: The PepsiCo (In million $) Sales Net Income Trend Percentages Sales Net Income 121.23% 107.91% 134.33% 133.95% 100% 100 2007 39,474 5,658 2006 35,137 5,642 2005 32,562 4,212

The trend percentages for PepsiCo in the year 2005-2007 implies the humble growth in the sales for the past two years which also reflects its accelerations that is happening in the growth for the past two years with 2005 as the base year. With regards to the net income, it shows the significant increase in the growth trend for the past two years with the sudden increase for the year 2006. Generally, the trend for the percentages will give for the broader picture for the growing yet profitable company.

PepsiCo, Inc. has 19 mega-brands that generate $1 billion or more each in annual retail sales (estimated worldwide retail sales in billions). Pepsi-Cola Mountain Dew / Mtn Dew Lays Potato Chips Gatorade (Thirst Quencher, G2, Propel) Diet Pepsi Tropicana Beverages 7UP (outside U.S.) Doritos Tortilla Chips Lipton Teas (PepsiCo/Unilever Partnership) Quaker Foods and Snacks Cheetos Cheese Flavored Snacks Mirinda Ruffles Potato Chips Aquafina Bottled Water Tostitos Tortilla Chips Sierra Mist Fritos Corn Chips Walkers Potato Crisps Pepsi Max

FINANCIAL REPORTING Our management is responsible for establishing and maintaining adequate internal control over financial reporting, as such term is defined in Rule 13a-15(f) of the Exchange Act. Under the supervision and with the participation of our management, including our Chief Executive Officer and Chief Financial Officer, we conducted an evaluation of the effectiveness of our internal control over financial reporting based upon the framework in Internal Control Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission. Based on that evaluation, our management concluded that our internal control over financial reporting is effective as of December 26, 2009. KPMG LLP, an independent registered public accounting firm, has audited the consolidated financial statements included in this Annual Report on Form 10-K and, as part of their audit, has issued their report, included herein, on the effectiveness of our internal control over financial reporting. During our fourth fiscal quarter of 2009, we continued migrating certain of our financial processing systems to SAP software. This software implementation is part of our ongoing global business transformation initiative, and we plan to continue implementing such software throughout other parts of our businesses over the course of the next few years. In connection with the SAP implementation and resulting business process changes , we continue to enhance the design and documentation of our internal control processes to ensure suitable controls over our financial reporting. Except as described above, there were no changes in our internal control over financial reporting during our fourth fiscal quarter of 2009 that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.

SUPPLEMENTAL FINANCIAL INFORMATION 2009 2008 2007 Accounts receivable Trade receivables $4,026 $3,784 Other receivables 688 969 4,714 4,753 Allowance, beginning of year 70 69 $64 Net amounts charged to expense 40 21 5 Deductions (a) (21) (16) (7) Other (b) 1 (4) 7 Allowance, end of year 90 70 $69 Net receivables $4,624 $4,683 Inventories (c) Raw materials $1,274 $1,228 Work-in-process 165 169 Finished goods 1,179 1,125 $2,618 $2,522 (a) Includes accounts written off. (b) Includes currency translation effects and other adjustments. (c) Inventories are valued at the lower of cost or market. Cost is determined using the average, first-in, first-out (FIFO) or last-in, first-out (LIFO) methods. Approximately 10% in 2009 and 11% in 2008 of the inventory cost was computed using the LIFO method. The differences between LIFO and FIFO methods of valuing these inventories were not material. 2009 2008

FIANICIAL STATEMENT OF THE COMPANY Period 12/25/201012/26/2009 12/27/2008 12/29/2007 12/30/2006 End Date Period 52 Weeks 52 Weeks 52 Weeks 52 Weeks 52 Weeks Length Stmt 10-K 10-K 10-K 10-K 10-K Source Stmt 02/18/201102/22/2010 02/22/2010 02/22/2010 02/19/2009 Source Date Stmt Updated UpdatedReclassifiedReclassifiedReclassified Update Type Revenue Total 57,838.0 57,838.0 43,232.0 43,232.0 43,251.0 43,251.0 39,474.0 39,474.0 35,137.0 35,137.0

Revenue Cost of Revenue, Total Gross Profit 26,575.0 20,099.0 20,351.0 18,038.0 15,762.0

31,263.0

23,133.0

22,900.0

21,436.0

19,375.0

BALANCE SHEET OF THE COMPANY

Assets Cash and Short Term Investments 4,029.06,369.05,809.04,754.04,147.0 Total Receivables, Net 6,937.06,323.07,245.06,880.06,204.0Total Inventory3,831.03,372.03,359.03,530.03,283.0Prepaid Expenses1,715.01,505.01,488.01,579.01,631.0Other Current Assets, Total0.00.00.00.00.0Total Current Assets16,512.017,569.017,901.016,743.015,265.0 Property/Plant/Equipment, Total Net20,329.019,058.018,534.018,396.018,850.0Goodwill, Net15,824.014,661.013,905.013,605.013,156.0Intangibles, Net17,895.013,808.013,762.013,876.014,350.0Long Term Investments1,408.01,368.01,401.01,373.01,381.0Note Receivable - Long Term0.00.00.00.00.0Other Long Term Assets, Total1,117.01,689.01,199.01,081.01,142.0Other Assets, Total0.00.00.00.00.0 Total Assets 73,085.068,153.066,702.065,074.064,144.0 Liabilities and Shareholders' Equity Accounts Payable0.00.00.00.00.0Payable/Accrued10,243.010,923.010,699.09,843.09,553.0Accrued Expenses0.00.00.00.00.0Notes Payable/Short Term Debt6,256.04,898.05,756.04,493.01,974.0Current Port. of LT Debt/Capital Leases0.00.00.00.00.0Other Current Liabilities, Total341.071.0662.0236.0127.0 Total Current Liabilities16,840.015,892.017,117.014,572.011,654.0 Total Long Term Debt 20,942.019,999.018,445.019,586.019,884.0Deferred Income Tax4,972.04,057.03,865.04,159.04,143.0Minority Interest1,689.0312.0298.0288.0275.0Other Liabilities, Total6,657.06,729.07,039.06,843.06,607 Total Liabilities51,100.046,989.046,764.045,448.042,563.0 Redeemable Preferred Stock0.00.00.00.00.0Preferred Stock - Non Redeemable, Net-111.0-109.0-107.0-106.0-

105.0Common Stock31.031.031.031.031.0Additional Paid-In Capital4,407.04,527.04,535.04,539.04,510.0Retained Earnings (Accumulated Deficit)37,466.037,090.036,487.035,328.034,496.0Treasury Stock - Common-16,773.016,745.0-16,650.0-15,940.0-13,782.0Other Equity, Total-3,035.0-3,630.0-4,358.0-4,226.03,569.0 Total Equity21,985.021,164.019,938.019,626.021,581.0 Total Liabilities & Shareholders Equity73,085.068,153.066,702.065,074.064,144.0 Total Common Shares Outstanding1,581.01,581.01,582.01,593.01,626.0Total Preferred Shares Outstanding0.00.80.80.80.0

PEPSI MEGA RAND PepsiCo, Inc. has 19 mega-brands that generate $1 billion or more each in annual retail sales (estimated worldwide retail sales in billions). Pepsi-Cola Mountain Dew / Mtn Dew Lays Potato Chips (Thirst Quencher, G2, Propel) Diet Pepsi Tropicana Beverages

* Gatorade

UP (outside U.S.) 1Doritos Tortilla Chips 2Lipton Teas (PepsiCo/Unilever Partnership) 3Quaker Foods and Snacks 4Cheetos Cheese Flavored Snacks 5 Mirinda 6 Ruffles Potato Chips 7 Aquafina Bottled Water 8Tostitos Tortilla Chips 9 Sierra Mist 10 Fritos Corn Chips 11 Walkers Potato Crisps 12 Pepsi Max

SWOT ANALYSIS:STRENGTH The strength of these brands is evident in PepsiCos presence in over 200 countries. The company has the largest market share in the US beverage at 39%, and snack food market at 25%. Such brand dominance insures loyalty and repetitive sales which contributes to over $15 million in annual sales for the company

Diversification - PepsiCos diversification is obvious in that the fact that each of its top 18 brands generates annual sales of over $1,000 million. PepsiCos arsenal also includes ready-to-drink teas, juice drinks, bottled water, as well as breakfast cereals, cakes and cake mixes.This broad product base plus a multi-channel distribution system serve to help insulate PepsiCo from shifting business climates. Distribution - The company delivers its products directly from manufacturing plants and warehouses to customer warehouses and retail stores. This is part of a three pronged approach which also includes employees making direct store deliveries of snacks and beverages and the use of third party distribution services.

Weaknesses

Overdependence on Wal-Mart - Sales to Wal-Mart represent approximately 12% of PepsiCos total net revenue. Wal-Mart is PepsiCos largest customer. As a result PepsiCos fortunes are influenced by the business strategy of Wal-Mart specifically its emphasis on private-label sales which produce a higher profit margin than national brands. Wal-Marts low price themes put pressure on PepsiCo to hold down prices. Overdependence on US Markets - Despite its international presence, 52% of its revenues originate in the US. This concentration does leave PepsiCo somewhat vulnerable to the impact of changing economic conditions, and labor strikes. Large US customers could exploit PepsiCos lack of bargaining power and negatively impact its revenues. Low Productivity - In 2008 PepsiCo had approximately 198,000 employees. Its revenue per employee was $219,439, which was lower that its competitors. This may indicate comparatively low productivity on the part of PepsiCo employees. Image Damage Due to Product Recall - Recently (2008) salmonella contamination forced PepsiCo to pull Aunt Jemima pancake and waffle mix from retail shelves. This followed incidents of exploding Diet Pepsi cans in 2007. Such occurrences damage company image and reduce consumer confidence in PepsiCo products.

Opportunities

Broadening of Product Base - PepsiCo is seeking to address one of its potential weaknesses; dependency on US markets by acquiring Russias leading Juice Company, Lebedyansky, and V Wwater in the United Kingdom. It continues to broaden its product base by introducing TrueNorth Nut Snacks and increasing its Lipton Tea venture with Unilever. These recent initiatives will enable PepsiCo to adjust to the changing lifestyles of its consumers. International Expansion - PepsiCo is in the midst of making a $1, 000 million investment in China, and a $500 million investment in India. Both initiatives are part

of its expansion into international markets and a lessening of its dependence on US sales. In addition the company plans on major capital initiatives in Brazil and Mexico. Growing Savory Snack and Bottled Water market in US - PepsiCo is positioned well to capitalize on the growing bottle water market which is projected to be worth over $24 million by 2012. Products such as Aquafina, and Propel are well established products and in a position to ride the upward crest.PepsiCo products such as, Doritos tortilla chips, Cheetos cheese flavored snacks, Tostitos tortilla chips, Fritos corn chips, Ruffles potato chips, Sun Chips multigrain snacks, Rold Gold pretzels, Santitas are also benefiting from a growing savory snack market which is projected to grow as much as 27% by 2013, representing an increase of $28 million.

Threats

Decline in Carbonated Drink Sales - Soft drink sales are projected to decline by as much as 2.7% by 2012, down $ 63,459 million in value. PepsiCo is in the process of diversification, but is likely to feel the impact of the projected decline. Potential Negative Impact of Government Regulations - It is anticipated that government initiatives related to environmental, health and safety may have the potential to negatively impact PepsiCo. For example, manufacturing, marketing, and distribution of food products may be altered as a result of state, federal or local dictates. Preliminary studies on acrylamide seem to suggest that it may cause cancer in laboratory animals when consumed in significant amounts. If the company has to comply with a related regulation and add warning labels or place warnings in certain locations where its products are sold, a negative impact may result for PepsiCo. Intense Competition - The Coca-Cola Company is PepsiCos primary competitors. But others include Nestl, Groupe Danone and Kraft Foods. Intense competition may influence pricing, advertising, sales promotion initiatives undertaken by PepsiCo. Resently Coca-Cola passed PepsiCo in Juice sales. Potential Disruption Due to Labor Unrest - Based upon recent history, PepsiCo may be vulnerable to strikes and other labor disputes. In 2008 a strike in India shut down production for nearly an entire month. This disrupted both manufacturing and distribution.

Industry Information: Price 63.3 Market Cap (mil) 100,178.9

FOOD & BEVERAGE - Beverages - Soft Drink [more like this] Bid Ask Open 63.63 DPS 1.89 High Low Volume 5789905 52-Wks-Range 71.89 - 60.10

Day Change -0.85 Shares Outstanding (mil) 1,582.6

63.16 67.3 Beta 0.54 EPS 3.91

64.11 63.18 P/E 16.1 Yield 3.3

KEY FIGURES (Latest Twelve Months - LTM) Yesterday's Close PE Ratio - LTM Market Capitalisation Latest Shares Outstanding Earnings pS (EPS) Dividend pS (DPS) Dividend Yield Dividend Payout Ratio Revenue per Employee Effective Tax Rate Float Float as % of Shares Outstanding Foreign Sales Domestic Sales Selling, General & Adm/tive (SG&A) as % of Revenue Research & Devlopment (R&D) as % of Revenue 63.30 $ 16.1 100,178.9 mil 1,582.6 mil 3.91 $ 1.89 3.3 % 48 % 196,728 $ 23.0 % 1,599.2 mil 99.9 % 27,220 mil 30,618 mil 38.50 %

0.00 %

Gross Profit Margin EBITDA Margin Pre-Tax Profit Margin Assets Turnover Return on Assets (ROA) Return on Equity (ROE) Return on Capital Invested (ROCI) Current Ratio Leverage Ratio (Assets/Equity) Interest Cover Total Debt/Equity (Gearing Ratio) LT Debt/Total Capital Working Capital pS Cash pS Book-Value pS Tangible Book-Value pS Cash Flow pS Free Cash Flow pS

57.8 % 19.3 % 13.9 % 0.9 % 8.3 % 26.4 % 13.9 % 1.0 3.2 10.0 1.14 47.0 % -0.09 $ 1.84 $ 15.11 $ 3.24 $ 5.60 $ -1.31 $

KEY FIGURES (LTM): Price info Price/Book Ratio Price/Tangible Book Ratio Price/Cash Flow Price/Free Cash Flow 4.19 19.52 11.3 -48.5

P/E as % of Industry Group P/E as % of Sector Segment

85.0 % 109.0 %

Share price performance intraday

PRICE/VOLUME High 1 Week 4 Weeks 13 Weeks 26 Weeks 52 Weeks YTD 64.91 70.75 71.89 71.89 71.89

Low 60.10 60.10 60.10 60.10 60.10

Close 64.67 68.97 63.40 65.57 -

% Price Chg 0.2 -2.1 -8.2 -0.2 -3.5 -3.1

% Price Chg vs. Mkt. 100 100 101 112 91 104

Avg. Daily Vol 95,552 117,306 92,158 76,791 72,134 77,194

Total Vol 468,687 2,346,115 5,898,119 9,752,504 18,177,799 13,123,033

Moving Average

5Days 64.11

10Days 63.58

10Weeks 65.63

30-Weeks 66.41

200-Days 66.13

Beta (60Mnth) 0.54

Beta (36Mnth) 0.53

GROWTH RATES Revenue Income Dividend

5-Year Growh 11.07 5.71 12.34

R of 5-Year Growth 90.7 70.9 93.3 NA NA NA

3-Year Growth 12.22 4.92 6.32 18.94 0.00 4.84

Capital Spending 10.80 R&D Normalized Inc. CHANGES Revenue % Earnings % EPS % EPS $ 0.00 5.65

YTD vs. Curr Qtr vs. Annual vs. Last YTD Qtr 1-Yr ago Last Annual 19.0 -0.2 1.1 0.02 13.7 17.6 19.4 0.19 33.8 6.3 3.7 0.14