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Investor Update
June 2, 2009
June 2, 2009
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Cautionary Statement
Statements made in this presentation that relate to future performance or financial results of the Company are
forward-looking statements which involve risks and uncertainties that could cause actual performance or results to
materially differ. Such risks and uncertainties include, but are not limited to: the outcome of, or developments
concerning, PepsiCo’s proposal to purchase all outstanding shares of the Company that it does not already own; the
outcome of, and expenses associated with, any litigation related to PepsiCo’s acquisition proposal; PepsiCo’s ability
to affect matters concerning us through its equity ownership of PBG, representation on our Board and approval
rights under our Master Bottling Agreement; material changes in expected levels of bottler incentive payments from
PepsiCo; material changes from expectations in the cost or availability of ingredients, packaging materials, other
raw materials or energy; an inability to achieve strategic business plan targets; material changes in capital
investment for infrastructure and an inability to achieve the expected timing for returns on cold-drink equipment
and related infrastructure expenditures; an inability to successfully integrate acquired businesses or to meet
projections for performance in newly acquired territories; loss of key members of management; and changes in laws
and regulations governing the manufacture and sale of food and beverages, the environment, transportation,
employee safety, labor and government contracts. For additional information on these and other risks and
uncertainties that could cause PBG’s actual results to materially differ from those set forth herein, please see PBG’s
Securities and Exchange Commission reports, including PBG’s annual report on Form 10-K for the year ended
December 27, 2008. PBG undertakes no obligation to update any of the forward-looking statements set forth
herein. Readers are cautioned not to place undue reliance on these forward-looking statements, which speak only
as to the date hereof.
We have disclosed certain non-GAAP measures within this presentation. Our 2009 financial outlook also contains
non-GAAP measures. “Non-GAAP” measures include those designated as “Comparable” as well as Operating Free
Cash Flow (OFCF). Please see reconciliations to their respective measures prescribed by accounting principles
generally accepted in the U.S. included on our website at www.pbg.com under Investor Relations.
forward-looking statements which involve risks and uncertainties that could cause actual performance or results to
materially differ. Such risks and uncertainties include, but are not limited to: the outcome of, or developments
concerning, PepsiCo’s proposal to purchase all outstanding shares of the Company that it does not already own; the
outcome of, and expenses associated with, any litigation related to PepsiCo’s acquisition proposal; PepsiCo’s ability
to affect matters concerning us through its equity ownership of PBG, representation on our Board and approval
rights under our Master Bottling Agreement; material changes in expected levels of bottler incentive payments from
PepsiCo; material changes from expectations in the cost or availability of ingredients, packaging materials, other
raw materials or energy; an inability to achieve strategic business plan targets; material changes in capital
investment for infrastructure and an inability to achieve the expected timing for returns on cold-drink equipment
and related infrastructure expenditures; an inability to successfully integrate acquired businesses or to meet
projections for performance in newly acquired territories; loss of key members of management; and changes in laws
and regulations governing the manufacture and sale of food and beverages, the environment, transportation,
employee safety, labor and government contracts. For additional information on these and other risks and
uncertainties that could cause PBG’s actual results to materially differ from those set forth herein, please see PBG’s
Securities and Exchange Commission reports, including PBG’s annual report on Form 10-K for the year ended
December 27, 2008. PBG undertakes no obligation to update any of the forward-looking statements set forth
herein. Readers are cautioned not to place undue reliance on these forward-looking statements, which speak only
as to the date hereof.
We have disclosed certain non-GAAP measures within this presentation. Our 2009 financial outlook also contains
non-GAAP measures. “Non-GAAP” measures include those designated as “Comparable” as well as Operating Free
Cash Flow (OFCF). Please see reconciliations to their respective measures prescribed by accounting principles
generally accepted in the U.S. included on our website at www.pbg.com under Investor Relations.
![](https://capedge.com/proxy/8-K/0000950157-09-000341/ex1img003.jpg)
Agenda
Track Record of Success
PBG… A Strategic Gem
Strong Financial Outlook
Review of PepsiCo Proposal
![](https://capedge.com/proxy/8-K/0000950157-09-000341/ex1img004.jpg)
Track Record of Success
Strong Financial Outlook
Positive Start to the Year,
Exceeded Q1 2009 Guidance
Exceeded Q1 2009 Guidance
Raising Q2 Comparable EPS Outlook by $0.05
Increasing Full-Year Comparable EPS Outlook
by $0.10 to Range of $2.30 to $2.40
by $0.10 to Range of $2.30 to $2.40
Forecast Full-Year Operating Free Cash Flow
of $525 Million, Increase of $25 Million
of $525 Million, Increase of $25 Million
![](https://capedge.com/proxy/8-K/0000950157-09-000341/ex1img005.jpg)
Strong Sector Performance in Q1 2009
Improving CSD Trends in the U.S.
Continued Commodity Cost Deflation
Decreased Volatility in Foreign Exchange Rates
Bottler Consolidation Accelerating
Track Record of Success
Current Developments Encouraging
![](https://capedge.com/proxy/8-K/0000950157-09-000341/ex1img006.jpg)
Track Record of Success
Proven Financial Track Record
All figures are on a comparable basis
Topline
Growth
(in billions)
Growth
(in billions)
Operating
Profit
(in billions)
Profit
(in billions)
EPS
Growth
(in dollars)
Growth
(in dollars)
Cash
Flow
(in millions)
Flow
(in millions)
CAGR
7%
CAGR
11%
CAGR
16%
CAGR
16%
![](https://capedge.com/proxy/8-K/0000950157-09-000341/ex1img007.jpg)
Significant Shareholder Value Creation
Total Return Analysis
Total Return Analysis
Track Record of Success
+231%
Consumer Staples
S&P 500
PBG IPO to Date
3/31/99 to 5/29/09
![](https://capedge.com/proxy/8-K/0000950157-09-000341/ex1img008.jpg)
5 Year
3 Year
1 Year
13%
Track Record of Success
Stock Price Returns
Through 5/29/09
Through 5/29/09
Significant Outperformance by PBG
Consumer Staples
S&P 500
5%
1%
![](https://capedge.com/proxy/8-K/0000950157-09-000341/ex1img009.jpg)
PBG Winning in the Marketplace
United States
Track Record of Success
Execution
Volume & Share
Customer Satisfaction
CSD Fair Share Index vs. Coke
111
128
Display
Inventory
Feature
RWV
Relative
Value
125
vs. IPO
+9 pts.
+12 pts.
+8 pts.
2x NCB Inventory &
3x NCB Features vs. Coke
3x NCB Features vs. Coke
Faster Volume Growth
7 of 10 years
Greater Topline Growth
8 of 10 years
Improved Share Position
Gains in 7 of 10 years
Four Key Focus Areas
Accounts Serviced
as Scheduled
as Scheduled
Out-of-Stock Reduction
Respond & Recover
Weekend Service
Improved Customer
Satisfaction
Satisfaction
Increasing Customer
Loyalty
Loyalty
Source: IRI Grocery Channel for PBG
![](https://capedge.com/proxy/8-K/0000950157-09-000341/ex1img010.jpg)
Agenda
Track Record of Success
PBG… A Strategic Gem
Strong Financial Outlook
Review of PepsiCo Proposal
![](https://capedge.com/proxy/8-K/0000950157-09-000341/ex1img011.jpg)
PBG… A Strategic Gem
PBG is the Key to Unlocking Value in the U.S. Pepsi System
Strong scale position with ~60% of U.S. volume
Geographic footprint in growing U.S. markets
Unmatched operating and executional capability
Exciting Core Growth Opportunities
Highly Attractive International Growth Territories
Mexico
Russia
![](https://capedge.com/proxy/8-K/0000950157-09-000341/ex1img012.jpg)
Great Portfolio of Brands… Strong #1 or #2
Colas
Non-Carbs
Water
Invigoration & Energy
Flavors
PBG… A Strategic Gem
![](https://capedge.com/proxy/8-K/0000950157-09-000341/ex1img013.jpg)
PBG… A Strategic Gem
1999
2009 & Beyond
“We Sell Soda.”
Service
Excellence
Operational
Excellence
Revenue / Margin
Management Excellence
Management Excellence
Executional
Excellence
Excellence
Selling
Excellence
Best-in-Class Execution
![](https://capedge.com/proxy/8-K/0000950157-09-000341/ex1img014.jpg)
Reposition and Strengthen Brand Portfolio
Transform Performance Through Operating Excellence
Capitalize on Geographic Growth Opportunities
PBG… A Strategic Gem
Strategic Platforms for Growth
![](https://capedge.com/proxy/8-K/0000950157-09-000341/ex1img015.jpg)
PBG… A Strategic Gem
Enter
White Space
White Space
Invest in
Core Brands
Core Brands
Fill Portfolio Gaps:
Goal #1 or #2 Position
Leverage
Learning Labs
Learning Labs
Reposition and Strengthen Global Brand Portfolio
![](https://capedge.com/proxy/8-K/0000950157-09-000341/ex1img016.jpg)
Step Change in Cost Structure and Productivity
Transform Performance Through Operating Excellence
Transform
Warehouse
Capabilities
Warehouse
Capabilities
Maximize
Go-to-Market
Effectiveness
Go-to-Market
Effectiveness
Optimize
Manufacturing
Cost
Manufacturing
Cost
PBG… A Strategic Gem
Capture
G&A Cost
Opportunities
G&A Cost
Opportunities
![](https://capedge.com/proxy/8-K/0000950157-09-000341/ex1img017.jpg)
PBG… A Strategic Gem
Speed to Market
Greater Reach
Promotional Lift
Larger Transactions
90% Distribution in 2 Weeks
Fast Turns to Drive Profit
More Trips
44% of Shopping Trips
Retailer Benefits
99% Household Penetration
Cash Flow & Labor Savings
Transform Performance Through Operating Excellence
Direct Store Delivery Advantage… Proven, Powerful and Profitable
High Spend / Trip
![](https://capedge.com/proxy/8-K/0000950157-09-000341/ex1img018.jpg)
International
Domestic
PBG… A Strategic Gem
Capitalize on Geographic Growth Opportunities
Low LRB per Capita
Consumption
Consumption
Robust LRB Category
Growth Potential
Growth Potential
Long-Term Business
Prospects Positive
Prospects Positive
Increased Pace Since 2008
Four Deals Totaling in
$200MM in Revenues
$200MM in Revenues
Financially Accretive
Value Creation Driven by
PBG Operating Expertise
PBG Operating Expertise
U.S. System Consolidation
Third Largest Beverage
Market in the World
Market in the World
Large and Young
Population Base
Population Base
LRB Category Growth
Projected in the
Low-Single Digits
Projected in the
Low-Single Digits
Other
Anchors
Anchors
Independent
Bottlers
Bottlers
Russia
Mexico
![](https://capedge.com/proxy/8-K/0000950157-09-000341/ex1img019.jpg)
Agenda
Track Record of Success
PBG… A Strategic Gem
Strong Financial Outlook
Review of PepsiCo Proposal
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Strong Financial Outlook
Strong Sector Performance in Q1 2009
Continued Commodity Cost Deflation
Decreased Volatility in Foreign Exchange Rates
Ample Liquidity and Solid Balance Sheet
LRB Category Rebounds with Improving
Economy and GDP
Economy and GDP
…Raising Q2 and Full-Year 2009 Guidance
External Environment Improving
![](https://capedge.com/proxy/8-K/0000950157-09-000341/ex1img021.jpg)
Strong Financial Outlook
Q2 2009 Guidance
Previous
Current
Comparable EPS
$0.70 to $0.74
FY 2009 Guidance
Operating Free
Cash Flow
Cash Flow
Raising Q2 and Full-Year 2009 Outlook
$2.30 to $2.40
about $525MM
$0.65 to $0.69
$2.20 to $2.30
Previous
Current
$500MM
![](https://capedge.com/proxy/8-K/0000950157-09-000341/ex1img022.jpg)
Strong Financial Outlook
Vastly Improved Commodities Environment
Raw Materials
(Including fuel, excluding concentrate)
$MM increase vs. prior year
2006
2007
2008
2009F
2010F
Corn
Down 50% from Peak in 2008
Oil
Reached a High of ~$140
Current Price of ~$60 per Barrel
Aluminum
Peaked at $3,300/MT
Currently at $1,500/MT
Decrease of 55%
$80
$120
$170
$230
$(125)
Transactional Forex
![](https://capedge.com/proxy/8-K/0000950157-09-000341/ex1img023.jpg)
7%
Strong Financial Outlook
Strong LRB to GDP Correlation
Key Learnings
Crises Typically Lasted 5 to 8 Quarters
Strong Correlation Between GDP and LRB Results
LRB Growth Rebounds with GDP
Russia Financial Crisis 1998 to 1999
Mexico Peso Crisis 1994 to 1995
LRB Category Growth
GDP Growth
18%
1997
1998/1999
2000
2001 to 2003
1994
1995
1996
1997 to 2000
![](https://capedge.com/proxy/8-K/0000950157-09-000341/ex1img024.jpg)
Strong Financial Outlook
Ongoing Ability to Generate Cost & Productivity Savings
2007
2008
2009F
$ in MM
![](https://capedge.com/proxy/8-K/0000950157-09-000341/ex1img025.jpg)
Agenda
Track Record of Success
PBG… A Strategic Gem
Strong Financial Outlook
Review of PepsiCo Proposal
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PepsiCo Proposed to Buy PBG for $29.50 on April 19th
Independent Special Committee Formed by PBG’s Board
to Review Proposal with Fiduciary Responsibility to PBG’s
Independent Shareholders
to Review Proposal with Fiduciary Responsibility to PBG’s
Independent Shareholders
Special Committee Undertook Rigorous Review of Proposal,
Advised by Morgan Stanley and Cravath, Swaine & Moore
Advised by Morgan Stanley and Cravath, Swaine & Moore
PepsiCo’s Proposal Deemed Grossly Inadequate by Special
Committee and Board on May 4th
Committee and Board on May 4th
Review of PepsiCo Proposal
![](https://capedge.com/proxy/8-K/0000950157-09-000341/ex1img027.jpg)
Independent Shareholders Own 2/3 of PBG’s Stock
and Have 60% of the Voting Power
and Have 60% of the Voting Power
8 of 10 PBG Directors are Independent from PepsiCo
PepsiCo Cannot Acquire or Increase Interest in PBG
Without the Approval of the PBG Board of Directors
Without the Approval of the PBG Board of Directors
PepsiCo Cannot Unilaterally Replace the PBG Board
Review of PepsiCo Proposal
Transaction Would Not be a Minority Squeeze-Out
![](https://capedge.com/proxy/8-K/0000950157-09-000341/ex1img028.jpg)
Review of PepsiCo Proposal
Valuation Methods
Value of Your PBG Shares
Precedent Transactions
Standalone Value
Synergies
Historical Trading Multiples
Intrinsic Value
Fair Share of $25 per PBG Share
NPV of System Synergies
NPV of System Synergies
M&A Market Premiums
Precedent Transaction Multiples
![](https://capedge.com/proxy/8-K/0000950157-09-000341/ex1img029.jpg)
Review of PepsiCo Proposal
Precedent Transactions: Insufficient Premium
Premiums In Deals > $1Bn Since
the September 2008 Market Break are
Substantially Above Historical Levels
the September 2008 Market Break are
Substantially Above Historical Levels
PepsiCo Proposal More Akin to a Cash
Deal Given Relative Sizes of PepsiCo
and PBG
Deal Given Relative Sizes of PepsiCo
and PBG
PBG shareholders not able to
meaningfully participate in synergies
meaningfully participate in synergies
All Deals Since
Market Break
Market Break
All Cash Deals
Since Market Break
Since Market Break
Acquisition Premiums
![](https://capedge.com/proxy/8-K/0000950157-09-000341/ex1img030.jpg)
Review of PepsiCo Proposal
Precedent Transactions: Proposal Well Below Comparable Multiples
Transaction EBITDA Multiples
PBG’s Attributes Would Support
a Superior Multiple to Precedent
Bottler Acquisitions
a Superior Multiple to Precedent
Bottler Acquisitions
Scale
Geographic diversity
Strong presence in attractive
U.S. and international markets
U.S. and international markets
Track record of strong operating
growth and returns
growth and returns
LTM EBITDA $1.8 Billion
PAS /
Whitman
Whitman
PBG Bottler
Acquisitions
Acquisitions
PepsiCo
Proposal
![](https://capedge.com/proxy/8-K/0000950157-09-000341/ex1img031.jpg)
Review of PepsiCo Proposal
Proposal Opportunistic & Undervalues PBG Fundamental Value
PepsiCo Proposal was Made Prior
to PBG’s Q1 Earnings
to PBG’s Q1 Earnings
CCE up 13% since their
Q1 announcement
Q1 announcement
Proposal Near Historical
Valuation Low Point
Valuation Low Point
Normalized trading multiple
would imply a standalone share
price in excess of $30
would imply a standalone share
price in excess of $30
Proposal Well Below
PBG’s DCF Value
PBG’s DCF Value
Historical NTM P/E
PBG ’04-’08
Avg: 15.1x
Avg: 15.1x
S&P 500
2004
2005
2006
2007
2008
2009
PepsiCo
Proposal
Proposal
18
16
14
12
10
8
6
![](https://capedge.com/proxy/8-K/0000950157-09-000341/ex1img032.jpg)
Review of PepsiCo Proposal
PBG Management Scoped System Transformation
Project in Q3 2008
Project in Q3 2008
Engaged a Leading Global Consulting Firm in
September 2008
September 2008
Assessed Value Creation Available from
Transformational Initiatives
Transformational Initiatives
Combined Consulting Firm’s Analytical Expertise
with PBG’s Operating Knowledge
with PBG’s Operating Knowledge
Delivered Final Report in Early 2009
Synergies: Blue System Transformation
![](https://capedge.com/proxy/8-K/0000950157-09-000341/ex1img033.jpg)
Review of PepsiCo Proposal
Annual System Synergies
Areas of Opportunity
Route to Market
Manufacturing Consolidation
Supply Chain
General & Administrative
Annual Synergies of
$750 to $850 Million
$750 to $850 Million
One Time Cost = Annual Savings
More than $5 Billion ($25 per
PBG Share) NPV of Synergies
PBG Share) NPV of Synergies
Valuation
PBG is the Key to Enabling Synergies
![](https://capedge.com/proxy/8-K/0000950157-09-000341/ex1img034.jpg)
Review of PepsiCo Proposal
Synergy Benchmarks
% of Target Sales
Synergies
PBG and PAS Combined Sales
Morgan Stanley
Select Large
Food Beverage Deals
Select Large
Food Beverage Deals
6.5%
$1.2Bn
$19Bn
Leading Global
Consulting Firm
Consulting Firm
4.7% to 6.2%
$900MM to $1.18Bn
$19Bn
Synergies Appropriate Versus External Benchmarks
Benchmarks Imply Synergy Range of $900 Million to $1.2 Billion…
Sell-Side Target Range of Synergies $500 Million to $1 Billion
![](https://capedge.com/proxy/8-K/0000950157-09-000341/ex1img035.jpg)
Long Track Record of Winning for Key Stakeholders
Strong 2009 Financial Outlook Will Drive Continued Value Creation
Encouraging Sector and Economic Developments
Exciting Core Domestic and International Growth Opportunities
PBG… A Strategic Gem with a Bright Future