PepsiCo (PEP) 8-K PepsiCo Reports Second-Quarter 2008 Results

Exhibit 99.1

Contacts:	Media
	Jenny Schiavone
	Director, Financial Communications
	914-253-3941
	Investors
	Jane Nielsen/ Mike Nathenson
	VP Investor Relations
	914-253-3035

PepsiCo Reports Second-Quarter 2008 Results

• Strong Net Revenue Growth of 14 Percent

• Operating Profit Increased 12 Percent and Net Income Grew 9 Percent

• EPS Increased to $1.05; Excluding Mark-to-Market Gains, EPS Was up 11 Percent to $1.03

• PepsiCo Confirms Full-Year Earnings Per Share Guidance of at Least $3.72, excluding Mark-to-Market Gains/Losses

• Company Raises Intended 2008 Share Repurchases by at Least $1 Billion

PURCHASE, N.Y. (July 23, 2008) – PepsiCo, Inc. (NYSE: PEP) today reported strong second-quarter operating results, with 14 percent net revenue and 12 percent operating profit growth. The Company delivered earnings per share of $1.05. Excluding current and prior year mark-to-market gains on commodity positions included in corporate unallocated expenses, earnings per share would have totaled $1.03, up 11 percent.

Summary of PepsiCo Second-Quarter and Year-to-Date 2008 Results

	Quarter Alone		Year-to-Date
	% Growth		% Growth
Volume (Servings)		5		4.5
Revenue		14		14
Division Operating Profit		7		8
Operating Profit		12		11
Net Income		9		7
Earnings Per Share (EPS)		13		10
EPS ex-Mark-to-Market		11		10

PepsiCo Chairman and Chief Executive Officer, Indra Nooyi said, “The strength and breadth of our global portfolio and geographic footprint delivered another quarter of solid results. PepsiCo continued to drive growth across its worldwide snacks and beverage businesses primarily through strong product innovation, well-executed pricing actions and focus on expense control and productivity.” Nooyi continued, “We are proud of our first-half performance and confident that we are well-positioned to deliver on our outlook amidst a challenging macroeconomic environment.”

Summary of Division Reported Q2 and YTD 2008 Results
	Q2 % Growth							Year-to-Date % Growth
						Div.							Div.
						Operating							Operating
	Volume			Revenue		Profit		Volume			Revenue		Profit
PAF		2			16		13		3			15		10
FLNA		2			8		8		2			8		6
QFNA		2			4		4		1			6		5.5
LAF		4			41		38		5.5			39		33
PAB		-1			1		-7		-1			3		-1
PI		10 / 13	*		25		18		10 / 13	*		25		20
UKEU		8 / 20	*		24		19		8 / 22	*		24		19
MEAA		13 / 10	*		25		16		14 / 10	*		27		22
Total PepsiCo		4 / 5	*		14		7		4 / 4	*		14		8

*snacks/beverages

The results atPepsiCo Americas Foods (PAF)reflected solid top- and bottom-line performance across all segments of the business in spite of difficult macroeconomic conditions and rapidly escalating commodity costs.

Frito-Lay North America (FLNA).Our strong brands enabled 2 percent volume growth even as high-single-digit net price increases were realized from weight-outs and visual pricing to offset commodity inflation. FLNA revenue growth of 8 percent was broad based, and operating profit grew 8 percent, driven by net revenue growth and productivity, partially offset by higher costs for cooking oil, energy and fuel.

Volume growth was driven by double-digit growth in trademark Cheetos, Ruffles, Quaker Chewy Granola and SunChips. Innovation was the key for both Cheetos (e.g. Cracker Trax) and SunChips, which introduced new flavors and was supported by the ‘Made From the Sun’ marketing campaign. Weight-outs and a promotional shift to help manage potato supply constraints led to a high-single-digit volume decrease in trademark Lay’s; but revenues were up high-single-digits. While pricing actions also contributed to a mid-single-digit volume decrease in trademark Doritos, revenues were up low-single digits. Single serve packages continued to provide volume growth.

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AtQuaker Foods North America (QFNA),volume grew 2 percent, reflecting an increase in Quaker Oatmeal, grits and Rice-A-Roni. Revenue and operating profit grew 4 percent.

At the end of the second quarter, flooding in Cedar Rapids, Iowa, shut down our major Quaker manufacturing facility. The Company expects to be back to full production levels by mid-August, but we are experiencing supply disruptions, and many Quaker products have been on allocation. We expect insurance to cover asset damage and business interruption exposures in the second half of the year.

AtLatin America Foods (LAF)organic revenue and profit increased 10 percent and 21 percent, respectively, despite higher commodity costs. Revenue growth was driven by broad based pricing actions at our key businesses of Sabritas and Gamesa. At Sabritas unit volumes grew mid-single digits; kilo volume declined by low-single digits as expected, largely due to weight-outs. Also consistent with expectations, Gamesa experienced double-digit net revenue growth due to favorable pricing actions; its volume was essentially flat in the quarter lapping double-digit growth in the prior year. In total, LAF volume grew 4 percent, benefiting from the Lucky brands acquisition in Brazil in the fourth quarter of 2007.

PepsiCo Americas Beverages (PAB). In North America, the economic slowdown continues to pressure the liquid refreshment beverage category with a decline across convenience channels and a reduction in the growth of unflavored water. In this environment, PAB volume decreased 1 percent during the quarter, driven by a 3 percent decline in North America that was partially offset by a mid-single-digit volume increase in Latin America. As a result, net revenue grew 1 percent and operating profit declined 7 percent.

The North American carbonated soft drink (CSD) portfolio gained market share in measured channels. While showing sequential improvement, CSD volume declined 2 percent due to category softness. Trademarks Mountain Dew and Sierra Mist both grew low-single digits, partially offsetting a mid-single digit decline in trademark Pepsi. Non-carbonated beverages (NCB) volume declined 4 percent primarily due to a double-digit decline in unflavored water. Volume growth in the Company’s North American energy drinks portfolio – led by triple-digit volume growth for Amp Energy and more than 50 percent volume growth for SoBe Life Water – was partially offset by mid-single-digit declines in juice. Gatorade volume was up slightly for the quarter.

The Company’s Latin America Beverage business (LAB) continues to produce strong top- and bottom-line growth. LAB’s broad-based volume growth was driven by mid-single-digit growth in the CSD portfolio and double-digit growth in NCBs.

PepsiCo International (PI)continued to deliver strong performance while lapping over 20 percent revenue growth and over 30 percent profit growth from prior year. PI captured broad-based volume gains in snacks and beverages even as the Company continued to implement pricing actions across its markets.

In theUK/Europe (UKEU)segment, broad-based snack volume growth of 8 percent was driven by double-digit growth in Russia and high-single-digit growth in Poland. Additionally, Walkers in the United Kingdom grew at a mid-single-digit rate. The acquisition of the Penelopa nuts and seeds business in Bulgaria increased total snack volume by 1 point. UKEU beverage volume grew

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20 percent, primarily reflecting the Sandora acquisition and the expansion of the Pepsi Lipton International joint venture, which together contributed 17 percentage points to volume growth. UKEU net revenue increased 24 percent, reflecting volume growth and effective net pricing in major markets; foreign exchange contributed 11 percentage points and acquisitions 4 percentage points of growth. Operating profit grew 19 percent driven by net revenue growth and partially offset by increased commodity costs; foreign exchange added 9 percentage points and acquisitions 4 percentage points to growth.

Middle East/Africa/Asia (MEAA) segmentsnack volume grew 13 percent, led by double-digit growth across the Middle East, India, South Africa and China. In beverages, 10 percent volume growth in the MEAA segment reflected broad-based gains led primarily by double-digit growth in the Middle East, China and India. CSD volume grew at a high-single-digit rate and NCBs grew at a double-digit rate. Net revenue for snacks and beverages increased 25 percent, reflecting volume growth and effective net pricing; foreign exchange contributed 6 percentage points to net revenue growth. Operating profit grew 16 percent as a result of revenue growth, partially offset by higher commodity costs; foreign exchange contributed 4 percentage points to growth.

Commodity mark-to-market valuation gains contributed to EPS growth.

For the quarter, corporate unallocated expenses decreased $71 million compared to last year, primarily due to increased mark-to-market gains on commodity hedges ($61 million this quarter compared with $13 million in the second quarter last year). Excluding this net $48 million mark-to-market valuation change, corporate unallocated costs would have decreased $23 million compared to last year, driven by lower employee-related costs, which were partially offset by continued investment in our business transformation initiative and higher investments in research and development. Net interest expense increased $21 million. For the quarter, the reported tax rate was 26.7 percent versus 26.5 percent in the previous year.

For the Company in total, foreign exchange contributed 4 percentage points to revenue growth and 3 percentage points to operating profit growth. Acquisitions accounted for 3 percentage points to revenue growth and 1 percentage point to operating profit growth.

2008 GUIDANCE

The Company expects full-year 2008 performance of three to five percent volume growth, low-double-digit net revenue growth (including acquisitions and foreign exchange) and EPS of at least $3.72 excluding the impact of any mark-to-market gains/losses. The Company is not able to provide guidance on the 2008 projected EPS growth including the impact of the mark-to-market gains or losses on commodity hedges due to the unpredictability of future changes in commodity prices.

Cash provided by operating activities is expected to be approximately $7.6 billion and capital spending about $2.7 billion. In 2008, the Company intends to repurchase at least $5.3 billion of its shares, subject to market conditions. This represents an increase of at least $1 billion from its previously announced intention to spend $4.3 billion in share repurchases in 2008. As of the end of the second quarter, the Company spent $2.9 billion repurchasing its shares in 2008.

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About PepsiCo

PepsiCo is one of the world’s largest food and beverage companies, with 2007 annual revenues of more than $39 billion. The Company employs approximately 185,000 people worldwide, and its products are sold in approximately 200 countries. Its principal businesses include: Frito-Lay snacks, Pepsi-Cola beverages, Gatorade sports drinks, Tropicana juices and Quaker foods. The PepsiCo portfolio includes 18 brands that generate $1 billion or more each in annual retail sales. PepsiCo’s commitment to sustainable growth, defined as Performance with Purpose, is focused on generating healthy financial returns while giving back to communities the Company serves. This includes meeting consumer needs for a spectrum of convenient foods and beverages, reducing the Company’s impact on the environment through water, energy and packaging initiatives, and supporting its employees through a diverse and inclusive culture that recruits and retains world-class talent. PepsiCo is listed on the Dow Jones Sustainability North America Index and the Dow Jones Sustainability World Index. For more information, please visit www.pepsico.com.

Cautionary Statement

This release contains statements concerning PepsiCo’s expectations for future performance, including our 2008 guidance. These “forward-looking statements” are based on currently available information, operating plans and projections about future events and trends. They inherently involve risks and uncertainties that could cause actual results to differ materially from those predicted in such forward-looking statements. Such risks and uncertainties include, but are not limited to: changes in demand for our products, as a result of shifts in consumer preferences or otherwise; our ability to maintain our reputation; our ability to build and sustain our information technology infrastructure, successfully implement our business process transformation initiative or outsource certain functions effectively; fluctuations in the cost and availability of raw materials; our ability to compete effectively; disruption of our supply chain; trade consolidation, the loss of any key customer, or failure to maintain good relationships with our bottling partners; changes in the legal or regulatory environment; our ability to hire or retain key employees; unfavorable economic, environmental or political conditions in the countries where we operate; and market risks arising from changes in commodity prices, foreign exchange rates and interest rates. For additional information on these and other factors that could cause our actual results to materially differ from those set forth herein, please see our filings with the Securities and Exchange Commission, including our most recent annual report on Form 10-K and subsequent reports on Forms 10-Q and 8-K. Investors are cautioned not to place undue reliance on any such forward-looking statements, which speak only as of the date they are made. PepsiCo undertakes no obligation to update any forward-looking statements, whether as a result of new information, future events or otherwise.

Miscellaneous Disclosures

Conference Call. At 11 a.m. (Eastern Time) today, the Company will host a conference call with investors to discuss second-quarter 2008 results and the outlook for the full-year 2008. For details, visit the Company’s website at www.pepsico.com, under “Financial Press Releases” in the “Investors” section.

Reconciliation. In discussing financial results and guidance, the Company may refer to certain non-GAAP measures. Reconciliations of any such non-GAAP measures to the most directly comparable financial measures in accordance with GAAP can be found under “PepsiCo Financial Press Releases” on the Company’s website in the “Investors” section at www.pepsico.com.

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Bottler Volume. Volume for products sold by PepsiCo’s bottlers is reported by PepsiCo on a monthly basis, with the second quarter comprising April and May for North America, and March, April and May for our bottlers outside of North America.

Bottler Case Sales (BCS). BCS represents physical beverage volume shipped to retailers and independent distributors from both PepsiCo and our bottlers.

Concentrate Shipment Equivalents (CSE). CSE represents PepsiCo’s physical beverage volume shipments to bottlers, retailers and independent distributors.

“Effective net pricing” refers to the combined impact of mix and price. “Net pricing” refers to the combined impact of list price changes, discounts and allowances. “Pricing” refers to the impact of list price changes.

Mark-to-market gain or loss. The change in market value for financial instruments, such as commodity contracts, that we purchase to mitigate the volatility in costs of energy and raw materials that we consume. The market value is determined based on average prices on national exchanges and recently reported transactions in the marketplace.

Organic revenue and/or profit growth. Growth excluding the impact of foreign exchange and acquisition/divestiture activity.

Division Operating Profit. The aggregation of the operating profit for each of our reportable segments, which excludes the impact of corporate unallocated expenses.

###

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PepsiCo, Inc. and Subsidiaries
Condensed Consolidated Statement of Income
(in millions except per share amounts, unaudited)

	12 Weeks Ended						24 Weeks Ended
	6/14/08			6/16/07			6/14/08			6/16/07
Net Revenue	$	10,945		$	9,607		$	19,278		$	16,957
Costs and Expenses
Cost of sales		5,078			4,342			8,912			7,627
Selling, general and administrative expenses		3,664			3,295			6,598			5,930
Amortization of intangible assets		18			11			30			22
Operating Profit		2,185			1,959			3,738			3,378
Bottling Equity Income		168			173			238			247
Interest Expense		(74	)		(54	)		(132	)		(96	)
Interest Income		38			39			39			61
Income before Income Taxes		2,317			2,117			3,883			3,590
Provision for Income Taxes		618			560			1,036			937
Net Income	$	1,699		$	1,557		$	2,847		$	2,653
Diluted
Net Income Per Common Share	$	1.05		$	0.94		$	1.76		$	1.59
Average Shares Outstanding		1,612			1,665			1,622			1,669

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PepsiCo, Inc. and Subsidiaries
Supplemental Financial Information
(in millions, unaudited)

	12 Weeks Ended						24 Weeks Ended
	6/14/08			6/16/07			6/14/08			6/16/07
Net Revenue
Frito-Lay North America	$	2,950		$	2,723		$	5,680		$	5,276
Quaker Foods North America		406			390			901			853
Latin America Foods		1,523			1,079			2,494			1,789
PepsiCo Americas Foods		4,879			4,192			9,075			7,918
PepsiCo Americas Beverages		2,880			2,855			5,240			5,075
United Kingdom & Europe		1,727			1,396			2,638			2,136
Middle East, Africa & Asia		1,459			1,164			2,325			1,828
PepsiCo International		3,186			2,560			4,963			3,964
Total Net Revenue	$	10,945		$	9,607		$	19,278		$	16,957
Operating Profit
Frito-Lay North America	$	735		$	682		$	1,368		$	1,292
Quaker Foods North America		122			117			288			273
Latin America Foods		254			183			421			316
PepsiCo Americas Foods		1,111			982			2,077			1,881
PepsiCo Americas Beverages		681			729			1,185			1,202
United Kingdom & Europe		262			220			364			306
Middle East, Africa & Asia		233			201			372			306
PepsiCo International		495			421			736			612
Division Operating Profit		2,287			2,132			3,998			3,695
Corporate		(102	)		(173	)		(260	)		(317	)
Total Operating Profit	$	2,185		$	1,959		$	3,738		$	3,378

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PepsiCo, Inc. and Subsidiaries
Condensed Consolidated Statement of Cash Flows
(in millions, unaudited)

	24 Weeks Ended
	6/14/08			6/16/07
Operating Activities
Net income	$	2,847		$	2,653
Depreciation and amortization		678			608
Stock-based compensation expense		112			123
Excess tax benefits from share-based payment arrangements		(65	)		(86	)
Pension and retiree medical plan contributions		(86	)		(116	)
Pension and retiree medical plan expenses		211			240
Bottling equity income, net of dividends		(196	)		(207	)
Deferred income taxes and other tax charges and credits		222			64
Change in accounts and notes receivable		(1,102	)		(852	)
Change in inventories		(602	)		(526	)
Change in prepaid expenses and other current assets		(219	)		(69	)
Change in accounts payable and other current liabilities		125			(28	)
Change in income taxes payable		427			369
Other, net		(159	)		(155	)
Net Cash Provided by Operating Activities		2,193			2,018
Investing Activities
Capital spending		(896	)		(743	)
Sales of property, plant and equipment		65			15
Acquisitions and investments in noncontrolled affiliates		(262	)		(853	)
Cash proceeds from sale of The Pepsi Bottling Group (PBG) and PepsiAmericas, Inc. (PAS) stock		200			192
Short-term investments, net		1,255			326
Net Cash Provided by/(Used for) Investing Activities		362			(1,063	)
Financing Activities
Proceeds from issuances of long-term debt		1,733			1,005
Payments of long-term debt		(437	)		(534	)
Short-term borrowings, net		705			266
Cash dividends paid		(1,209	)		(989	)
Share repurchases – common		(2,904	)		(1,964	)
Share repurchases – preferred		(3	)		(4	)
Proceeds from exercises of stock options		339			485
Excess tax benefits from share-based payment arrangements		65			86
Net Cash Used for Financing Activities		(1,711	)		(1,649	)
Effect of Exchange Rate Changes on Cash and Cash Equivalents		14			41
Net Increase/(Decrease) in Cash and Cash Equivalents		858			(653	)
Cash and Cash Equivalents – Beginning of year		910			1,651
Cash and Cash Equivalents – End of period	$	1,768		$	998

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PepsiCo, Inc. and Subsidiaries
Condensed Consolidated Balance Sheet
(in millions)

	6/14/08			12/29/07
	(unaudited)
Assets
Current Assets
Cash and cash equivalents	$	1,768		$	910
Short-term investments		305			1,571
Accounts and notes receivable, net		5,617			4,389
Inventories
Raw materials		1,275			1,056
Work-in-process		331			157
Finished goods		1,329			1,077
		2,935			2,290
Prepaid expenses and other current assets		1,026			991
Total Current Assets		11,651			10,151
Property, plant and equipment, net		11,600			11,228
Amortizable intangible assets, net		847			796
Goodwill		5,511			5,169
Other nonamortizable intangible assets		1,375			1,248
Nonamortizable Intangible Assets		6,886			6,417
Investments in noncontrolled affiliates		4,519			4,354
Other assets		1,276			1,682
Total Assets	$	36,779		$	34,628
Liabilities and Shareholders’ Equity
Current Liabilities
Accounts payable and other current liabilities	$	7,986		$	7,602
Income taxes payable		353			151
Total Current Liabilities		8,339			7,753
Long-term debt obligations		6,053			4,203
Other liabilities		4,982			4,792
Deferred income taxes		752			646
Total Liabilities		20,126			17,394
Commitments and Contingencies
Preferred stock, no par value		41			41
Repurchased preferred stock		(135	)		(132	)
Common Shareholders’ Equity
Common stock		30			30
Capital in excess of par value		345			450
Retained earnings		29,669			28,184
Accumulated other comprehensive loss		(473	)		(952	)
		29,571			27,712
Less: Repurchased common stock		(12,824	)		(10,387	)
Total Common Shareholders’ Equity		16,747			17,325
Total Liabilities and Shareholders’ Equity	$	36,779		$	34,628

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PepsiCo, Inc. and Subsidiaries
Supplemental Share and Stock-Based Compensation Data
(in millions, except dollar amounts, and unaudited)

	12 Weeks Ended						24 Weeks Ended
	6/14/08			6/16/07			6/14/08			6/16/07
Beginning Net Shares Outstanding		1,591			1,632			1,605			1,639
Options Exercised/Restricted Stock Units Converted		3			6			10			14
Shares Repurchased		(22	)		(17	)		(43	)		(32	)
Ending Net Shares Outstanding		1,572			1,621			1,572			1,621
Weighted Average Basic		1,582			1,628			1,591			1,632
Dilutive Securities:
Options		25			31			27			31
Restricted Stock Units		4			4			3			4
ESOP Convertible Preferred Stock/Other		1			2			1			2
Weighted Average Diluted		1,612			1,665			1,622			1,669
Average Share Price for the Period	$	69.07		$	66.32		$	70.27		$	65.15
Growth Versus Prior Year		4	%		13	%		8	%		11	%
Options Outstanding		111			125			113			129
Options in the Money		111			125			113			123
Dilutive Shares from Options		25			31			27			31
Dilutive Shares from Options as a % of Options in the Money		23	%		25	%		24	%		25	%
Average Exercise Price of Options in the Money	$	49.98		$	46.49		$	49.94		$	45.47
Restricted Stock Units Outstanding		7			8			7			8
Dilutive Shares from Restricted Stock Units		4			4			3			4
Average Intrinsic Value of Restricted Stock Units Outstanding*	$	63.04		$	58.46		$	63.04		$	58.44

^* Weighted-average intrinsic value at grant date

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Reconciliation of GAAP and Non-GAAP Information
(unaudited)

In the 12 and 24 weeks ended June 14, 2008, we recognized $61 million and $57 million, respectively, of mark-to-market net gains on commodity hedges in corporate unallocated expenses. In the 12 and 24 weeks ended June 16, 2007, we recognized $13 million and $30 million, respectively, of mark-to-market net gains on commodity hedges in corporate unallocated expenses. We centrally manage commodity derivatives on behalf of our divisions. Certain of these commodity derivatives do not qualify for hedge accounting treatment and are marked to market with the resulting gains and losses recognized in corporate unallocated expenses. These gains and losses are subsequently reflected in division results when the divisions take delivery of the underlying commodity. We are not able to predict our 2008 projected diluted EPS growth including the impact of the mark-to-market gains or losses on commodity hedges due to the unpredictability of future changes in commodity prices, and we therefore are unable to provide a reconciliation of our 2008 projected diluted EPS including such impact.

The financial measures listed below are not measures defined by generally accepted accounting principles (GAAP). However, we believe investors should consider these measures as they are more indicative of our ongoing performance and how management evaluates our operational results and trends. Specifically, investors should consider the following with respect to our results:

• Our 2008 and 2007 division operating profit;

• Our 2008 division operating profit growth;

• Our 2008 Latin America Foods (LAF) revenue growth and operating profit growth without the impact of M&A activity and foreign currency; and

• Our 2008 diluted EPS and EPS growth excluding the impact of mark-to-market net gains on commodity hedges recognized in corporate unallocated expenses.

Operating Profit Growth Reconciliation

	12 Weeks			24 Weeks
	Ended			Ended
	6/14/08			6/14/08
Division Operating Profit Growth		7	%		8	%
Impact of Corporate Unallocated		4			2.5
Total Operating Profit Growth		12	%*		11	%*

* Does not sum due to rounding.

LAF Revenue Growth and Operating Profit Growth Reconciliation

	12 Weeks
	Ended
	6/14/08
Revenue Growth		41	%
Impact of M&A Activity		(23	)
Impact of Foreign Currency		(8	)
Revenue Growth Excluding above Items		10	%
Operating Profit Growth		38	%
Impact of M&A Activity		(10	)
Impact of Foreign Currency		(7	)
Operating Profit Growth Excluding above Items		21	%

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Reconciliation of GAAP and Non-GAAP Information (cont.)
(unaudited)

Diluted EPS Reconciliation

	12 Weeks			12 Weeks
	Ended			Ended
	6/14/08			6/16/07			Growth
Reported Diluted EPS	$	1.05		$	0.94			13	%
Mark-to-Market Net Gains on Commodity Hedges		(0.02	)		–
Diluted EPS Excluding above Item	$	1.03		$	0.93	*		11	%

* Does not sum due to rounding.

	24 Weeks			24 Weeks
	Ended			Ended
	6/14/08			6/16/07			Growth
Reported Diluted EPS	$	1.76		$	1.59			10	%
Mark-to-Market Net Gains on Commodity Hedges		(0.02	)		(0.01	)
Diluted EPS Excluding above Item	$	1.73	*	$	1.58			10	%

* Does not sum due to rounding.

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