PepsiCo, Inc.

PepsiCo operates in five business segments: beverages, food products, food service,
transportation, and sporting goods. Each division develops its own plans and goals
consonant with its operating environment and PepsiCo's corporate objectives.
The corporation’s steady growth record is based upon high performance standards,
a flexible approach to marketing challenges, and the integrity of its products, people,
and business practices. Also, the premium placed on results has helped to make
PepsiCo products and services brand leaders in the fields in which they compete.
Known around the world, PepsiCo is synonymous with leisure time activity. Its mar¬
keting and service divisions, all in growth fields, are synchronized to the popular basics
of everyday life.
With investments abroad developing into even healthier businesses, and domestic
operations more promising than ever, PepsiCo is in solid financial condition and pre¬
pared for continuing growth in the unfolding decade.
In this Report, along with an examination of the financial developments of 1980,
is PepsiCo Worldwide, a photographic essay on the corporation’s pervasive sales,
marketing, and distribution network—a spreading foundation for future growth.

Table of 1980 Highlights 1

Letter to Shareholders 2
Contents Behind That Pepsi Spirit 4
Financial Highlights 6
Operations Review: 8
Beverages 8
Food Products 10
Food Service 12
Transportation 13
Sporting Goods 15
PepsiCo Worldwide 16
Financial Review 38
Financial Statements 45
Notes to Financial Statements 49
Ten-Year Comparative Summary 54

This Annual Report contains many of the valuable trademarks owned and used by PepsiCo and its subsidiaries and
affiliates in the United States and internationally to distinguish products and services of outstanding quality.
1980 Highlights Operating profit rose 20 percent All five business
segments contributed to profit growth.

Particularly strong profit improvement was achieved

by food service, transportation, and sporting goods
businesses.

Earnings per share rose 12 percent and net income

increased 10 percent before an extraordinary
charge despite major swing in interest costs and
higher effective tax rate.

Sales and revenues increased 17 percent

Capital spending was a record $446 million, with

major expansion in snack foods and international
bottling.

Return on shareholders’ equity was 21.7 percent,

nearly equal to record set in 1979.

Pizza Hut reversed sales trends in second-half of

1980 with 10 percent increase in real volume per
store.

Frito-Lay had another exceptional year. Tostitos

brand Tortilla Chips achieved $140 million in retail
sales in first year. Two new superplants opened.

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1
Letter to Our In 1980, PepsiCo once again demonstrated the ability to sustain its record of continu¬
ous growth and high returns even in a period of unfavorable economic conditions.
Shareholders Despite difficult economic trends both at home and abroad, PepsiCo’s sales and
revenues increased by 17 percent to $6.0 billion. Net income rose 10 percent to $291.8
million, before an extraordinary charge related to the write-off of certain motor carrier
operating rights. Earnings were up three percent to $274.0 million after the charge.
Earnings per share advanced 12 percent to $3.20 before the charge and six percent to
$3.01 after the charge.
Operating profits (before interest and taxes) advanced 20 percent in 1980, reflecting
the strong performance of the corporation’s divisions. Our profit margin at the operating
level also increased in 1980, up from 9.4 percent in 1979 to 9.6 percent. Because of
substantially higher interest costs and taxes, however, the after-tax margin declined
slightly from 5.2 percent to 4.9 percent.
All five of our business segments contributed to our fine performance last year. Our
Beverage and Food Products Divisions made very satisfactory gains in both market
share and financial terms despite weak consumer buying power and intense
competition in their markets. It was particularly gratifying to see the substantial
improvements in our Food Service and Transportation lines. Although very difficult
conditions prevailed in the restaurant and trucking industries, each business made
important gains in its competitive position. We look forward to continued progress in the
year ahead. The Wilson Sporting Goods Division also substantially improved its profits
and return in 1980, even though consumer demand in its industry was generally weak.
You will find a detailed review of each of our business segments later in this Report.
In 1980, we maintained our return on shareholders' equity at a high level of 21.7
percent, nearly equal to the record set in 1979. The corporation’s return on assets
employed declined slightly from the record level of 15.3 percent in 1979 to 14.7 percent
in 1980. This decline reflects the higher effective tax rate incurred in 1980 and the major
investments PepsiCo made to expand capacity in our primary businesses. These invest¬
ments will contribute to our earnings performance in future years.
We remain committed to reinvesting in our businesses to ensure high levels of growth
and profitability in the future. In 1980, we had record capital expenditures of $446
million, an increase of 15 percent over 1979. With continuing volume growth projected
for all of our businesses, we expect to maintain a high level of capital spending in 1981,
financed primarily by internal cash flow.
The Board of Directors raised the dividend in May 1980 to an annual rate of $1.30.
As a result, dividends declared per share for 1980 were 14 percent higher than the
year before.
Donald M. Kendall, Chairman of the In these times, there is a natural interest in assessing a corporation’s progress after
Board and Chief Executive Officer
taking into account the effects of inflation. It is particularly noteworthy that PepsiCo has
been able to increase earnings and dividends over the last five years at rates well
above the general inflation rate. The Financial Review section of this Report provides a
discussion of several measures devised by the accounting profession to reflect infla¬
tion’s impact on financial results. When these measures are applied to PepsiCo, they
indicate that we have generally performed very favorably compared with most other
major companies.
Also, it is clear that, when our earnings are adjusted for inflation, we have been
paying U.S. federal income taxes at a rate well above the statutory rate. Hopefully,

Andrall E Pearson, President and

Chief Operating Officer

2
action will be taken in Washington to relieve this burden and promote greater invest¬
ment and productivity.
Mr. Caspar Weinberger resigned as PepsiCo director in January 1981 in order to
become Secretary of Defense in the Reagan Administration. While his counsel to
PepsiCo will be missed very much, we look forward with enthusiasm to his contributions
to our nation. At the same time, we are very fortunate that Mr. Thomas A. Murphy,
recently retired chairman of General Motors Corporation, joined PepsiCo’s Board of
Directors at the beginning of the year.
As we move on through the ’eighties, we are confident that PepsiCo has the human
and capital resources to meet the challenges that lie ahead.
Again, we wish to express our appreciation for the continuing support of our share¬
holders, employees, and customers.

Donald M. Kendall
Chairman of the Board and
Chief Executive Officer

(X^AaaJU.
Andrall E. Pearson
President and Chief Operating Officer

3
Behind That We believe PepsiCo has become one of a handful of top-performing, multinational
companies. We take great pride in this achievement, and we look forward to even more
Pepsi Spirit significant progress in the years immediately ahead. In a time of great economic
uncertainty for many businesses, we think our optimism is justified because we
have established a clear direction for our company marked by a demanding set of
performance objectives and reinforced by an explicit and consistently applied man¬
agement philosophy. In our view, these objectives and this philosophy are what have
set us apart from our competitors in the past and will continue to distinguish us from
them in the future.

A clear direction marked by demanding objectives

It is widely recognized that PepsiCo is a highly results-oriented company. This charac¬
teristic of our operating environment is frequently commented on by the press, and it is
supported by all our management programs and processes. It has not led us, however, to
neglect the long term or to overlook our responsibilities as a corporate citizen. Here, in
brief, are our key corporate objectives and some of the steps we have taken to meet them.
□ Achieve an outstanding financial record through steady, reliable growth and
high returns. At PepsiCo, we are constantly reviewing and raising our growth targets
to reflect both our improving position in the marketplace and the rising rate of inflation.
As shown in the Financial Highlights that follow, in the last five years our sales and
earnings growth accelerated more than enough to compensate for inflation. In addition,
over the past decade we have made significant progress against the two major per¬
formance yardsticks by which most large businesses are judged. On the most recent
Fortune 500 list, only 24 of the 285 companies with sales over $1 billion had a combina¬
tion of growth in earnings per share and return on equity that matched or exceeded
PepsiCo’s record. In other words, we were in the top eight percent of companies with
over $1 billion in sales.
□ Establish a leadership position in all of our businesses. In the mid 1970’s, we set
for PepsiCo the goal of becoming either the leader or a strong second in each industry
where we do business. Today, as the result of distinctive competitive strategies, we are
the leader in snack foods, ethnic food service, van line trucking, and sporting goods,
and we are a strong and growing challenger in beverages.
□ Invest and innovate to assure future growth in profitability and productivity.
Our strategies call for continuous reinvestment of earnings in the business, not only in
physical plant and equipment but also in marketing and R & D programs. Each year,
we have invested heavily in the development and launching of new products. The
success of these efforts is one indication of our ability to innovate and to back up new
ideas with investment spending. In addition, each division has an ongoing program
to improve the productivity of its manpower and physical assets.
□ Maintain integrity in all areas of business conduct. The Corporation has adopted
a worldwide Code of Conduct requiring all business to be carried out according to the
strictest standards of honesty, integrity, and fairness. Each year, this program is care¬
fully monitored to ensure understanding and compliance by key personnel around
the world.
□ Exercise our responsibility as citizens. We believe in actively pursuing public
policies that encourage free enterprise and foster the development of healthy condi¬
tions for our business. Our corporate contributions program reflects this commitment to
improving the environment in which we operate. We encourage our employees to
participate in the political process as well, as individuals and through PepsiCo’s politi¬
cal action program.

4
An explicit, consistent management philosophy
We regard PepsiCo’s management philosophy as one of the key elements of our suc¬
cess. It is widely supported by our top executives, to an extent that is unusual among
companies of our size; we know that it helps us recruit and retain talented people;
and we believe it has materially influenced our outstanding profit and share-of-market
growth. Above all, our philosophy—and the degree to which we have dedicated our¬
selves to making it work—is what gives PepsiCo its special character and makes our
company a dynamic, demanding, “fun” place to work. These are the main elements of
our management philosophy as we see it today.

□ We place major emphasis on these key measures of performance: earnings

per share, return on investment, cash flow, and share of market.
□ Achieving current targets is essential, but not at the expense of future health.
□ Our divisions are relatively autonomous, and are supported by a lean, involved
corporate team.
□ We strive to keep our organization structure simple, lines of communication
open, and decision-making prompt.
□ We encourage an informal atmosphere and a broad range of management
styles.
□ Developing key managers is a top priority for us; whenever possible, we fill
managerial vacancies by promoting from within. Besides ensuring continuity of
management, this is one of the ways we live up to our commitment to foster a
climate of personal growth.
□ Pay and promotions are based on achieving specific goals; we reward out¬
standing results with high pay.
□ We value entrepreneurship, so we encourage risk-taking in strategy, programs,
and people decisions.
As well as this philosophy works for PepsiCo today, we are constantly alert to the need
to adjust it so that we can continue to deal effectively with the problems and opportuni¬
ties that come with rapid growth and an increasingly challenging external environment.

5
Financial 1980 1979 Change
Highlights Revenues. $5,975,220,000 $5,090,567,000 + 17%
Net income . $291,752,000* $264,855,000 + 10%
Net income per share. $3.20* $2.85 + 12%
Dividends declared . $114,886,000 $102,449,000 + 12%
Dividends declared per share . $1.26 $1,105 + 14%
Shareholders’equity . $1,428,923,000 $1,263,649,000 + 13%
Shareholders’ equity per share. $15.65 $13.89 + 13%
Return on average shareholders’
equity. 21.7%* 21.8% —

Plant and equipment expenditures ... $445,712,000 $386,885,000 + 15%

*Before a S17.8 million (19 cents per share) extraordinary charge related to the write-off of motor
carrier operating rights.

Our Total Growth Rates (Last 10 Years and Last 5 Years)

Revenues Net Income Earnings per Share Dividends per Share

PepsiCo has sought to assure growth in earnings and dividends that would result in meaningful
increases, even after taking into consideration the general inflation rate. The charts indicate that
net income and earnings per share grew at rates, compounded annually, of between 16 and 19
percent over the last ten years and the last five years, exceeding the general inflation rates by
between eight and ten percent. Dividends also rose faster than the inflation rates, providing a
net gain of about six percent per year for the last ten years and about 11 percent per year for
the last five years.

6
 *

Revenues rose 17 percent Revenues In Millions Net income, before the Net Income In Millions

in 1980, following an increase extraordinary charge,

of 18 percent in 1979. advanced 10 percent, after
5400 a 17 percent increase in
1979. Operating profits (profit
3600
before interest and taxes),
however, grew faster in 1980
than 1979: 20 percent versus
12 percent.

Earnings per share, before Earnings per Share In Dollars Dividends per share rose Dividends per Share moon*.
the extraordinary charge, 14 percent in 1980, following
were up 12 percent in 1980, a 13 percent increase a year
after a rise of 17 percent the earlier.
year before.

Return on average share¬ Return on Average Investment in plant and Capital Investment in
holders' equity in 1980, be¬ Shareholders’Equity equipment was at a record Plant and Equipment In Millions

fore the extraordinary charge, level of $446 million, 15 per

was 21.7 percent, nearly cent above the prior year,
equal to the record level, set and more than three times
in 1979, of 21.8 percent and the $140 million spent in
almost a full point above the 1975.
1978 level.

7
Operations Beverages
Review This largest of PepsiCo’s businesses has two divisions, Pepsi-Cola Company (domestic
soft drinks) and PepsiCo International. Revenues for this segment improved 18 percent
in 1980, and profits, domestic and foreign, were up eight percent.
Both divisions have consistently performed well compared to their competitors and
show good potential for future growth-not only in the United States, but in the other 145
countries in which Pepsi-Cola has become a popular product.

Pepsi-Cola Company Outpacing the soft drink industry for the fifth straight year,
Pepsi-Cola Company accomplished a four percent rate of growth in bottler case sales-
encouraging in the face of a weak economy and a sluggish trend in consumers’ real dis¬
posable income. The company continues to be a key source of cash flow for PepsiCo,
while providing a high level of return on assets employed.
The domestic soft drink industry has had to adapt to intensified competition in the
Beverages
marketplace and ever-increasing costs of doing business. On the other hand,
Revenues Pepsi-Cola Company’s ability to accommodate such rapid changes and recession, has
allowed it to withstand profit pressure more effectively than most of its competitors.
Developments in 1980 and plans for 1981 signal continued real growth in volume and
2100
profits during the eighties.
A major legislative event for the soft drink industry in 1980 was the enactment of the
1400 Soft Drink Interbrand Competition Act, a law that preserves exclusive soft drink terri¬
tories. Such territories have been used in the business for over 80 years. This legislation
,00 1 validates these territories, which were challenged by the Federal Trade Commission
(FTC) in a proceeding commenced in 1971.
0
The industry, led by Pepsi-Cola Company and its bottlers, took its side of the con¬
76 77 78 79 80 troversy to the courts and Congress. The legislative victory that followed is an example
of democratic principles at work in the defense of free enterprise. The struggle over
Beverages the FTC ruling reaffirmed the integrity of the franchise concept, saved the soft drink
Operating Profit In Millions
industry from unnecessary upheaval, and brought the Pepsi-Cola bottlers together with
PepsiCo in a spirit of cooperation and mutual respect.
Pepsi-Cola Company President John Sculley was named Man of the Year by Bever¬
age Industry, a trade publication, in recognition of "his willingness to commit his time
and talents to fight for industry positions.” Mr. Sculley, as chairman of the National Soft
Drink Association’s Issues Committee, has put Pepsi-Cola Company in the forefront of
the industry’s political involvement with the food safety and exclusive territories issues.
1980 was an intensely competitive year. Pepsi-Cola’s answer to this increased com¬
petition was, in part, the Pepsi Challenge, a highly visible advertising and marketing
campaign that emphasizes quality and taste through a simple consumer test. Results
during the year continued to show clearly that, in an extremely competitive environ¬
ment, the Challenge program can build sales volume and increase Pepsi-Cola’s share
of the market.
Pepsi-Cola was also the exclusive soft drink sponsor on network television of the
World Series and the Major League Baseball Championship Series, building marketing
equity through this leading national pastime. The World Series advertising was coordi¬
nated with a major promotion in which over 40 million “rub-off” cards were distributed via
Pepsi-Cola cartons and bottle hangers. (Each consumer could become a player by
following along at home with the World Series games.)
Sales gains for Diet Pepsi and Pepsi Light indicated renewed growth, as did the
entire diet category. The Diet Pepsi brand increased its share of the market and the repo¬
sitioning of Pepsi Light as a “one calorie” lemon-flavored cola was well received. In addi¬
tion, Mountain Dew, confronting rival brand introductions, continued to increase its sales
volume and share position. Mountain Dew sales now rank eighth among all soft drinks.
Outperforming the industry by a wide margin, Pepsi-Cola Bottling Group (PBG),
the division’s flagship company-owned bottling operation, again increased market
share, achieved record levels of volume and revenues, and closed out the year with
a significant profit improvement. Although the competition tried hard to undermine
its industry leadership, PBG remained firmly in control of its strategic objectives,
leading the Pepsi-Cola bottling network with hard-hitting marketing programs. This
group continually leads the field in testing new promotions, packaging innovations,
and selling techniques.
8
 Pepsi-Cola Company's Food Service Division concentrates on expanding sales
with chain restaurants and on opening up new opportunities with emerging channels
such as convenience stores. Reacting to difficult industry conditions and widespread
declines in restaurant traffic, this division also completed a strong performance with
growth in profit, volume, and market share. Several important new national accounts
were added along with a growing number of regional outlets.
By putting special effort into being a major multibrand supplier, emphasizing not only
brand Pepsi-Cola, but other company brands like Diet Pepsi and Mountain Dew, the
Food Service Division was able to counter general marketplace deterioration and, in
the case of Mountain Dew, conclude another year of very substantial volume growth.

PepsiCo International Today, PepsiCo International has 602 plants in 126 countries.
Nearly 80 percent of the division’s volume comes through its franchise operation,
which sells soft drink concentrate to franchised bottlers. United Beverages Interna¬
tional (UBI), the flagship bottler system that manages the company-owned bottling
operations outside the United States, provides the rest.
During 1980, overall division case sales volume grew eight percent, which exceeded
the industry growth rate by a wide margin. As a result, the division’s share of market has
risen approximately 22 percent over the last five years. Much of this growth has come
from major markets, the strongest being countries in the Mideast like Saudi Arabia and
Egypt, and in the developing markets of Africa and Asia, like Nigeria and the Philip¬
pines. These countries have grown in excess of 20 percent per year. Others have
grown between 10 to 20 percent, including Eastern Europe, Brazil, Ecuador, Mexico,
and Venezuela.
These gains have come mostly through continuing programs of investment in the
bottlers’ basic business framework-the production and distribution network of people
and machinery required to increase capacity and sales, as well as through aggressive
marketing programs. These investments should continue to have positive effects dur¬
ing the years to come.
In 1980, PepsiCo International franchised nine new markets and refranchised four.
Included in these were the first Pepsi-Cola franchises in Sweden, Cameroon, and East
Malaysia. Twenty-six new plants were opened, three of which are company-owned.
Large plastic bottles were launched in four countries, cans in six, and “high-value"
packages in six. New Mirinda flavors were introduced in eight countries, Teem in five,
Mountain Dew in three. These introductions accounted for International's flavor line
growing significantly in total volume.
One of the best examples of this success is in the Philippines where Mountain Dew,
introduced in June, is becoming that nation’s second most popular soft drink (after
Pepsi-Cola). The Philippine soft drink market is one of the largest in the world and
PepsiCo International’s second ranking in total volume.
Flavors are still the largest part of the overseas soft drink industry, but colas are
growing almost twice as fast. PepsiCo International is concentrating most of its market¬
ing push behind Pepsi-Cola, which is the second leading cola in foreign sales with a
one-third share of the cola market.
With 35 plants and 15 thousand employees in 11 countries, UBI sets the pace for
PepsiCo International’s marketing programs, providing an important example of suc¬
cess that often stimulates positive action by franchised bottlers. In addition, UBI by
itself is an important contributor to volume growth, beyond what the division would be
able to achieve solely through concentrate sales to franchisees.
Consistent with the division’s policy of progress through broadening and developing
the distribution network, through opening new territories, adding plants, bottling lines,
trucks, and warehouses, is a second strategy of exercising leadership in packaging
innovation. For example, when UBI took over a faltering franchise in Barcelona in 1978,
a new production line was installed to introduce Spain's first soft drink cans. Next
followed a new 1.5 liter “value package,” leading a complete turnaround for PepsiCo in

9
 the Spanish market. In the last two years, UBI's Barcelona operation doubled its volume
and the total Pepsi group in Spain increased its market share in food stores by nearly
50 percent.
Special attention was given in 1980 to increasing the contribution of Mirinda orange
and Teem lemon/lime flavors. In Brazil, for instance, Teem increased its sales volume
seven times and, in nearby Argentina, Teem volume climbed 33 percent. Similar oppor¬
tunities are available in the development of Diet Pepsi-Cola and Mountain Dew in these
and many other markets.
The international soft drink market is about 11.1 billion cases, compared to 5.6 billion
cases in the United States. International market growth in case sales has averaged
about seven percent over the past five years, compared to under six percent domesti¬
cally. Per capita consumption, however, is still only one-fifth that of the United States, or a
little over 110 eight-ounce bottles per person per year abroad. PepsiCo International’s
management team, at headquarters and in field locations throughout the world, is
positioned to take full advantage of this extraordinary potential.

Food Products
The two divisions constituting this business segment are Frito-Lay, the nation’s leading
quality snack food company, and PepsiCo Foods International, which manufactures
Food Products and distributes many similar products in five nations and Puerto Rico.
Revenues In Millions
In 1980, this segment’s total domestic and foreign sales rose 21 percent with a profit
improvement of 26 percent over 1979.
1500 Although the rapid growth of the food products segment continually outpaces the
rest of the corporation, its prospects for future expansion are still promising. Innova¬
1000
tions in product and packaging development, combined with exceptional marketing
and distribution, are the ingredients for success in this very attractive field.
500
Domestic Snack Foods Frito-Lay, PepsiCo's largest profit contributor, concluded its
twelfth straight year of record earnings. By any criterion, its growth and profitability
0 have been extraordinary.
76 77 78 79 80
Frito-Lay is now extremely well-positioned to continue to make strong advances in
Food Products the over $12 billion snack food market. While its sales grew sharply in major product,
Operating Profit In Millions trade, and geographic business segments, the company took actions to guarantee a
strong base for future growth.
For example, a new development for Frito-Lay in 1980 was the acquisition of
210
GrandMa’s Foods, Inc., an Oregon-based manufacturer of quality cookies and snack
bars with a unique product line and very high potential. This acquisition further extends
140
the number of entries that Frito-Lay has placed in the large baked goods category. In
1981 the company will begin to test fully the potential of these added lines.
70 While all major Frito-Lay products are enjoying growth in volume and revenue, the
snack food market itself, ignited by vigorous competition, is glowing with new life.
0 In 1980 the market grew about 16 percent in dollars and six percent in pounds. Pacing
76 77 78 79 80 that development with even stronger growth of over 20 percent in dollars and 14
percent in pounds, Frito-Lay is investing at record levels in research and development,
and in other business building programs.
Tostitos brand crispy round tortilla chips have broken all sales records for new
products, creating unprecedented growth in overall tortilla chip consumption. In its first
year of national distribution, the product exceeded its sales goals and topped $140
million in retail sales.
Frito-Lay’s existing brands also contributed importantly to volume growth for the
company. For example, Lay’s brand and Ruffles brand potato chips are showing out¬
standing growth. As a category, potato chips are the largest segment of the snack
industry—and Frito-Lay has the only major brands showing consistent growth in market
share.
In regard to new products, extensive research has led to the development of two
snack ideas currently being market tested: in New Orleans, Biddles brand crispy rice
chips; and in Columbus, Ohio, Tiffles brand crispy corn chips.
In 1981, Frito-Lay is expanding nutritional labeling for all products on a national basis.

10
This program informs our consumers of the nutritional content of Frito-Lay products by
providing full nutritional data on the backs of packages.
Frito-Lay’s renowned store-door delivery system was again strengthened in 1980
with the addition of 800 salespersons to a force that is now over 8,700 strong and
makes 70 thousand sales calls a day. Even though fuel costs have risen sharply, the
company has demonstrated that store-door marketing actually has become less
expensive, over time, through the effects of volume growth, better route management,
and productivity improvement.
To support sales growth, Frito-Lay opened three plants in late 1979 and in 1980,
which alone increased potential capacity by nearly 20 percent. The Charlotte, North
Carolina, plant officially opened during the spring, and the Killingly, Connecticut, and
Frankfort, Indiana, plants began production late in the year. Construction has just
started on a new plant in Rosenberg, Texas, and another plant in the far west is in the
planning stage. In addition, major expansions were completed at three other plants,
and construction started on 30 new distribution centers.
Within its industry, Frito-Lay is the leading innovator in manufacturing, engineering,
and basic research, and has developed its own production, packaging, and waste
treatment systems. For instance, the treatment system at the Frankfort plant, equiva¬
lent in capacity to a system for a city of 80,000, is so effective that treated wastewater is
discharged directly into a creek, fully meeting rigid local standards. The company has
also effectively integrated new products like meats and baked goods into its existing
production system, and has been able to expand and change its distribution system to
cope with new products manufactured in many different locations. Behind this is a
sophisticated electronic management information and inventory control system, and a
computerized vehicle schedule program for more efficient product distribution.
Frito-Lay’s product research continues to move forward. Its Research and Develop¬
ment scientists intensified activities in new potato variety development, cloning one
thousand different disease-free potato plants. At Frito-Lay research farms in Wisconsin,
Alabama, and Texas, the company has experimented in many aspects of agriculture.
In summary, new product introductions, high quality market support behind major
brands, the excellence of its store-door delivery system, and a nutrition program
that explains the high quality of its snacks combine to further Frito-Lay as a leader in
the snack food industry.

International Snack Foods One of PepsiCo’s fastest growing divisions, PepsiCo Foods
International (PFI) marked a year of significant growth in its key sales areas while
preparing to move into promising new segments of the overseas snack market. Gross
sales in 1980 grew more than 18 percent over the prior year in spite of the sale of the
company’s business in Venezuela. This operation’s product line of pasta, jams, and
sauces did not fit into PFI’s long-range strategy.
In 1980, PFI’s businesses in Mexico, Canada, Brazil, Puerto Rico, and Spain all
continued to set sales and profit records. Production capacity was expanded with the
completion of two new plants during the year: The Saltillo Plant in Mexico began
producing in the fourth quarter, and the Itu Plant in Brazil was running by year-end. As a
consequence, 450 new sales routes will be added in Mexico and, in Brazil, the new
facility will enable the company to handle the phenomenal growth in demand that has,
so far, outstripped production capacity.
By the end of 1980, the Mexican Sabritas business had doubled its sales in just two
years, requiring a change in organization structure to improve control and manage¬
ment of the continually growing business. In Brazil, 1980 unit sales grew 30 percent
over 1979 in spite of the earlier capacity constraints, leaving PFI with a leading share of
that rapidly growing snack market.
To continue this momentum, PFI plans further capital investment in plants and route
trucks—tools of the trade that will expand distribution and sales. Promising new markets
in existing territories are the relatively untapped suburban and rural communities.
In addition, there is the export potential to nations where PFI production facilities do not
exist. During 1980, initial programs to export semifinished snacks from Spain to coun¬
tries such as Norway, Finland, and Kuwait were most encouraging.
The company is constantly looking for new markets to develop and for new ways to
merchandise its products, particularly in nations where there is the built-in leverage of

11
 sister PepsiCo companies. In its existing territories, PFI is well-situated for continued
growth in sales and in market share, and plans continued operating improvements and
a healthy return on investment.

Food Service
PepsiCos Food Service Division comprises two companies: the Pizza Hut and Taco Bell
Food Service
restaurant chains. Despite a year of rising food costs and minimal growth in consumer
Revenues In Millions disposable income, both businesses completed very good years, with their combined
sales growing 17 percent and profits improving 19 percent.
In 1980, PepsiCo named Donald N. Smith as president of the Food Service Division.
Mr Smith came to the corporation from Burger King, where he was division president
and chief executive officer. Prior to that, he spent 12 years with McDonald’s restaurants,
serving finally as senior executive vice-president and chief operations officer. Alto¬
gether, he has over 22 years in the food service business.
Under the new Food Service Division organization, overseas development for the two
chains will be directed by a new international group—PepsiCo Food ServicaJnterna-
tional. Specific strategy is being developed to achieve rapid growth abroadTThis
overseas expansion will call for careful adaptation to local conditions while retaining the
basic format and trademarks that have made our food service businesses successful.
Food Service
Operating Profit Pizza Hut The year was an extremely important one for Pizza Hut, Inc., the food service
industry’s preeminent pizza and pasta restaurant chain. During the last half of 1980,
recession notwithstanding, the company achieved the strongest sales volume perform¬
ance since 1975; real volume per restaurant was up nearly 10 percent over the same
period in 1979 Key to this success was the nationwide introduction of Pan Pizza, begun
in late 1979. All Pizza Hut locations, both company-operated and franchised, were
offering this highly popular product by May, 1980, with strong advertising support
during the balance of the year.
Success was attributable not only to the popularity of Pan Pizza, but to an important
37 percent increase in television advertising, improved service, and a significant
improvement in quality. A boost in sales started during late July and August when, for
the first time, advertising emphasized the carryout part of the business. A larger
increase in advertising is planned for 1981 with the help of a new franchise agreement
that provides for major expenditures for cooperative local television advertising. This
will be in addition to established national advertising. Commercials will be aimed at
regional markets, with emphasis on quality, value, and individual products.
In a rapidly growing industry like fast-food service, a field that went from 22 thousand
restaurants in 1972 to 80 thousand by 1980, Pizza Hut’s vital signs are most encourag¬
ing for the new decade. In fact, average sales growth for the year exceeded that of its
four largest competitors by a notable margin. A number of measures are being taken to
help ensure that this momentum endures.
Plans include improvements in decor and equipment layouts as well as menu inno¬
vations and increased productivity. Both improved sit-down dinner and self-service
“fast lunch’’ variations are being tested. Improved facilities for carryout pizza, new
pasta, sandwiches, and the introduction of hot bread and wine in redecorated warm,
cheerful interiors are all part of a plan to position Pizza Hut for further growth. The
company intends to incorporate the most successful attributes of the motif and menu
tests into an improved concept that can be rolled out in selected markets.
Generally, there will be more attention paid to improving existing Pizza Huts than to
opening new ones. With Pizza Hut’s approximately 1,900 company locations, this refur¬
bishing is expected to spread over 36 months.
Overall plans are based upon four basic principles. Pizza Hut means to establish a
new, positive image for the ’eighties. The system, both company-owned and franchised
restaurants, will be managed as one organization. Food quality and pleasant service
will continue to receive strong focus, with the objective of an even better dining experi¬
ence. Finally, marketing efficiency, commensurate with PepsiCo’s high standards, will
continue to be improved and strengthened.
Pizza Hut people are at the heart of this undertaking. With the closing of area offices,
area supervisors will be working in the customer areas of their restaurants. Salary

12
upgrading will be continued during 1981 and comprehensive new training programs
are being set into motion. Results already look promising, with employee turnover down
and customer retention up.
As the United States economy strengthens, so also will the restaurant industry. Pizza
is expected to continue to be a growing business and Pizza Hut’s share of both dollar
volume and dining occasions should be generous.

Taco Bell began the new decade with a firm hold on its leading position in the rapidly
expanding Mexican fast-food industry. Total system sales were up more than 21 per¬
cent over 1979, while company profits increased by nearly one-third.
Acceptance of Mexican food is growing faster than any other. This advantage was
broadened in 1980 with the extension of business into the Northeast; a total of 13 new
restaurants were opened in the Hartford, Philadelphia, Pittsburgh, and Baltimore/
Washington areas. Their early success indicates that Taco Bell’s potential for expansion
is without regional bounds. During the year, the chain opened 171 new restaurants
for a system total of 1,270 franchised and company-operated restaurants.
The unfavorable economic climate that has troubled the fast-food industry for the last
several years continued through 1980 with a squeeze on disposable income and
reductions in leisure driving that adversely affected sales growth. As a result, Taco Bell
encountered stiff competition in the form of increased advertising, costly sales promo¬
tions, and discounting. Still doing better than their industry, Taco Bell’s neighborhood
locations continued to show a loyal group of repeat customers.
To build volume, Taco Bell set out to improve existing restaurants with an upgraded
decor package. Eighty-four of these attractive installations were completed in three
major markets during the year. A drive-through concept was also tested in a number of
Taco Bell units. Redecoration of half of the company-operated restaurants is planned
for 1981, with many more conversions to drive-through, where possible.
National expansion of the Paul Bunyan large-size drink and of the Cinnamon Crispas
brand dessert pastry (a cinnamon tortilla) was completed during 1980, and tests of a
new Taco Salad Supreme and Nachos were undertaken. Other new products are
planned for test in 1981 under the supervision of Taco Bell’s Research and Development
Department.
Major promotions and specially designed marketing campaigns for key sales
regions also helped combat aggressive competition. Taco Bell’s radio and television
advertising will continue to emphasize the chain's all-fresh, high-quality food, and to
improve the simple “Deliciously Different” price/value perception with its two target
consumer groups: 18- to 34-year-olds, and teenagers, 13 to 17.
In 1980. Taco Bell focused on its need to find, keep, and develop good people.
Employee training and incentives have been improved and, as a result, supervisor
turnover has been reduced by one-third.
The company’s wholly-owned subsidiary, Bell Foods Services, added five new ware¬
houses for a total of 15, and is now supplying 68 percent of the company-operated
restaurants. Plans are to expand this system in order to help control costs in an
inflationary environment.
Taco Bell is progressing rapidly with many opportunities to build upon its reputation
as a major force in its field.

Transportation
PepsiCo’s two transportation companies, North American Van Lines and LeeWay Motor
Freight, both reported highly improved results in 1980, a turbulent year for the trucking
business. This business segment as a whole chalked up revenue growth of 17 percent
and an increase in profits of 116 percent.
The passage of the Motor Carrier Act of 1980 (MCA) impacted the industry in a
number of ways but most significantly by easing trucking company entry into new
markets. Prior to enactment of the MCA, lengthy applications had to be completed and
approved before the Interstate Commerce Commission would approve a trucker’s
carrying a particular cargo along a new route. The MCA deregulation relaxed these
time-consuming procedures in order to foster increased competition and innovations in
service and price.

13
 A company's actual expansion, however, can depend more upon sales, manage¬
ment expertise, and capital equipment than it does upon an approved application.
PepsiCo’s transportation business, in better condition than the overall industry, is
well-positioned for growth in this new operating environment.

North American Van Lines 1980 was another record year for North American Van
Transportation Lines (NAVL), with its increased revenues and profits reflecting the company’s versatility
Revenues In Millions and strength in a difficult economy.
When housing starts and consumer spending sank in April, indicating a decline in
future traffic volumes, NAVL had already instituted tight cost controls and aggressive
600
marketing programs. These were aimed at new business and at existing accounts
that tend to be less sensitive to recession. These strategies, and an emphasis on
400
quality service, made significant inroads against the recessive economic situation.
The company’s strong sales force and effective market research are key elements for
200 NAVUs continued success under the MCA (described above). While the Act opens up
new markets for NAVL, it also creates the potential for other carriers to make inroads
0
into NAVUs base markets. NAVL remains prepared to answer this challenge from its
76 77 78 79 80 strong marketing position, its experience as an irregular route carrier (not terminal-
based) of both special and general commodities, and from its proven leadership as a
Transportation worldwide household goods mover.
Operating Profit In Millions
NAVL has already capitalized on growth from new hauling authorities. The company
secured over 300 new transportation permits during 1980. With this expansion, some
important rate relief, and an increase in government traffic, NAVL revenues grew 17
percent over 1979.
The government segment of the company’s New Products Group hauled everything
from tank parts to pillows, tent stakes to cake topping. This illustrates NAVUs ability to
carry all sorts of merchandise, with service that fits shippers’ unique needs. Accord¬
ingly, the company plans to extend the services of its New Products Group further into
all segments of retail and wholesale business, significantly widening its markets while
holding existing ones. A national accounts sales staff is now in place to bolster this
effort.
NAVUs High Value Products Group has also expanded into new national accounts,
such as large-volume manufacturers of high technology equipment and principal elec¬
tronic office products companies. This segment grew significantly in 1980 while making
reductions in cargo claims and improvements in on-time service.
Finally, NAVUs Household Goods Group also gained market share, especially in
national accounts. The favorable effects of the King Tutankhamen advertising program
—initiated in 1979 and showing how NAVU "moved the treasures of a King ”—and the
expansion of already broad agency representation across the United States helped
this segment make a record contribution to income.
Overall, NAVU did far better than its competition in 1980, in spite of difficulties,
demonstrating strong management and marketing strength and, with easing of the
economic situation, the potential for even more positive prospects in the years ahead.

LeeWay Motor Freight Despite the soft economy, 1980 was a year of significant
financial improvement for LeeWay, a major transcontinental trucking company. The
year was characterized by a variety of encouraging results, most of which were due to
improved internal execution and industry price increases.
The general economic slowdown that began in the fall of 1979 was viewed by Lee
Way as a major challenge. By emphasizing its superior transit time, the company
prepared to take a larger share of the surface transportation market and, by January
1980, it began to demonstrate positive performance when compared with its major
competition.
The improved performance of Leeway’s reorganized sales force, accompanied by a
new national advertising program stressing the company’s service leadership, was the
key factor supporting the significant increase in market share. By better segmenting its
markets, LeeWay was able to place more emphasis upon selling national accounts
and major customers, resulting in impressive sales growth even within the severely
depressed automotive industry.
Additionally, LeeWay was able to show important gains in fuel efficiency, improved
productivity in terminal labor, and lower maintenance costs, while holding a consis-
14
 tently superior transit time. Still the company’s process of improvement is far from over.
Internal operations will continually need to be made more effective while management
responds to timely opportunities for external growth.
In 1981, with further refinements in cost control and management structure, LeeWay
should be able to take full advantage of the Motor Carrier Act of 1980 through the use of
more direct routes and expansion opportunities made possible by easier market entry.
Leeway’s 1981 Plan calls for market expansion in the form of several new service
lanes, plus a number of new terminals in key markets. These new markets will help Lee
Way expand its revenue base, and set the stage for future growth.
With a stable, experienced workforce and a record of improvements in market share,
productivity, and cost control, LeeWay is well positioned to take advantage of eco¬
nomic recovery and the changing structure of the surface transportation business.
Already outstripping trends for industry tonnage growth, the company is optimistic
that it can achieve continued positive share-of-market performance and improved
profitability in 1981.

Sporting Goods
Wilson Sporting Goods The leading company in its markets, Wilson Sporting Goods
Sporting Goods achieved a second consecutive year of earnings improvement. Operating profit in
Revenues ►.«■<»» 1980 tripled that of 1979, while return on sales and return on assets employed both
increased. Its organizational and product revamping complete, Wilson is now able to
concentrate on realizing revenue growth.
Wilson’s 1980 sales were slightly below those of 1979, but the 1979 figure included
revenue from product lines that Wilson discontinued in 1980. Remaining businesses
grew 12 percent during 1980, a significant achievement considering recessionary
conditions.
After an extensive assessment of its business opportunities, in 1980 Wilson com¬
pleted its exit from unprofitable product lines and the elimination of problem inventories.
Procedures for collecting receivables were tightened. Management took tighter
control of a pruned and redirected organization. Now, the second stage of recovery is
under way—a period in which the effectiveness of the sales force will be further
Sporting Goods enhanced, marketing programs will be improved, and specific plans for improving cost
Operating Profit *«««•»
competitiveness will be instituted.
The company's sales force, largest in the industry, has the potential of providing
20 ( Wilson with a competitive advantage. Efforts in 1981 will be directed at improving this
group’s productivity through new control systems. A modified incentive plan will
10 1 improve motivation. In addition, sales force tactical plans have been better tailored to

0 | LJ
1
the competitive needs of individual product markets.
Historically, Wilson has maintained leadership in innovative marketing and promotion.
During 1980, a variety of interesting new products were developed that should result
in improved sales and market share in golf and tennis.
-10 For those golfers who would like to go beyond mere fun, to humble the course as well
76 77 78 79 80
as their opponents, Wilson has introduced the Aggressor Investment Cast Competition
golf clubs, equipment manufactured to the exacting standards of the aerospace and
surgical tool industries.
In tennis, the first large-head racket with Wilson’s exclusive Perimeter Weighting
System is the Cobra, designed to put more power behind the ball with more control
and less twisting. Also incorporating the latest technology are the Wilson Triumph
aluminum tennis racket and the new Wilson Legacy racket, both superior, exciting
contributions to the game.
Wilson’s advertising strategy should create more excitement and be better targeted
to consumer demand. More innovative promotional efforts are being developed, timed
to fit retailers’ needs. Superior marketing should continue to provide Wilson with a
competitive edge.
In contrast to the usual trends of a recessionary year, Wilson managed its inventories
and receivables to lower levels and maintained a healthy balance sheet. This manage¬
rial soundness, the company’s leading position in its industry, its very successful
program for overseas expansion, heightened sales force effectiveness, and upgraded
marketing programs all suggest that 1981 will be a year of further growth for Wilson.

15
VV^-| I' , Jt r
Symbolizing PepsiCo’s
growing presence in
Europe, a bright new

■
truck services soft
mm drink vending machines
mm •* jib
in a medieval village
— mI Ml one-half hour from

W1
Kl Frankfurt, Germany-a
less developed but high-
^m f potential market.

'» N
®Es5!

1 __
1 mmmmrn
£•) L ‘v^ ~ •

ga-/ A l\ 1 .
.;
Jk\
 The Frito-Lay route
safes truck is as familiar
a feature in front of a
traditional French Quar¬
ter village shop near
Montreal as it is at mar¬
kets and convenience
stores across the United
States. PepsiCo Foods
International is one of
the corporation’s fastest
growing divisions.

One way to get your

product up trails where
trucks won’t go is by
motorized ricksha, a
popular and colorful
transport in the Philip¬
pine islands. PepsiCo’s
business in the Far East
is firmly established
in key countries with tre¬
mendous potential
for gains in both volume
and market share.

I
During the dawn meet¬
ing of Mexico City route
sales drivers, a PepsiCo
Foods International
fleet serviceman up¬
dates rolling billboards
that tie in with highly
successful point-of-pur¬
chase and television
advertising. By the end
of 1980, Sabritas had
doubled its business in
just two years. Distri¬
bution is still being
expanded.
Taco Bell is a major
force in the Mexican fast-
food industry. To encour¬
age higher volume, 84
existing restaurants
in three key markets
were fitted with an up¬
graded decor package
in 1980: English oak,
upholstered booths,
hanging plants, ceramic
tiles, and solid wood
custom arched window
frames highlight the
new theme. Redecora¬
tion of about half of the
company-owned restau¬
rants is planned for 1981.

Pizza Hut, North

America’s preeminent
pizza and pasta restau¬
rant chain, has exciting
potential for foreign
expansion. The com¬
pany’s successful basic
format and trademarks
prove as popular in
Mexico City suburbs as
in the Zona Rosa, a
major downtown busi¬
ness and tourist district.
Prominent above a prin¬
cipal square leading to
central Cairo, the Pepsi
name and allied prod¬
ucts stand out in the
noonday sun. PepsiCo
International’s Middle
East markets have
shown some of the divi¬
sion’s strongest growth.
Expectations for the
future are high.

25
...
■ ■> < -ja
The day’s last light and
18 degrees below zero
in downtown Montreal:
One of North American
Van Lines’ special elec¬
tronics exhibits vans
rolls carefully to its des¬
tination. NAVL handles
a wide variety of ship¬
ments throughout
the United States and
worldwide.

Lee Way Motor Freight

is a rapidly expanding
transcontinental motor
carrier with direct
service to and from 27
states as well as Canada
and Mexico. Handling
seagoing container
freight is one of its
many new developing
businesses.
Near Dallas, Texas,
Research Section Man¬
ager John IK Carmi¬
chael, Ph.D., a special¬
ist in genetics and plant
pathology, is one of 48
scientists at work in
Frito-Lay Research and
Development. In the
forefront of agricultural
development, the
company has cloned
over 1,000 disease-free
plants specially
suited to potato snack
preparation.

28
Wilson Sporting Goods
is known for quality
around the world. As the
European tennis mar¬
ket is rapidly expanding,
with Germany in the
vanguard, a leading re¬
tailer in Barcelona,
Spain arranges his win¬
dow with Wilson as the
dominant line.

One of Pepsi-Cola Com¬

pany’s successful pro¬
motions in the United
States: A Christmas tie-
in with Mattel Toys, fea¬
tured in thousands of
food and toy stores and
accompanied by news¬
paper and television
advertising, significantly
increased share of mar¬
ket and sales volume.
 P€P/IUg

iniMMlP^- :—.

yft wi, < v\\. 1 ' ju !r 1 V

Within 100 meters of
Magellan’s landfall,
Mountain Dew and
Pepsi-Cola are carried
ashore from shallow-
draft outriggers; daily
deliveries are scheduled
for dawn and sunset
on the Island of Cebu in
East Central Philippines.

32
In the dying light of a
winter afternoon in Old
Montreal, Pepsi-Cola
salesman Corad Guay, a
25-year veteran, fills in
his computer-monitored
route page account.
This new system takes
the guesswork out of
marketing packaged
goods by ensuring that
all the product on a
truck is presold 48
hours before leaving
the plant. The computer
also segments sales by
promotion, size, flavor,
and type of outlet.

Innovative sales and dis¬

tribution techniques are
one of the most visible
characteristics of Far
Eastern markets. More
than promotion, trans¬
portation by any means,
such as river launch in
Bangkok, is the key to
getting product from
the plant into the hands
of the purchaser.
 ■

Tn ,il

WZM wUr
t. e k t ». * ft i ft'- «i\

1 . -4 OE*

MM
From the eye of the Roda
Panoramica, a Ferris
wheel in a big Sao Paulo
amusement park,
PepsiCo Foods Inter¬
national’s trademark
face glows for miles.
PFI has the exclusive
snack food franchise in
the park, reflecting the
company’s tremendous
popularity and success
in the rapidly growing
Brazilian market.

36
 Analysis of Operations
Financial
Review PepsiCo’s ten-year unbroken trend of improved revenues and net income continued in 1980.
Sales and other operating revenues rose 17 percent in 1980 after an increase of 18 percent in
1979. A significant portion of the substantial growth in revenues can be attributed to gains in unit
volumes, particularly in the beverage and food products businesses. For all business segments
combined, physical volume increases accounted for approximately 40 percent and 50 percent
of the revenue gains in 1980 and 1979, respectively.
Cost increases, stimulated by inflation, and additional expenses continued to put pressure
on margins in 1980, as in the previous two years. In particular, higher fuel costs in 1980 and 1979
significantly affected the transportation businesses and distribution costs in all operations.
Productivity gains and price increases offset these cost increases in 1980, allowing operating
margins to improve, whereas in 1979 operating margins had declined. (The impact of inflation is
further reviewed under Discussion of the Effects of Inflation below.)
Marketing, administrative, and other expenses increased 18 percent in 1980 after an
increase of 23 percent in 1979, as heavy spending continued in support of PepsiCo’s product
and marketing programs. Total advertising, for example, increased 17 percent to $358 million in
1980 after a 19 percent increase in 1979, reflecting a higher level of advertising as well as
inflation in media costs. A significant part of the additional spending in 1980 was in domestic
beverage operations, reflecting intense competitive activity.
Foreign currency gains for 1980 and 1979 amounted to $11.9 million and $5.7 million,
respectively, compared with a loss in 1978 of $11.6 million which was due principally to Swiss
franc debt retired in December 1978.
Profits before interest and taxes increased 20 percent in 1980, after a gain of 12 percent in
the previous year. Food products paced the profit growth, as in 1979, accounting for nearly half
Domestic and
Foreign Revenues In Millions
the increase in profits from operations. Substantially better performance in transportation and
food service contributed to the sharp acceleration in growth rate.
Net interest expense (after deducting interest income) increased $34.6 million in 1980,
following a $17.4 million increase in 1979. In addition, $11.2 million of interest costs were capital¬
ized in 1980. as required by Statement of Financial Accounting Standards No. 34. The increased
costs in both years primarily reflected higher debt levels to support growth in operations, and to
a lesser extent, higher interest rates. Debt issued to finance the repurchase of 3.6 million shares
of PepsiCo capital stock in late 1979 also contributed to the higher interest expense, although
the net effect of the share repurchase was to increase earnings per share modestly in 1980.
The provision for U S. and foreign income taxes was 40.8 percent of income before taxes in
1980, 38.9 percent in 1979, and 43.6 percent in 1978. The higher effective rate in 1980 resulted
primarily from losses sustained in certain development markets overseas for which PepsiCo
receives no current tax benefit. The lower rate in 1979, compared with 1978, reflected the two
percentage point decrease in the U.S. statutory corporate tax rate and an increased proportion
Domestic and of earnings from foreign operations taxed at rates lower than the U.S. rate.
Foreign
Operating Profits _ In Millions Net income before an extraordinary charge in 1980 rose 10 percent to $291.8 million, after a
17 percent increase in 1979 and a 15 percent increase in 1978. However, after adjustments to
exclude certain special provisions and non-recurring items in 1978. net income increased 12
percent and 19 percent in 1979 and 1978, respectively.
As stated in Note 9 to the Consolidated Financial Statements, in 1980 PepsiCo recorded an
extraordinary charge of $17.8 million to write off certain operating rights in accordance with
Statement of Financial Accounting Standards No. 44. The Statement required the write-off of
operating rights of motor carriers, to reflect enactment of the Motor Carrier Act of 1980 which
substantially deregulated the trucking industry.
While PepsiCo continues to emphasize efficient asset utilization, return on assets employed
dropped back to the 1978 level of 14.7 percent, down from 15.3 percent in 1979, primarily as a
result of the high level of new investment in both 1980 and the latter part of 1979. However, at
21.7 percent, return on average shareholders’ equity (before the extraordinary charge)
remained close to 1979s level of 21.8 percent, up from 20.8 percent in 1978, as a result of
PepsiCo’s increased financial leverage offsetting the decline in return on assets employed.

38
Business Segments

Revenues (m millions) 1980 1979 1978

$ % $ % $ %
Beverage 2,367.7 40 2,013.7 40 1,698.4 39
Food products 1,830.7 31 1,518.5 30 1,231.8 29
Food service 872.7 14 748.3 15 622.1 14
Transportation 673.9 11 575.4 11 501.1 12
Sporting goods 230.2 4 234.7 4 246.6 6
Total 5,975.2 100 5,090.6 100 4.300.0 100
Foreign portion 1,335.2 22 1,161.9 23 902.2 21
Operating Profits (in millions)111
Beverage 274.7 44 254.0 49 227.Of21 48
Food products 245.8 39 195.4 37 158 2131 34
Food service 59.5 9 49.9 10 64.1 14
Transportation 39.9'4I 6 18.5 3 29.3 6
Sporting goods 10.9 2 34 1 (7.5)15' (2)
Total 630.8 100 521.2 100 47.1.1 100
Foreign portion 131.8 21 116.7 22 83.112' 18
Investment (in millions)

Depreciation
and
Identifiable Amortization Capital
Assets_ _Expense_ Expenditures!81
1980 1979 1978 1980 1979 1978 1980 1979 1978
$ $ $ $ $ $ $ $ $
Beverage 1266.0 9586 749 9 56.3 459 35.0 1404 100 9 123.8
Food products 791.9 640.1 475.9 494 37.0 31.8 176.1 159.5 75.3
Food service 520.4 474.0 423.1 34.8 29.8 24.5 83.4 71.5 99.5
Transportation 292.3 2924 279.9 21.5‘4* 20.0 17.3 32.7 37.2 46.6
Sporting goods 2295 2362 268.5 49 5.0 4.2 4.1 4.5 8.7
Corporate 317.4l6l 286 3,6l 222 I'61 5.3 4.4 4.2 9.0 13.3 10.6
Total 3.417.5 2,8876 2,4194 172.2 142.1 117.0 445.7 386 9 364.5
Foreign portion 1.055 61'! 792.0171 589 51'! 36 4 279 22 7 119.6 78.2 72 3
[ 1 ] Excludes general corporate expenses and interest expense (net) which totaled as follows (in millions);
1980. $138.0; 1979. $88.1; 1978, $75.5
12] Excludes an $8 8 million expense related to receivables from Iran
[3] Excludes a $13.3 million credit for settlement of litigation.
14] Excludes a $17.8 million extraordinary charge related to write-off of operating rights (see Note 9 to Consolidated
Financial Statements)
[5| Includes a $9 0 million expense related to receivables and inventory.
[6] Corporate assets are principally marketable securities and administrative office buildings.
[7] PepsiCo’s investments in foreign subsidiaries and branches outside the U.S. were $415.2, $313.0, and $2979 in
1980. 1979 and 1978, respectively.
[8] Excludes expenditures for returnable bottles and cases.

Beverage: Combined revenues for domestic and foreign beverage operations increased
18 percent over 1979, following an increase of 19 percent in 1979. The revenue growth in 1980
reflected both price and volume increases, and was particularly large in company-owned
bottling operations. Domestic bottlers’ case sales continued to outpace a sluggish market in
1980, although the four percent rate of growth slowed somewhat in comparison to the seven
percent rate in 1979, which had seen strong gains in market share. Overseas case sales growth
of eight percent in 1980, while substantial, also slowed from 1979’s 13 percent rate, reflecting
difficult economic conditions in many countries and exceptionally poor weather during peak
summer months in several key markets.
Total costs and operating expenses for domestic and foreign operations rose 19 percent in
1980 and 20 percent in 1979, with a significant portion of the increase in 1980 representing
higher sugar and distribution costs. The increases in both years also resulted from heavier

39
expenditures for advertising and other marketing programs, especially in domestic operations
where the level of competitive activity escalated sharply.
Operating profits rose eight percent in 1980 after a 12 percent increase in 1979. Domestic
profits grew more slowly than revenues, reflecting the cost pressures described above, while
overseas beverage profit growth also slowed from the rapid pace of 1979. In late 1979 and
throughout 1980, PepsiCo introduced new soft drink packages as a major competitive tool in
overseas markets, supported with heavy investment spending and promotional pricing in
PepsiCo's overseas bottling operations, all of which tempered profit gains.
Food Products: The food products segment reported a revenue increase of 21 percent for
1980 after a 23 percent increase in 1979, with the strong unit volume trend of the last two years
continuing in 1980. Domestic volume grew 14 percent after an 11 percent gain in 1979, including
the impact of several new products which accounted for about half the growth in 1980. Over¬
seas volume also continued strong, growing 11 percent in 1980 despite the disposition of an
overseas operation, compared with 29 percent in 1979. Operating profits increased 26 percent
after a 24 percent gain in 1979. Overseas profits grew somewhat faster than the total segment,
reflecting improvement in several countries and continued strong performance in Mexico where
rapid development of the business continues.
Food Service: A revenue increase of 17 percent over 1979 was recorded by the food
service business segment, following a 20 percent increase in 1979. The sales gains are attribut¬
able to improved average store revenues, which increased nine percent in 1980 compared with
seven percent growth in 1979, and to an increase in the combined number of company-owned
Pizza Hut and Taco Bell stores (four percent increase over the prior year at the end of 1980,
following an eight percent increase in 1979). Operating profits increased 19 percent for the year
versus 1979, reflecting improved store operating margins, after a 22 percent decline last year.
The operating margin improvement is attributable, in part, to real growth in average sales per
store of one percent, following a three percent decline in 1979.
Transportation: PepsiCo’s transportation business segment reported a revenue increase of
17 percent in 1980. In 1979 revenues had increased 15 percent. Operating profits more than
doubled in 1980, as compared with 1979 when operating profits had declined 37 percent from
the prior year. (The extraordinary charge referred to in Note 9 is not included in this segment
information.) North American Van Lines operations showed substantial gains in revenues and
profits in 1980, although at a more modest pace than in 1979-a year of significant volume gains.
Volume increased slightly in 1980, despite the economic recession, while profit improvement
came primarily from favorable product mix, tight control of expenses and tariff increases. Lee
Way Motor Freight results also improved significantly after the loss in 1979. With volume slightly
higher than 1979, LeeWay performed substantially better than the overall industry. Management
actions to increase productivity and tariff increases were largely responsible for the profit
improvement in 1980, whereas inadequate tariff relief, the Teamsters' strike and costs to improve
service had adversely affected results in 1979.
Sporting Goods: The sporting goods segment recorded a decline of two percent in reve¬
nues in 1980, following a five percent decline in 1979. The decline principally reflects manage¬
ment actions to prune certain low-profit product lines. The operating profit in 1980 was more than
triple the 1979 level, which had in turn approximately doubled 1978’s profit before a special
provision for receivables and inventory. An increased proportion of more profitable products in
the sales mix and tight operating expense control accounted for the profit improvement.

Revenues and profits from domestic segments in 1980 grew faster than those from overseas
businesses, reversing the prior year's trend. Domestic operating profits were up 23 percent,
reflecting the strong performance of domestic snack food and transportation operations. Con¬
versely, foreign operating profits grew a more modest 13 percent, reflecting slower profit growth
in overseas beverage operations.

Capital Spending

To facilitate the growth of PepsiCo’s business, net investment in property, plant and equipment
has doubled since 1977, from $0.9 billion to $1.8 billion. Expenditures for plant and equipment
(including capital leases) reached a record level of $446 million in 1980, up from $387 million in
1979 and $365 million in 1978. Much of this spending was for expansion of operations, with the
major part for additional food product and bottling capacity. For instance, Frito-Lay’s capacity
has expanded by more than a third over the past two years to permit continuing rapid growth.
Similarly, six high-volume bottling lines were added in company-owned overseas operations in
1980, increasing capacity by nearly 20 percent. In addition to these plant and equipment
i

expenditures, major new beverage package sizes were introduced in five markets in Europe
and the Far East, resulting in substantially higher purchases of returnable bottles and cases in
1980, at $137 million compared with $63 million and $47 million in the previous two years.

Liquidity, Financial Resources and Capital Structure

PepsiCo is committed to long-term growth by investing funds retained by the Company in

suitable projects which show attractive potential returns. Additional funds from external sources
are used as necessary, depending on the volume of such projects, and consistent with main¬
Return on Assets taining flexibility and sound financial standing. PepsiCo’s mix of borrowings will vary from time to
Employed
time as the Company seeks to maintain a maturity structure which it believes will minimize long-
run financing costs.
Funds from operations grew steadily to $493 million in 1980, up from $446 million in 1979
and $378 million in 1978. Dividends of $115 million were paid to stockholders, 12 percent higher
than in 1979, while remaining funds retained in the business were used primarily for capacity
expansion. In 1980, internally generated funds were supplemented by additional borrowings,
including $150 million of 10V8% six-year notes issued in June. As a result, the ratio of PepsiCo's
total debt to total capital employed increased to 35.6 percent in 1980 from 32.9 percent in 1979.
Capital spending in 1979 was funded largely from operations, although total debt to total capital
employed still increased from 29.4 percent in 1978 as a result of issuing additional debt to
repurchase 3.6 million shares of capital stock at a cost of $95 million.
The high level of capital spending is expected to continue in 1981, financed primarily with
Total Debt as a Percent funds from operations and some additional borrowing. Management currently anticipates refi¬
of Capital Employed nancing the long-term debt maturing in 1981, and may undertake additional refinancing
depending upon conditions in the credit markets.
PepsiCo retains a high degree of financial flexibility, based on a strong and stable flow of
funds from operations. The Company also has unused bank credit facilities, which totaled $495
million at the end of 1980, and a strong credit standing which facilitates continued access to
world capital markets. In addition, significant investments in marketable securities in Puerto Rico
can be repatriated at PepsiCo's discretion upon payment of a modest tollgate tax.
1980 1979
(in thousands)
Short-term borrowings-domestic $ 31.670 $ 1.673
-foreign. 72.534 59.542
Total short-term borrowings. 104,204 61,215
Long-term borrowings-current. 6.290 11.693
-non-current
-senior. 612,720 443.295
-subordinated. 8.843 12.940
Total long-term borrowings. 627.853 467,928
Total borrowings . 732,057 529.143
Capital lease obligations
-current. 8.650 8,125
-non-current. 160.146 162.715
Total capital lease obligations. 168.796 170,840
Total debt (including capital lease obligations). 900.853 699,983
Shareholders'equity . 1.428.923 1.263,649
Total debt and shareholders' equity. 2.329.776 1,963,632
Deferred income taxes and other liabilities.and deferred credits. 201.643 161,421
Total capital employed. $2,531,419 $2,125,053

Discussion of the Effects of Inflation

The high rates of inflation that have plagued the American economy over the past decade
continued into 1980, further eroding the purchasing power of the dollar and distorting the
conventional measures of financial performance based on historical cost accounting. To assist
readers of financial statements in assessing the impact of inflation, the Financial Accounting
Standards Board (FASB) issued Statement No. 33, Financial Reporting and Changing Prices,
which requires the presentation of certain information on the effects of inflation on business
enterprises under two different methods: constant dollar and current cost.
The constant dollar method, applied initially in 1979, is intended to measure the impact of
general inflation on PepsiCo’s operations. The restated amounts are referred to as constant

41
dollar amounts since the conventional measures of earnings and capital, which are expressed
in dollars of varying purchasing power (historical dollars), have been restated into dollars of the
same purchasing power using the Consumer Price Index for All Urban Consumers (CPI-U).
Required for the first time in 1980 annual reports, the current cost method attempts to
measure the effects of changes in the specific costs of PepsiCo’s assets from the dates they
were acquired to the present. Several methods were used in estimating these amounts, includ¬
ing direct pricing and indexing, which are intended to reflect costs to replace existing assets
with identical assets rather than with different or technologically improved assets. Current costs
differ from constant dollar amounts to the extent that the specific costs of PepsiCo's inventories
and property, plant and equipment have increased more or less rapidly than general inflation.
The accompanying statement of earnings and five-year summary of selected data reflect
certain adjustments to the amounts shown in the primary financial statements using both the
constant dollar and current cost methods. Since both methods inherently involve the use of
assumptions, approximations, and estimates, readers are cautioned that the following informa¬
tion should not be viewed as precise indicators of the effects of inflation on PepsiCo’s operations.
Under the guidelines of Statement No. 33, only cost of sales and depreciation expense are
required to be adjusted in the statement of earnings, since these are the items of income which
are most affected by inflation. During inflationary periods, these adjustments will usually result in
lower earnings than reported in the primary financial statements.
The marginally lower cost of sales amount on a current cost basis, compared to constant
dollar, reflects the fact that, for the most part, the high rates of inflation in recent years have
outpaced the increase in the specific costs of PepsiCo’s inventories. In other words, for the
average two-month period between the time PepsiCo produces and the time it sells its invento¬
ries, the increase in cost to replace those inventories has been slightly less than the increase in
general inflation. Although pricing and productivity improvements have helped offset these
higher inventory costs, it should be noted that the ability of a company to recover cost increases
by raising selling prices is subject to normal competitive factors and regulatory conditions.
Unlike inventories, the increase in the current cost of PepsiCo’s fixed assets since the time
of acquisition, which extends over several years, has been greater than the increase in general
inflation as measured by the CPI-U. Consequently, depreciation on a current cost basis has
exceeded the same amount on a constant dollar basis. Because of the significantly longer lives
of property, plant and equipment, compared to inventories, this increase in depreciation on a
current cost versus constant dollar basis more than offsets the comparative decrease in cost of
sales, causing income from continuing operations under current cost to be lower than under
constant dollar.
In accordance with Statement No. 33, restated net income does not reflect an adjustment to
historical dollar income tax expense, because present tax laws do not allow deductions for
increased depreciation expense and cost of sales due to inflation. As a result, the effective tax
rate for 1980 and 1979 rises from 40.8 and 38.9 percent, respectively, to 48.5 and 45.5 percent
on a constant dollar basis and 50.5 and 48.4 percent on a current cost basis. PepsiCo believes
this result supports the contention that corrective tax legislation is urgently needed to better
reflect existing economic conditions and to help stimulate real economic growth.
Besides the impact of inflation on the conventional measures of net income, inflation also
affects monetary assets and liabilities, such as cash, receivables and payables. During periods
of inflation, monetary assets lose purchasing power since they will buy fewer goods or services
as the general level of prices rises. Conversely, holders of monetary liabilities benefit during
inflation because cheaper dollars are used to satisfy these obligations in the future. For example,
a 1970 debt of one dollar can be satisfied with the payment of a 1980 dollar which has the
equivalent purchasing power of 47 cents.
Since PepsiCo had net monetary liabilities during the year, a net gain in purchasing power
is included in the adjusted statement of earnings under both the constant dollar and current cost
methods. This gain, which amounted to $100,979,000 in 1980 and $79,255,000 in 1979, should
be viewed as part of the overall impact of inflation on operations. Since the interest rate charged
by lenders is intended, in part, to compensate them for lost purchasing power during inflation,
historical dollar interest expense should theoretically be reduced by the purchasing power gain
from holding net monetary liabilities. However, the FASB requires that this gain be shown
separately from net income in the statement of earnings.
Statement No. 33 also requires that increases in current costs based on specific prices of
inventories and property, plant and equipment during the year be compared with the amount of
such increases based on changes in the general price level. Over the past two years, the rate of
general inflation, as measured by the CPI-U, has increased at a faster pace than the specific
prices of PepsiCo’s assets, resulting in a net decrease in the current costs of our assets after
inflation in both 1980 and 1979. This is not surprising, considering that the CPI-U reflects such
items as food, housing, and fuel-the costs of which have increased dramatically in recent years.
 Statement of Earnings
Adjusted for the Effects of Inflation
For the Years Ended December 27, 1980 and December 29, 1979
(in thousands except per share amounts)

1980 1979
As Reported Adjusted As Reported Adjusted
in the Adjusted for in the Adjusted for
Primary for Changes in Primary for Changes in
Financial General Specific Financial General Specific
Statements Inflation Prices Statements Inflation Prices
(Historical (Constant (Current (Historical (Constant (Current
Cost) Dollar) Cost) Cost) Dollar) Cost)
Net sales and other
operating revenues. $5,975,220 $5,975,220 $5,975,220 $5,090,567 $5,090,567 $5,090,567
Cost of sales, excluding
depreciation. 2,403,047 2,434,421 2,433,602 2,070,555 2,097,162 2,096,123
Depreciation and
amortization. 172,209 219,239 236,474 142,053 179,146 201,664
Other operating
expenses, net. 2,824,933 2,824,933 2,824,933 2,397,228 2,397,228 2.397,228
Net interest expense. 82,198 82,198 82,198 47,601 47,601 47,601
Provision for income taxes. 201,081 201,081 201,081 168,275 168,275 168,275
5,683,468 5,761,872 5,778.288 4,825,712 4.889,412 4,910.891
Net income!11. $ 291,752 $ 213,348 $ 196,932 $ 264,855 $ 201,155 $ 179,676

Per common share!11. $ 3.20 $ 2.34 $ 2.16 $ 2.85 $ 2 17 $ 1.94

Purchasing power gain on
net monetary liabilities. $ 100,979 $ 100.979 $ 79,255 $ 79,255
Effect of increase in
general price level on
inventories and property,
plant and equipment
during the year. $ 284,350 $ 256,996
Increase in specific prices
(current costs)!2!. 190,879 200,949
Excess of increase in
general price level
over increase in
specific prices. $ 93,471 $ 56,047

Five-Year Comparison of Selected Supplementary Financial Data

Adjusted for the Effects of Inflation

(in thousands of average 1980 dollars except per share amounts)

1980 1979 1978 1977 1976

Net sales and other
operating revenues. $5,975,220 $5,778,988 $5,431,123 $4.962,232 $4,500,830
Constant Dollar Information:
Netincomel1!. $ 213,348 $ 228,358
Per common shared. $ 2.34 $ 2.46
Net assets. $1,860,537 $1,798,157
Current Cost Information:
Netincomel1!. $ 196,932 $ 203,974
Per common share*11. $ 2.16 $ 2.20
Excess of increase in general
price level over increase in
specific prices. $ 93,471 $ 63,626
Net assets. $2,092,299 $2,078,559
Other Information:
Purchasing power gain on net
monetary liabilities. $ 100,979 $ 89,973
Cash dividends declared
per common share. $ 1.260 $ 1.254 $ 1.231 $ 1.122 $ .916
Market price per common share
at year-end. $ 24.83 $ 26.84 $ 31.02 $ 37.13 $ 36.34
Average consumer price index
(1967= 100)..246.8 217.4 195.4 181.5 170.5
•1 Before extraordinary charge of $17,762 (19 cents per share) in 1980.
!2lAt December 27, 1980 and December 29.1979, current cost of inventory was $433,840 and $379,814, respectively,
and current cost of property, plant and equipment, net of accumulated depreciation, was $2,490,062 and $2,040,590.

43
 In addition to the statement of earnings, various financial data for the past five years have
been restated into average 1980 dollars and are presented in a separate schedule. The sched¬
ule shows that in “real" terms (i.e., after removing the effects of inflation) both sales and cash
dividends per share have increased steadily each year since 1976.
However, net income adjusted into average 1980 dollars, has decreased from 1979 to 1980
under both the constant dollar and current cost methods, despite the increases reflected in the
statement of earnings. This is because 1979 results have been restated using the general
inflation rate of 13.5 percent in 1980, whereas year-to-year increases in net income before such
restatement, were 6.1 percent under the constant dollar method and 9.6 percent under the
current cost method.
Between year-end 1976 and year-end 1980, the actual market price of PepsiCo's common
stock increased. During the same period, the market price per share, adjusted for inflation,
decreased, although year-to-year changes were volatile, moving in both directions. Considering
the many influences on the stock market, it is difficult to evaluate the meaningfulness of this
information.
The value of PepsiCo’s net assets on both a constant dollar and current cost basis is
considerably higher than the historical dollar amount primarily due to the inflationary impact on
property, plant and equipment. The current cost amount of net assets is higher than the corre¬
sponding amount in constant dollars, principally because the prices of PepsiCo’s fixed assets
have increased at a faster rate than general inflation during the period since acquisition, even
though the last two years have seen a reversal in that trend.

Quarterly Financial Data and Information on Capital Stock

Summarized quarterly financial data (in thousands except per share amounts) for 1980,1979
and 1978 are as follows: c .
1980 Quarters Ended
March 22 June 14 Sept. 6 Dec. 27
(12 Weeks) (12 Weeks) (12 Weeks) (16 Weeks) Total
Net sales and other operating revenues. $1,183,042 $1,381,372 $1,518,430 $1,892,376 $5,975,220
Gross profit. 591,088 693,280 749.397 934.949 2,968,714
Net income. 47,596 77,498 88,507 78,151* 291.752*
Net income per share. .52 .85 .97 .86* 3.20'
* Before extraordinary charge of $17,762 (19 cents per share).

1979 Quarters Ended

March 24 June 16 Sept. 8 Dec. 29
(12 Weeks) (12 Weeks) (12 Weeks) (16 Weeks) Total
Net sales and other operating revenues. $1,014,232 $1,183,746 $1,286,378 $1,606,211 $5,090,567
Gross profit. 503,521 585,073 639,362 774.890 2,502.846
Net income. 45,165 72,578 80,594 66,518 264,855
Net income per share. .48 .78 .86 .73 2.85

1978 Quarters Ended

March 25 June 17 Sept. 9 Dec. 30
(12 Weeks) (12 Weeks) (12 Weeks) (16 Weeks) Total
Net sales and other operating revenues. $ 833,787 $1,023,041 $1,098,128 $1,345,050 $4,300,006
Gross profit. 415,403 499,372 532,271 628,461 2,075,507
Net income. 37,044 59,801 69,120 59,804 225,769
Net income per share. .40 .65 .74 64 2.43

Shares of PepsiCo Capital Stock are traded on the New York and Midwest Stock Exchanges. The
range of market prices for PepsiCo stock, as reported by the New York Stock Exchange, and the
dividends declared in each quarter of the last two years are set forth in the table below. The
quarterly dividend was increased 14% in May 1980 from 28V2 cents per share to 32’/2 cents per
share, following an increase in 1979 of 14% that raised the per share dividend from 25 cents to
28V2 cents. As of February 26,1981 the approximate number of holders of record of Capital
Stock was 51,000.
Quarter High Low Close Dividend
1979
1st Quarter 27% 23'A 24% 25 4
2nd Quarter 25% 21% 24 28% 4
3rd Quarter 28% 23% 273/4 28% 4
4th Quarter 28% 23% 25 28% 4

1980
1st Quarter 25% 20 21% 28% 4
2nd Quarter 26% 20 25% 32% 4
3rd Quarter 28% 23% 26% 32% 4
4th Quarter 26% 24 26 32% 4
Consolidated 1980 1979 1978
Statement Revenues
Net sales. $5,271,598 $4,488,032 $3,774,628
of Income Other operating revenues. 703,622 602,535 525.378
and Retained 5,975,220 5,090,567 4,300,006
Earnings
(in thousands except
per share amounts)
Costs and Expenses
PepsiCo, Inc. and Subsidiaries Cost of sales. 2,461,087 2,113,592 1,825,162
Years ended December 27, 1980, Cost of other operating revenues. 545,419 474.129 399,337
December 29, 1979 and
December 30, 1978
Marketing, administrative and other
expenses. 2,393,683 2,022,115 1,645,142
Interest expense. 114,149 73,121 51,996
Interest income. (31,951) (25,520) (21,748)
5,482,387 4,657,437 3,899,889
492,833 433.130 400,117

Provision for United States and foreign

income taxes (including deferred: 1980-
$22,800: 1979-$25,800; 1978-314,100) . 201,081 168,275 174,348

Income before Extraordinary Charge 291,752 264,855 225,769

Extraordinary Charge
Write-off of motor carrier operating rights .. 17,762

Net Income 273,990 264,855 225,769

Retained earnings at beginning of year.... 1,134,060 971,654 834,270

Cash dividends (per share: 1980-SI.26;
1979-$1,105: 1978-S.975). (114,886) (102,449) (88,385)
Retained earnings at end of year. $1,293,164 $1,134,060 $ 971,654

Net Income Per Share

Income before extraordinary charge. $ 3.20 $ 2.85 $ 2.43
Extraordinary charge. .19
Net income. $ 3.01 $ 2.85 $ 2.43

See accompanying notes

45
Consolidated Assets 1980 1979
Balance Sheet Current Assets
(dollars in thousands) Cash. $ 45,430 $ 38,619
PepsiCo, Inc. and Subsidiaries Marketable securities. 186,694 166,698
December 27, 1980 and Notes and accounts receivable, less allowance:
December 29, 1979
1980-$25,697; 1979-$24,034 . 596,676 557,157
Inventories. 428,609 370,111
Prepaid expenses and other current assets. 100,226 68,509
1,357,635 1,201,094

Long-Term Receivables and Investments

Long-term receivables. 42,281 37,170
Investments. 15,218 19,085
57,499 56,255

Property, Plant and Equipment

Land . 127,836 101,755
Buildings. 495,247 390,612
Machinery and equipment. 1,494,948 1,255,823
Capital leases. 187,110 186,792
Bottles and cases, net of customers' deposits: 1980-
$49,715; 1979-$49,460. 171,524 68,350
2,476,665 2,003,332
Less accumulated depreciation and amortization. 717,606 602,081
1,759,059 1,401,251

Goodwill 157,356 167,797

Other Assets 85,989 61,181
$3,417,538 $2,887,578

See accompanying notes

46
Liabilities and Shareholders’ Equity 1980 1979
Current Liabilities
Notes payable (including current installments on long-term
debt and capital lease obligations). $119,144 $ 81,033
Accounts payable. 441,359 364,525
United States and foreign income taxes. 67,844 62,569
Other accrued taxes. 41,926 41,367
Other current liabilities. 334,990 294,064
1,005,263 843,558

Long-Term Debt 621,563 456,235

Capital Lease Obligations 160,146 162,715

Other Liabilities and Deferred Credits 67,943 54,821

Deferred Income Taxes 133,700 106,600

Shareholders’ Equity
Capital stock, par value 5$ per share; authorized 135,000,000
shares; issued: 1980-94,916,223; 1979-94,601,214 shares.. 4,746 4,730
Capital in excess of par value. 225,915 219,951
Retained earnings. 1,293,164 1,134,060
Less cost of repurchased shares: 1980-3,639,701;
1979-3,647,000. (94,902) (95,092)
1,428,923 1,263,649
$3,417,538 $2,887,578

47
Consolidated 1980 1979 1978
Statement Financial Resources Provided
Operations
of Changes Net income before extraordinary charge... $291,752 $264,855 $225,769
in Financial Depreciation and amortization. 172,209 142,053 117,019
Position Deferred income taxes. 27,100 26,300 23,200
(in thousands) Other. 1,546 12,758 12,495
PepsiCo, Inc. and Subsidiaries Total from operations. 492,607 445,966 378,483
Years ended December 27.1980,
December 29. 1979 and December
30. 1978 Long-term debt and capital lease obligations. 186,307 189,429 65,324
Property disposals. 30,086 17,419 19,667
Capital stock (including conversion of debt) .. 6,170 28,676 26,874
715,170 681,490 490,348

Financial Resources Applied

Plant and equipment. 445,712 386,885 364,539
Dividends. 114,886 102,449 88,385
Bottles and cases, net. 103,174 26,304 19,153
Long-term debt. 23,548 51,095 58,015
Repurchase of capital stock. — 95,092 _
Other. 33,014 20,809 24,130
720,334 682,634 554,222
(Decrease) in working capital. $ (5,164) $ (1,144) $ (63,874)

Increase (Decrease) in Working Capital by Element

Cash. $ 6,811 $ 8,491 $ (234)
Marketable securities. 19,996 30,201 (101,649)
Notes and accounts receivable. 39,519 123,507 59,251
Inventories. 58,498 15,500 38,734
Prepaid expenses and other current assets... 31,717 14,031 16,247
Notes payable. (38,111) (23,753) (8,712)
Accounts payable. (76,834) (100,681) (55,136)
United States and foreign income taxes. (5,275) 6,912 17,784
Other accrued taxes. (559) (5,891) (4,043)
Other current liabilities. (40,926) (69,461) (26,116)
(Decrease) in working capital. (5,164) (1,144) (63,874)

Working Capital at Beginning of Year 357,536 358,680 422,554

Working Capital at End of Year $352,372 $357,536 $358,680

48
 Note 1/Summary of Significant Accounting Policies
Notes to
Principles of Consolidation. The consolidated financial statements include the accounts of
Consolidated PepsiCo, Inc. and its subsidiaries. All significant intercompany transactions have been
Financial eliminated.
Statements Marketable Securities. Marketable securities are stated at cost which approximates market
and include time deposits of $107,871,000 in 1980 and $132,004,000 in 1979.
Inventories. Inventories are stated at the lower of cost (computed on the average or first-in,
first-out method) or net realizable value.
Property, Plant and Equipment. Land, buildings, and machinery and equipment are stated
at cost. Depreciation is calculated principally on a straight-line basis over the estimated useful
lives of the respective assets.
In accordance with Statement of Financial Accounting Standards No. 34, beginning in 1980
interest costs associated with the construction of new facilities or major expansions are
capitalized and amortized over the lives of the related assets. The amount of interest capitalized
in 1980 was $11,168,000 (seven cents per share) with a corresponding reduction in interest
expense.
Valuation of returnable bottles and cases is based on periodic physical inventories of those
in-plant and on estimates of those in-trade. In-plant and estimated in-trade breakage, less
related customers' deposits, is charged to cost of sales. Returnable bottles and cases are
adjusted to deposit value within one year of acquisition except for the initial introduction of new
soft drink package sizes which are adjusted to deposit value over four years. In foreign
operations, returnable bottles and cases and the related customers' deposits are translated into
U.S. dollars at current rates of exchange.
Goodwill. Goodwill represents the excess of cost over net tangible assets of companies
acquired, certain operating rights (prior to 1980) and trademarks. Approximately $60 million,
relating to acquisitions made prior to November 1,1970, is not amortized unless there is an
impairment of value. The remaining $97 million is amortized over appropriate periods not
exceeding 40 years. Amortization was $4,363,000 in 1980, $3,887000 in 1979 and $3,170,000 in
1978
Marketing Costs. Costs of advertising and other marketing and promotional programs are
charged to expense during the year, generally in relation to sales, and, except for materials in
inventory and prepayments, are fully expensed by the end of the year in which the cost is
incurred.
Income Taxes. Deferred income taxes arise from the deferral of investment tax credits,
which are amortized over the estimated useful lives of the related assets, and from timing
differences between financial and tax reporting, principally depreciation.
Taxes which would result from dividend distributions by foreign subsidiaries to the U.S.
parent are provided to the extent dividends are anticipated. All other undistributed earnings of
subsidiaries operating outside the U.S. have been reinvested indefinitely in foreign operations.
Accordingly, no provision has been made for additional taxes, not material in amount, that might
be payable with respect to such earnings in the event of remittance.
Fiscal Year. PepsiCo's fiscal year ends on the last Saturday in December. Fiscal years 1980,
1979 and 1978 ended on December 27, December 29, and December 30, respectively.
Net Income Per Share. Net income per share is computed by dividing net income by the
average number of common shares and common share equivalents outstanding during each
year. The conversion of all convertible debentures would not result in a material dilution.
Business Segments. Information related to revenues, operating profits, identifiable assets,
depreciation and amortization expense and capital expenditures for PepsiCo’s business
segments is presented on page 39.
Audit Committee of the Board of Directors. The Audit Committee of the Board, composed
entirely of outside directors, meets on a regular basis with PepsiCo's financial management,
internal auditors, and independent accountants to review internal and external audit plans,
activities, and recommendations, as well as PepsiCo's financial controls.

Note 2/Inventories
Inventories at December 27,1980 and December 29,1979 are summarized as follows:

1980_1979
(in thousands)
Finished goods. $164,957 $151,631
Raw materials, supplies and in-process 252,026 206.009
Equipment held for resale. 11.626 12.471
$428,609 $370,111

49
Note 3/Notes Payable and Long-term Debt
Notes payable at December 27,1980 and December 29, 1979 comprised the following:
_ 1980_1979
(in thousands)
Current maturities on long-term debt and capital lease obligations. . $ 14,940 $ 19,818
Other notes payable. 104,204 61,215
$119,144 $ 81,033

At December 27 1980 and December 29,1979, long-term debt (less current maturities)
consisted of:
_1980_1979
(in thousands)
Commercial paper, bank loans and notes (1980-15%%, 1979-13'/2%). $210,000 $106,000
10%% notes due 1986. 150,000
9'/»% notes due 1984. 100,000 100,000
8'/4% notes due 1985. 100.000 100,000
8%% notes due 1981. — 75,000
4%% convertible subordinated debentures ($2,500,000 due in 1995,
with balance due in 1996) 4,483 8,364
Other. 57,080 66,871
Total long-term debt. $621,563 $456,235

At December 27 1980 PepsiCo had revolving credit agreements with a group of commercial
banks, providing for loans up to a maximum of $325 million, maturing January 2,1984, which
supports the classification of commercial paper, bank loans and 8%% notes due 1981 as
long-term debt.
The amounts of long-term debt maturing after 1981 are as follows. 1982, $5,101,000; 1983,
$3,870,000; 1984, $312,805,000; 1985, $104,215,000; and subsequently, $195,572,000.
At December 27 1980, $170 million of unused lines of credit with U.S. banks were also
available for use by PepsiCo.
The debt agreements to which PepsiCo is a party include various restrictions, none of which
is currently significant to PepsiCo.

Note 4/Capital Stock and Capital in Excess of Par Value

The changes in capital stock and capital in excess of par value are summarized below:

Capital in Repur¬
Excess of chased
Shares Amount Par Value Shares
(dollars in thousands)
Balance at December 31,1977 . 91,794,150 $4,590 $ 164,541
Conversion of debentures and notes. 751,362 38 15,814 —
Exercise of stock options and warrants. 529,591 26 10,996 —

Balance at December 30,1978. 93,075,103 4,654 191,351 —

Conversion of debentures and notes. 1,220,364 61 25.774 —
Exercise of stock options and warrants. 305,747 15 2,826 —
Shares repurchased. (3,647,000) — — $(95,092)
Balance at December 29, 1979. 90,954,214 4,730 219,951 (95,092)
Conversion of debentures and other. 190,800 9 3,864 190
Exercise of stock options. 131,508 7 2,100 —

Balance outstanding at December 27,1980. 91,276,522 $4,746 $ 225,915 $(94,902)

Shares reserved at December 27 1980 were as follows:

Incentive plan. 4,137,606
Stock option plans. 967,143
Convertible subordinated debentures (at $21.17 per share). 211,778
5,316,527

Under PepsiCo's stock option plans, during 1980 options for 131,508 shares were exercised
at prices ranging from $2.89 to $24.63 per share. Options for 142,997 and 529,591 shares were
exercised at prices ranging from $2.89 to $24.63 and from $2.89 to $28.88, in 1979 and 1978,
respectively.
At December 27 1980, December 29,1979 and December 30,1978 there were outstanding
options for the purchase of 1,323,184,1,243,383 and 1,511,697 shares, respectively, at prices
ranging from $2.89 to $28.88. At December 27,1980, options for 249,736 shares were
exercisable.
Options were granted during 1980 for 602,070 shares at option prices ranging from $23.88
to $24.13. Options have been cancelled as follows: 1980-79,694; 1979-125,317; 1978-278,957.
 In 1979, stock appreciation rights (“SAR's”) were granted with respect to certain stock
options. Each SAR entitles an optionee to receive, in cash or shares of PepsiCo capital stock (as
determined by the Compensation Committee of PepsiCo's Board of Directors), the excess, if
any, of the fair market value of a share of capital stock on the date the SAR is exercised, less the
option exercise price. Options are automatically cancelled upon exercise of the related SAR.
SAR’s expire on the same dates as the related options. At December 27,1980, 220,256 SAR’s
were outstanding and exercisable.
In 1979, PepsiCo shareholders approved the 1979 Incentive Plan which carried forward the
principal features of the 1972 Performance Share Plan and replaced the 1975 Stock Option Plan
with an incentive stock unit program. Under the 1979 Plan the Compensation Committee of the
Board of Directors may award performance shares (each unit being limited to the market value
of a share of PepsiCo capital stock on date of grant), and an equal number of stock options to
purchase capital stock to senior management employees, and may award incentive stock units,
rather than options, to other management employees. Performance shares are not paid unless
PepsiCo achieves stated cumulative growth rates in earnings per share over the four-year
period following the award. Incentive stock units are rights to receive shares of capital stock or
their value, which vest over a period of time, without payment of any amounts to PepsiCo or
satisfaction of any performance objectives.
Payments for performance share units and incentive stock units may be made in cash or in
capital stock, or a combination thereof, as the Committee decides. The aggregate number of
shares of capital stock which may be delivered or purchased under the Plan may not exceed
4,600,000 shares. During 1980 and 1978, performance share units were awarded, of which
965,797 were outstanding at December 27,1980. During 1980 and 1979, incentive stock units
were awarded of which 227,427 were outstanding at December 27,1980. The cost of awards
under the 1972 Performance Share Plan and the 1979 Incentive Plan is being charged to income
($8,787,000 in 1980, $5,220,000 in 1979 and $5,214,000 in 1978) over the applicable term of the
award period.

Note 5/Leases and Commitments

PepsiCo and its subsidiaries have noncancellable commitments for rental of restaurant facilities,
office space, plant and warehouse facilities, transportation equipment and other personal
property under both capital and operating leases. Certain franchised restaurants are leased
and subsequently subleased to franchisees. Lease commitments on capital and operating
leases expire at various dates to 2014 and 2015, respectively. Following is an analysis of leased
property under capital leases by major classes at December 27,1980 and December 29,1979.
1980 1979
(in thousands)
Buildings. $177,944 $178,253
Machinery and equipment. . 9,166 8,539
187,110 186,792
Less accumulated amortization. 64,398 57,740
$122,712 $129,052

Following is a schedule by year of future minimum lease commitments and sublease

receivables under all noncancellable leases (in thousands):
Commitments Sublease Receivables
Direct
Capital Operating Financing Operating
1981. $ 26,613 $ 42,863 $ (3.774) $ (4,569)
1982. 25,538 37,809 (3,720) (4,418)
1983. 24,274 31,699 (3,721) (4.283)
1984. 23,291 27,012 (3,733) (3,950)
1985. 22,507 23,353 (3,744) (3,799)
Later years. 218,465 166,202 (33,972) (27,887)
Total minimum lease commitments (receivables)... $340,688 $328,938 $(52,664) $(48,906)

The present value of minimum lease payments for capital leases amounts to $168,796,000 after
deducting $5,289,000 for estimated executory costs (taxes, maintenance and insurance) and
$166,603,000 representing imputed interest. The present value of minimum sublease
receivables amounts to $24,838,000 after deducting $27,826,000 of unearned income. Total
rental expense for all operating leases for years ended December 27,1980, December 29,1979
and December 30, 1978 was $76,208,000, $57,549,000 and $47,434,000, respectively. Total
rental income from all operating subleases for years ended December 27,1980, December 29,
1979 and December 30,1978 was $6,693,000, $5,953,000 and $5,255,000, respectively.
At December 27, 1980, PepsiCo and its subsidiaries were contingently liable under
guarantees aggregating $75,000,000.
51
Note 6/Income taxes
The provision for U S. federal and foreign income taxes is comprised of the following:

1980 1979 1978

(in thousands)
Current:
U.S. $132 947 $107,673 $133,670
Foreign. . 45.334 34,802 26,578
Deferred (principally U.S.) . . 22,800 25,800 14,100
$201,081 $168,275 $174,348

U.S. and foreign income before federal and foreign income taxes and the extraordinary
charge were as follows: 1980 1979 1978
(in thousands)
U.S. $359,275 $306,216 $312,216
Foreign. 133,558 126,914 87,901
Total. $492,833 $433,130 $400,117

The differences between the effective and statutory U.S. federal income tax rates are
comprised of the following: 1980 1979 1978
U.S. statutory rate. 46.0% 46.0% 48.0%
Effect of earnings of foreign operations taxed at an aggregate rate
less than the statutory U.S. rate (3.0) (5.3) (2.8)
Other-net. (2.2) (18) (16)
40 8% 38.9% 43.6%

The lower effective rates result principally because a substantial portion of the earnings of a U.S.
subsidiary operating in Puerto Rico (which has been invested in marketable securities) is not
taxable.
Deferred income tax expense arises from the following items:
1980 1979 1978
(in thousands)
Excess of tax over financial statement expense related to
depreciable assets (including capital leases). $ 23,500 $ 17.600 $ 9.600
Deferral of investment tax credit benefits 9,500 8,400 11,300
Other-net. (10,200) (200) (6.800)
$ 22.800 $ 25,800 $ 14,100

U.S. and foreign income taxes payable consist of the following: 1980 1979
(in thousands)
U.S. $ 37.744 $ 36,772
Foreign. 30,100 25,797
$ 67,844 $ 62,569

Deferred income taxes payable include: 1980 1979

(in thousands)
Deferred income taxes. $ 80,600 $ 63,000
Deferred investment tax credits. 53,100 43,600
$133,700 $106,600
Note 7/Employee Benefit Plans
PepsiCo and its subsidiaries have several non-contributory pension plans covering substantially
all domestic employees (mostly non-union). The total pension expense for all plans for 1980,
1979, and 1978 was approximately $42,400,000, $36,700,000, and $31,800,000, respectively,
which includes amortization of unfunded past service cost over 30 years for certain defined
benefit plans. PepsiCo makes annual contributions to the plans equal to the amounts accrued
for pension expense. A comparison of accumulated plan benefits and plan net assets for
PepsiCo’s domestic defined benefit plans is presented below: January i
1980 1979
(in thousands)
Actuarial present value of accumulated plan benefits:
Vested. $160,170 $149,923
Non-vested. 22,481 24,583
$182,651 $174,506
Net assets available for benefits $198,345 $158,580

The rate of return used in determining the actuarial present value of accumulated plan benefits
was seven percent for both 1980 and 1979.
 Note 8/Supplementary Income Statement Items
1980 1979 1978
(in thousands)
Maintenance and repairs. $142,450 $120,497 $100,073
Depreciation and amortization of property, plant and equipment... $166,862 $137,344 $112,778
Taxes other than U.S. federal and foreign income taxes:
Payroll. $ 81,966 $ 71,465 $ 60,577
State income taxes. $ 20,206 $ 21,215 $ 16,500
Other. $ 50,899 $ 53,822 $ 42,770
Advertising costs. $358,282 $306,501 $257,681
Foreign exchange losses (gains). $(11,900) $ (5.700) $ 11,600*

•Related principally to Swiss franc loan repaid in December 1978.

Note 9/Extraordinary Charge-Write-off of Motor Carrier Operating Rights

Subsequent to the enactment in July of the Motor Carrier Act of 1980, which substantially
deregulated the trucking industry, the Financial Accounting Standards Board adopted
Statement No. 44 which generally required the write-off of interstate operating rights in the
financial statements of motor carriers. Accordingly, PepsiCo recorded as an extraordinary
charge in the fourth quarter of 1980 the write-off of operating rights of its transportation
businesses aggregating $17,762,000 (19 cents per share). No current tax benefit has been
recorded for the extraordinary charge, pending clarification of its deductibility for income
tax purposes.

Report of To Our Shareholders:

Chief Financial PepsiCo, Inc. is responsible for the integrity and objectivity of its financial statements. To fulfill
this responsibility, PepsiCo maintains an accounting system and related controls directed
Officer towards the safeguarding of assets and the reliability of financial information. An integral part of
such controls is an internal audit program designed to monitor compliance with PepsiCo's
policies and procedures.
The international accounting firm of Arthur Young & Company has been retained to examine
the financial statements of PepsiCo and to report to our shareholders the results of that examina¬
tion. Representatives of that firm meet regularly with the Audit Committee of the Board of Direc¬
tors, composed entirely of non-employee directors, to discuss the results of their audit which
includes a review and evaluation of PepsiCo’s internal controls and financial reporting. Arthur
Young & Company’s report to you on our financial statements is presented below.

Herman A. Schaefer
Executive Vice President
Finance and Administration

Report of Board of Directors and Shareholders

PepsiCo, Inc.
Certified Public We have examined the accompanying consolidated balance sheet of PepsiCo, Inc. and subsid¬
Accountants iaries at December 27,1980 and December 29,1979, and the related consolidated statements
of income and retained earnings and changes in financial position for each of the three years in
the period ended December 27,1980. Our examinations were made in accordance with gen¬
erally accepted auditing standards and, accordingly, included such tests of the accounting
records and such other auditing procedures as we considered necessary in the circumstances.
In our opinion, the statements mentioned above present fairly the consolidated financial
position of PepsiCo, Inc. and subsidiaries at December 27,1980 and December 29, 1979, and
the consolidated results of operations and changes in financial position for each of the three
years in the period ended December 27 1980, in conformity with generally accepted accounting
principles applied on a consistent basis during the period.

277 Park Avenue

New York, New York
February 5,1981
53
Ten-Year 1980 1979
Comparative Summary of Operations
(in thousands except per common share)
Summary Net sales and other operating revenues. $5,975,220 $5,090,567
PepsiCo, Inc. and Subsidiaries Cost of sales and other operating revenues. 3,006,506 2,587,721
Marketing, administrative and other expenses. 2,393,683 2,022,115
Interest expense. 114,149 73,121
Interest income. (31,951) (25,520)
5,482,387 4,657,437
492,833 433,130

U.S. and foreign income taxes. 201,081 168,275

291,752 264,855

Equity in net income of PepsiCo Leasing Corporation.

Net income. 291,752(1> 264,855
Per common share. $ 3.20*11 $ 2.85
Cash dividends declared. 114,886 102,449
Per common share. $ 1.26 $ 1.105
Additions to property, plant and equipment. 445,712 386,885
Depreciation and amortization. 172,209 142,053
Average common shares outstanding. 91,165 92,808

Year-End Position
(in thousands except per common share)
Working capital . 352,372 357,536
Property, plant and equipment-net. 1,759,059 1,401,251
Total assets. 3,417,538 2,887,578
Long-term debt(2). 781,709 618,950
Shareholders'equity. 1,428,923 1,263,649
Per common share. $ 15.65 $ 13.89
Common shares outstanding. 91,277 90,954

Statistics and Ratios

Current assets to current liabilities. 1.4 to 1 1.4 to 1
Return on average shareholders’ equity. 21.7%*1> 21.8%
Return on revenues. 4.9%(1) 5.2%
Long-term debt(2)to total capital employed*3’. 30.9% 29.1%
Total debt*2’ to total capital employed*3’. 35.6% 32.9%
Employees. 111,000 105,000
Shareholders. 51,000 53,000

(1) Before extraordinary charge of $17,762 (19 cents per share)

(2) Includes capital leases
(3) Total capital employed is total debt, shareholders’ equity, deferred income
taxes and other liabilities and deferred credits.

54
 1978 1977 1976 1975 1974 1973 1972 1971

$4,300,006 $3,649,291 $3,109,366 $2,709,373 $2,408,808 $1,938,851 $1,578,802 $1,381,883

2,224,499 1,881,742 1,639,937 1,487,922 1,361,701 1,055,334 840,099 746,436
1,645,142 1,392,195 1,153,400 970,049 835,959 699,864 583,310 498,844
51,996 45,983 45,000 52,096 55,998 36,053 17,963 18,630
(21,748) (25,643) (26,034) (21,292) (18,313) (13,701) (9,066) (8,075)
3,899,889 3,294,277 2,812,303 2,488,775 2,235,345 1,777,550 1,432,306 1,255,835
400,117 355,014 297,063 220,598 173,463 161,301 146,496 126,048

174,348 158,273 135,328 98,964 75,536 74,494 67,852 57,096

225,769 196,741 161,735 121,634 97,927 86,807 78,644 68,952

1,852 2,345 2,699 2,638 990

225,769 196,741 161,735 123,486 100,272 89,506 81,282 69,942
$ 2.43 $ 2.14 $ 1.79 $ 1.38 $ 1.13 $ 1.01 $ .93 $ .82
88,385 67,021 47,764 37,085 31,755 27,783 24,108 23,592
$ .975 $ .825 $ .633 $ .500 $ .433 $ .380 $ .333 $ .333
364,539 275,116 191,767 139,838 194,614 182.567 87,262 65,897
117,019 93,723 79,057 72,739 64,832 54.031 41,334 36,128
92,883 92,046 90,600 89,288 89,008 88,798 87,306 85,427

358,680 422,554 424,817 369,772 305,108 172,426 169,660 150,613

1,137,744 885,328 713,191 614,803 590,749 495,553 374,368 335,721
2,419,369 2,130,294 1,853,599 1,660.577 1,603,892 1,358,572 1,064,550 933,778
479,134 467,808 433,887 463,857 482,491 345,661 257,305 226,994
1,167,659 1,003,401 868,480 719,532 630,367 560,004 497,465 422,934
$ 12.55 $ 10.93 $ 9.50 $ 8.09 $ 7.12 $ 6.34 $ 5.65 $ 4.91
93,075 91,794 91,420 88,894 88,563 88,396 88,003 86,119

1.6 to 1 1.7 to 1 1.9 to 1 1.9 to 1 1.7 to 1 1.4 to 1 1.7 to 1 1.7 to 1

20.8% 21.0% 20.4% 18.3% 16.8% 16.9% 17.7% 17.9%
5.3% 5.4% 5.2% 4.6% 4.2% 4.6% 5.1% 5.1%
26.2% 29.2% 30.6% 34.9% 36.3% 31.1% 29.4% 29.7%
29.4% 32.2% 34.2% 40.2% 47.6% 43.8% 36.4% 38.6%
95,000 83,000 77,000 71,000 68,000 63,000 51,000 46,000
55,000 52,000 48,000 49,000 51,000 52,000 53,000 53,000
PepsiCo, Inc- Directors Committees William J. Gill
Victor A. Bonomo Audit Committee: Vice President, Research
Directors and Executive Vice President, Messrs. Learson (chairman), and Technical Services
Operations, PepsiCo, Inc. Coleman, Garvin, James,
Officers William T. Coleman, Jr. Murphy, Stewart and Weber
Edward V. Lahey, Jr.
Vice President, General
Partner, O'Melveny & Myers Compensation Committee: Counsel and Secretary
Clifton C. Garvin, Jr. Messrs. Stewart (chairman), Harvey Luppescu
Chairman of the Board and Coleman, Garvin, James, Vice President, Tax
Chief Executive Officer, Learson, Murphy and Weber Administration
Exxon Corporation Executive Committee: Fredrick S. Meils
John V. James Messrs. Kendall (chairman), Vice President, Financial
Chairman of the Board and Bonomo, Garvin, Learson, Management and Planning
Chief Executive Officer, Pearson, Schaefer, Stewart
Frank L. Peck
Dresser Industries, Inc. and Warren
Vice President, Concentrate
Donald M. Kendall Officers Operations
Chairman of the Board and Donald M. Kendall Harvey C. Russell
Chief Executive Officer, Chairman of the Board and Vice President, Community
PepsiCo, Inc. Chief Executive Officer Affairs
T. Vincent Learson Andrall E. Pearson Leonard Schutzman
Member of the Board of President and Chief Vice President and
Directors and Retired Operating Officer Controller
Chairman, International Victor A. Bonomo Edward F. Walsh
Business Machines Executive Vice President, Vice President, Personnel
Corporation
Operations Vincent M. Burke
Thomas A. Murphy Herman A. Schaefer Assistant Controller
Retired Chairman of the
Executive Vice President, Douglas E. Moran
Board and Chief Executive Finance and Administration
Officer, General Motors Assistant Controller
Corporation D. Wayne Calloway Martyn R. Redgrave
Senior Vice President, Snack Assistant Controller
Andrall E. Pearson Foods (U.S.)
President and Chief Wendell W. Gunn
Operating Officer, John Sculley Assistant Treasurer
PepsiCo, Inc. Senior Vice President, Peter D. Houchin
Beverage Operations (U.S.) AssistantTreasurer
Herman A. Schaefer
Executive Vice President, Donald N. Smith Richard Leberman
Finance and Administration, Senior Vice President, Food
AssistantTreasurer
PepsiCo, Inc. Service
Walter S. Rosenstein
Robert H. Stewart, III Peter K. Warren Assistant Secretary
Chairman of the Executive Senior Vice President,
Committee, First International International Beverages
Bancshares, Inc. Richard I. Ahern
Peter K. Warren Vice President, International
Chairman, PepsiCo Bottling
International and Senior Vice Mehdi R. AH
President, International Vice President and Treasurer
Beverages, PepsiCo, Inc. Richard J. Caley
Dr. Arnold R. Weber Vice President, Sporting
President, University of Goods
Colorado Cartha D. DeLoach
Vice President, Corporate
Affairs
Gerald J. Fischer
Vice President, Corporate
Development

56
Executive Offices Taco Bell Capital Stock
Purchase, New York 10577 17381 Red Hill Avenue Shares of PepsiCo Capital
(914) 253-2000 Irvine, California 92714 Stock are traded on
Donald N. Smith, Chairman the New York and Midwest
Principal Divisions and Stock Exchanges
PepsiCo Foods International
Subsidiaries 4141 Blue Lake Circle
Pepsi-Cola Company Suite 260
Form10-K
Purchase, New York 10577 Copies of PepsiCo’s Form
Dallas, Texas 75234
John Sculley, President 10-K Report to the Securities
John J. Kickham, President
and Exchange Commission
Frito-Lay, Inc. Pepsi-Cola Bottling Group may be obtained without
Frito-Lay Tower, Purchase, New York 10577 charge from the Director of
Exchange Park Robert G. Dettmer, President Corporate Communications,
Dallas, Texas 75235 United Beverages PepsiCo, Inc., Purchase,
D. Wayne Calloway, President
International NY. 10577
PepsiCo International Purchase, New York 10577
Purchase, New York 10577 Richard I. Ahern, President Auditors
Peter K. Warren, Chairman Arthur Young & Company
PepsiCo Wines and
Robert H. Beeby, President 271 Park Avenue
Spirits International
Pizza Hut, Inc. Purchase, New York 10577 New York, New York 10172
9111 East Douglas Norman Heller, President
Wichita, Kansas 67207 Transfer Agents
Arthur G, Gunther, President PepsiCo Food Service and Registrars
International Morgan Guaranty Trust
North American Van Lines, Inc. Purchase, New York 10577
5001 U.S. 30 West Company of New York
Graham G. Butler, President 30 West Broadway
Fort Wayne, Indiana 46818
Kenneth W. Maxfield, New York, New York 10015
President (212) 587-6451
Lee Way Motor Freight, Inc. First National Bank in Dallas
3401 N.W. 63rd Street PO. Box 6031
Oklahoma City, Oklahoma Dallas. Texas 75283
73157 (214) 744-8464
Richard L. Frucci, President
Dividend Reinvestment
Wilson Sporting Goods Co. Agent
2233 West Street Citibank, N.A.
River Grove, Illinois 60171 Ill Wall Street
Richard J. Caley, President New York, New York 10043
(212) 558-7409

Annual Meeting
The Annual Meeting of
Shareholders will be held at
the offices of the Corporation,
Purchase, New York, at 10:00
a.m. (E.D.T.) Wednesday,
May 6,1981. Proxies for the
meeting will be solicited by
management in a separate
Proxy Statement. This report
is not part of such proxy
solicitation.

Design Eisenman & Enock, Inc

Principal Photography Charles Harbutt
Printing National Bickford Foremost