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Basis of Presentation and Our Divisions | 12 Months Ended
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Dec. 30, 2023
Organization, Consolidation and Presentation of Financial Statements [Abstract] |
Basis Of Presentation and Our Divisions | Basis of Presentation and Our Divisions Basis of Presentation The accompanying consolidated financial statements have been prepared in accordance with GAAP and include the consolidated accounts of PepsiCo, Inc. and the affiliates that we control. In addition, we include our share of the results of certain other affiliates using the equity method based on our economic ownership interest, our ability to exercise significant influence over the operating or financial decisions of these affiliates or our ability to direct their economic resources. We do not control these other affiliates, as our ownership in these other affiliates is generally 50% or less. Intercompany balances and transactions are eliminated. As a result of exchange restrictions and other operating restrictions, we do not have control over our Venezuelan subsidiaries. As such, our Venezuelan subsidiaries are not included within our consolidated financial results for any period presented. Raw materials, direct labor and plant overhead, as well as purchasing and receiving costs, costs directly related to production planning, inspection costs and raw materials handling facilities, are included in cost of sales. The costs of moving, storing and delivering finished product, including merchandising activities, are included in selling, general and administrative expenses. The preparation of our consolidated financial statements requires us to make estimates and assumptions that affect reported amounts of assets, liabilities, revenues, expenses and disclosure of contingent assets and liabilities. Estimates are used in determining, among other items, sales incentives accruals, tax reserves, share-based compensation, pension and retiree medical accruals, amounts and useful lives for intangible assets and future cash flows associated with impairment testing for indefinite-lived intangible assets, goodwill and other long-lived assets. We evaluate our estimates on an ongoing basis using our historical experience, as well as other factors we believe appropriate under the circumstances, such as current economic conditions, and adjust or revise our estimates as circumstances change. Additionally, the business and economic uncertainty resulting from the ongoing conflicts in Ukraine and the Middle East and the high interest rate and inflationary cost environment has made such estimates and assumptions more difficult to calculate. As future events and their effect cannot be determined with precision, actual results could differ significantly from those estimates. Our fiscal year ends on the last Saturday of each December, resulting in a 53 rd reporting week every five or six years, including in our 2022 financial results. While our North America financial results are reported on a weekly calendar basis, substantially all of our international operations reported on a monthly calendar basis prior to the fourth quarter of 2021. Beginning in the fourth quarter of 2021, all of our international operations reported on a monthly calendar basis. This change did not have a material impact on our consolidated financial statements. The following chart details our quarterly reporting schedule:
Quarter |  | United States and Canada |  | International
First Quarter |  | 12 weeks |  | January and February
Second Quarter |  | 12 weeks |  | March, April and May
Third Quarter |  | 12 weeks |  | June, July and August
Fourth Quarter |  | 16 weeks (17 weeks for 2022) |  | September, October, November and December
Unless otherwise noted, tabular dollars are in millions, except per share amounts. All per share amounts reflect common per share amounts, assume dilution unless otherwise noted, and are based on unrounded amounts. Certain reclassifications were made to the prior year’s consolidated financial statements to conform to the current year presentation. Our Divisions We are organized into seven reportable segments (also referred to as divisions), as follows: 1)Frito-Lay North America (FLNA), which includes our branded convenient food businesses in the United States and Canada; 2)Quaker Foods North America (QFNA), which includes our branded convenient food businesses, such as cereal, rice, pasta and other branded food, in the United States and Canada; 3)PepsiCo Beverages North America (PBNA), which includes our beverage businesses in the United States and Canada; 4)Latin America (LatAm), which includes all of our beverage and convenient food businesses in Latin America; 5)Europe, which includes all of our beverage and convenient food businesses in Europe; 6)Africa, Middle East and South Asia (AMESA), which includes all of our beverage and convenient food businesses in Africa, the Middle East and South Asia; and 7)Asia Pacific, Australia and New Zealand and China region (APAC), which includes all of our beverage and convenient food businesses in Asia Pacific, Australia and New Zealand, and China region. Through our operations, authorized bottlers, contract manufacturers and other third parties, we make, market, distribute and sell a wide variety of beverages and convenient foods, serving customers and consumers in more than 200 countries and territories with our largest operations in the United States, Mexico, Canada, Russia, China, the United Kingdom, Brazil and South Africa. The accounting policies for the divisions are the same as those described in Note 2, except for the following allocation methodologies: •share-based compensation expense; •pension and retiree medical expense; and •derivatives. Share-Based Compensation Expense Our divisions are held accountable for share-based compensation expense and, therefore, this expense is allocated to our divisions as an incremental employee compensation cost. The allocation of share-based compensation expense of each division is as follows:
| 2023 |  | 2022 |  | 2021
FLNA | 13 | % |  | 13 | % |  | 13 | %
QFNA | 1 | % |  | 1 | % |  | 1 | %
PBNA | 18 | % |  | 20 | % |  | 19 | %
LatAm | 6 | % |  | 6 | % |  | 5 | %
Europe | 10 | % |  | 11 | % |  | 13 | %
AMESA | 5 | % |  | 5 | % |  | 6 | %
APAC | 3 | % |  | 3 | % |  | 2 | %
Corporate unallocated expenses | 44 | % |  | 41 | % |  | 41 | %
The expense allocated to our divisions excludes any impact of changes in our assumptions during the year which reflect market conditions over which division management has no control. Therefore, any variances between allocated expense and our actual expense are recognized in corporate unallocated expenses. Pension and Retiree Medical Expense Pension and retiree medical service costs measured at fixed discount rates are reflected in division results. The variance between the fixed discount rate used to determine the service cost reflected in division results and the discount rate as disclosed in Note 7 is reflected in corporate unallocated expenses. Derivatives We centrally manage commodity derivatives on behalf of our divisions. These commodity derivatives include agricultural products, energy and metals. Commodity derivatives that do not qualify for hedge accounting treatment are marked to market each period with the resulting gains and losses recorded in corporate unallocated expenses as either cost of sales or selling, general and administrative expenses, depending on the underlying commodity. These gains and losses are subsequently reflected in division results when the divisions recognize the cost of the underlying commodity in operating profit. Therefore, the divisions realize the economic effects of the derivative without experiencing any resulting mark-to-market volatility, which remains in corporate unallocated expenses. These derivatives hedge underlying commodity price risk and were not entered into for trading or speculative purposes. Net Revenue and Operating Profit/(Loss) Net revenue and operating profit/(loss) of each division are as follows:
| Net Revenue |  | Operating Profit/(Loss)
| 2023 |  | 2022 |  | 2021 |  | 2023(a) |  | 2022(a) |  | 2021
FLNA | $ | 24,914 |  |  | $ | 23,291 |  |  | $ | 19,608 |  |  | $ | 6,755 |  |  | $ | 6,135 |  |  | $ | 5,633 |
QFNA (b) | 3,101 |  |  | 3,160 |  |  | 2,751 |  |  | 492 |  |  | 604 |  |  | 578 |
PBNA (c) | 27,626 |  |  | 26,213 |  |  | 25,276 |  |  | 2,584 |  |  | 5,426 |  |  | 2,442 |
LatAm | 11,654 |  |  | 9,779 |  |  | 8,108 |  |  | 2,252 |  |  | 1,627 |  |  | 1,369 |
Europe (c) | 13,234 |  |  | 12,724 |  |  | 13,038 |  |  | 767 |  |  | (1,380) |  |  | 1,292 |
AMESA | 6,139 |  |  | 6,438 |  |  | 6,078 |  |  | 807 |  |  | 666 |  |  | 858 |
APAC | 4,803 |  |  | 4,787 |  |  | 4,615 |  |  | 713 |  |  | 537 |  |  | 673 |
Total division | 91,471 |  |  | 86,392 |  |  | 79,474 |  |  | 14,370 |  |  | 13,615 |  |  | 12,845 |
Corporate unallocated expenses | — |  |  | — |  |  | — |  |  | (2,384) |  |  | (2,103) |  |  | (1,683) |
Total | $ | 91,471 |  |  | $ | 86,392 |  |  | $ | 79,474 |  |  | $ | 11,986 |  |  | $ | 11,512 |  |  | $ | 11,162 |
(a)See below for impairment and other charges taken related to the Russia-Ukraine conflict, brand portfolio impairment and other impairment. (b)In 2023, operating profit included a pre-tax charge of $136 million ($104 million after-tax or $0.07 per share) in cost of sales for product returns, inventory write-offs and customer and consumer-related costs associated with the Quaker Recall. (c)In 2022, we recorded a gain of $3,029 million and $292 million in our PBNA and Europe divisions, respectively, associated with the Juice Transaction. The total after-tax amount was $2,888 million or $2.08 per share. See Note 13 for further information. Disaggregation of Net Revenue Our primary performance obligation is the distribution and sales of beverage and convenient food products to our customers. The following table reflects the percentage of net revenue generated between our beverage business and our convenient food business for each of our international divisions, as well as our consolidated net revenue:
| 2023 |  | 2022 |  | 2021
| Beverages(a) |  | Convenient Foods |  | Beverages(a) |  | Convenient Foods |  | Beverages(a) |  | Convenient Foods
LatAm | 9 | % |  | 91 | % |  | 9 | % |  | 91 | % |  | 10 | % |  | 90 | %
Europe | 48 | % |  | 52 | % |  | 50 | % |  | 50 | % |  | 54 | % |  | 46 | %
AMESA | 29 | % |  | 71 | % |  | 30 | % |  | 70 | % |  | 31 | % |  | 69 | %
APAC | 23 | % |  | 77 | % |  | 23 | % |  | 77 | % |  | 22 | % |  | 78 | %
PepsiCo | 41 | % |  | 59 | % |  | 42 | % |  | 58 | % |  | 45 | % |  | 55 | %
(a)Beverage revenue from company-owned bottlers, which primarily includes our consolidated bottling operations in our PBNA and Europe divisions, is 35%, 37% and 40% of our consolidated net revenue in 2023, 2022 and 2021, respectively. Generally, our finished goods beverage operations produce higher net revenue, but lower operating margins as compared to concentrate sold to authorized bottling partners for the manufacture of finished goods beverages. Impairment and Other Charges We recognized Russia-Ukraine conflict charges, brand portfolio impairment charges and other impairment charges as described below. A summary of pre-tax charges taken in 2022 in our Europe division as a result of the Russia-Ukraine conflict is as follows:
|  |  |  |  |  |  |  |  | Cost of sales |  | Selling, general and administrative expenses |  | Impairment of intangible assets(a) |  | Total
Impairment charges related to intangible assets |  |  |  |  |  |  |  |  | $ | — |  |  | $ | — |  |  | $ | 1,198 |  |  | $ | 1,198 |
Impairment charges related to property, plant and equipment |  |  |  |  |  |  |  |  | 103 |  |  | 22 |  |  | — |  |  | 125 |
Allowance for expected credit losses |  |  |  |  |  |  |  |  | — |  |  | 12 |  |  | — |  |  | 12 |
Allowance for inventory write downs |  |  |  |  |  |  |  |  | 28 |  |  | 1 |  |  | — |  |  | 29 |
Other |  |  |  |  |  |  |  |  | 9 |  |  | 42 |  |  | — |  |  | 51 |
Total |  |  |  |  |  |  |  |  | $ | 140 |  |  | $ | 77 |  |  | $ | 1,198 |  |  | $ | 1,415 |
After-tax amount |  |  |  |  |  |  |  |  |  |  |  |  |  |  | $ | 1,124 |
Impact on net income attributable to PepsiCo per common share |  |  |  |  |  |  |  |  |  |  |  |  |  |  | $ | (0.81) |
(a)See Note 4 for further information. For information on our policies for indefinite-lived intangible assets, see Note 2. In 2023, a pre-tax credit of $7 million ($7 million after-tax or $0.01 per share) was recorded in our Europe division, primarily in selling, general and administrative expenses, representing adjustments for changes in estimates of previously recorded amounts. In addition, a tax benefit of $68 million ($0.05 per share) was recorded in our Europe division related to the impairment of certain consolidated investments. A summary of pre-tax charges taken in 2022 as a result of our decision to reposition or discontinue the sale/distribution of certain brands and to sell an investment is as follows:
|  |  |  |  |  |  |  |  | Cost of sales |  | Selling, general and administrative expenses |  | Impairment of intangible assets(a) |  | Total |
PBNA |  |  |  |  |  |  |  |  | $ | 26 |  |  | $ | 8 |  |  | $ | 126 |  |  | $ | 160 |  | Impairment and other charges associated with distribution rights and inventory due to the termination of Bang energy drinks distribution agreement
LatAm |  |  |  |  |  |  |  |  | — |  |  | 35 |  |  | 36 |  |  | 71 |  | Loss on sale and impairment of intangible assets related to the sale of certain non-strategic brands
Europe |  |  |  |  |  |  |  |  | 1 |  |  | 10 |  |  | 242 |  |  | 253 |  | Primarily impairment of intangible assets related to the discontinuation or repositioning of certain juice and dairy brands in Russia
AMESA |  |  |  |  |  |  |  |  | 29 |  |  | 121 |  |  | 9 |  |  | 159 |  | Primarily impairment of investment, property, plant and equipment and intangible assets related to the sale or discontinuation of non-strategic investment and brands
APAC |  |  |  |  |  |  |  |  | 5 |  |  | — |  |  | — |  |  | 5 |  | Impairment of property, plant and equipment related to the discontinuation of a non-strategic brand in China
Total |  |  |  |  |  |  |  |  | $ | 61 |  |  | $ | 174 |  |  | $ | 413 |  |  | $ | 648 |  |
After-tax amount |  |  |  |  |  |  |  |  |  |  |  |  |  |  | $ | 522 |  |
Impact on net income attributable to PepsiCo per common share |  |  |  |  |  |  |  |  |  |  |  |  |  |  | $ | (0.38) |  |
(a)See Note 4 for further information. For information on our policies for indefinite-lived intangible assets, see Note 2. In 2023, a pre-tax credit of $13 million ($13 million after-tax or $0.01 per share) was recorded in our AMESA division, with $9 million in selling, general and administrative expenses and $4 million in cost of sales. In addition, a pre-tax charge of $2 million ($1 million after-tax with a nominal amount per share) was recorded in our LatAm division in selling, general and administrative expenses. Both of these amounts represent adjustments for changes in estimates of previously recorded amounts. A summary of pre-tax impairment charges taken as a result of our quantitative assessments of certain of our indefinite-lived intangible assets and related to our investment in TBG is as follows:
|  |  | Other impairment charges |
|  |  | 2023 |  |  |  |  |  | 2022 |
|  |  | Selling, general and administrative expenses |  | Impairment of intangible assets(a) |  | Total |  |  |  |  |  | Impairment of intangible assets(a) |  |  |
FLNA |  |  | $ | — |  |  | $ | — |  |  | $ | — |  |  |  |  |  |  | $ | 88 |  |  |  | Related to a baked fruit convenient food brand
PBNA |  |  | 321 |  |  | — |  |  | 321 |  |  |  |  |  |  | — |  |  |  | Includes our proportionate share of TBG’s indefinite-lived intangible assets impairment and other-than-temporary impairment of our investment in TBG
Europe |  |  | — |  |  | 862 |  |  | 862 |  |  |  |  |  |  | 1,264 |  |  |  | Related to the SodaStream brand and goodwill
AMESA |  |  | — |  |  | 6 |  |  | 6 |  |  |  |  |  |  | 31 |  |  | Related to brands from the Pioneer Foods acquisition
APAC |  |  | — |  |  | 59 |  |  | 59 |  |  |  |  |  |  | 172 |  |  | Related to the Be & Cheery brand
Total |  |  | $ | 321 |  |  | $ | 927 |  |  | $ | 1,248 |  |  |  |  |  |  | $ | 1,555 |  |  |  |
After-tax amount |  |  |  |  |  |  | $ | 1,033 |  |  |  |  |  |  | $ | 1,301 |  |  |  |
Impact on net income attributable to PepsiCo per common share |  |  |  |  |  |  | $ | (0.75) |  |  |  |  |  |  | $ | (0.94) |  |  |  |
(a)See Note 4 for further information. For information on our policies for indefinite-lived intangible assets, see Note 2. COVID-19 Charges Operating profit includes certain pre-tax charges taken as a result of the COVID-19 pandemic related to incremental employee compensation costs, such as certain leave benefits and labor costs, employee protection costs, allowances for expected credit losses and upfront payments to customers and their related adjustments for changes in estimates as conditions improve. These pre-tax charges were not significant in 2023. In 2022 and 2021, these pre-tax charges by division were as follows:
| COVID-19 charges
| 2022 |  | 2021 |  |
FLNA | $ | 25 |  |  | $ | 56 |  |  |
QFNA | 1 |  |  | 2 |  |  |
PBNA (a) | 23 |  |  | (11) |  |  |
LatAm | 15 |  |  | 64 |  |  |
Europe | 5 |  |  | 21 |  |  |
AMESA | 5 |  |  | 7 |  |  |
APAC | 21 |  |  | 9 |  |  |
Total | $ | 95 |  |  | $ | 148 |  |  |
(a)Income amount primarily relates to adjustments for changes in estimates of allowances for expected credit losses and upfront payments to customers, due to improved projected default rates and lower at-risk balances. Corporate Unallocated Expenses Corporate unallocated expenses include costs of our corporate headquarters, centrally managed initiatives such as commodity derivative gains and losses, foreign exchange transaction gains and losses, our ongoing business transformation initiatives, unallocated research and development costs, unallocated insurance and benefit programs, tax-related contingent consideration, certain acquisition and divestiture-related charges, certain gains and losses on equity investments, as well as certain other items. Other Division Information Total assets and capital spending of each division are as follows:
| Total Assets |  | Capital Spending
| 2023 |  | 2022 |  | 2023 |  | 2022 |  | 2021
FLNA | $ | 12,176 |  |  | $ | 11,042 |  |  | $ | 1,341 |  |  | $ | 1,464 |  |  | $ | 1,411 |
QFNA | 1,199 |  |  | 1,245 |  |  | 103 |  |  | 93 |  |  | 92 |
PBNA | 41,355 |  |  | 40,286 |  |  | 1,723 |  |  | 1,714 |  |  | 1,275 |
LatAm | 9,281 |  |  | 7,886 |  |  | 841 |  |  | 581 |  |  | 461 |
Europe | 15,615 |  |  | 16,230 |  |  | 551 |  |  | 668 |  |  | 752 |
AMESA | 6,389 |  |  | 6,143 |  |  | 391 |  |  | 307 |  |  | 325 |
APAC | 5,630 |  |  | 5,452 |  |  | 284 |  |  | 241 |  |  | 203 |
Total division | 91,645 |  |  | 88,284 |  |  | 5,234 |  |  | 5,068 |  |  | 4,519 |
Corporate (a) | 8,850 |  |  | 3,903 |  |  | 284 |  |  | 139 |  |  | 106 |
Total | $ | 100,495 |  |  | $ | 92,187 |  |  | $ | 5,518 |  |  | $ | 5,207 |  |  | $ | 4,625 |
(a)Corporate assets consist principally of certain cash and cash equivalents, restricted cash, short-term investments, derivative instruments, property, plant and equipment, pension plan assets and tax assets. In 2023, the change in assets was primarily due to an increase in cash and cash equivalents. Amortization of intangible assets and depreciation and other amortization of each division are as follows:
| Amortization of Intangible Assets |  | Depreciation and Other Amortization
| 2023 |  | 2022 |  | 2021 |  | 2023 |  | 2022 |  | 2021
FLNA | $ | 11 |  |  | $ | 11 |  |  | $ | 11 |  |  | $ | 736 |  |  | $ | 653 |  |  | $ | 594 |
QFNA | — |  |  | — |  |  | — |  |  | 51 |  |  | 47 |  |  | 46 |
PBNA | 22 |  |  | 22 |  |  | 25 |  |  | 1,003 |  |  | 930 |  |  | 926 |
LatAm | 2 |  |  | 3 |  |  | 4 |  |  | 372 |  |  | 306 |  |  | 283 |
Europe | 29 |  |  | 30 |  |  | 37 |  |  | 347 |  |  | 357 |  |  | 364 |
AMESA | 3 |  |  | 4 |  |  | 5 |  |  | 167 |  |  | 179 |  |  | 181 |
APAC | 8 |  |  | 8 |  |  | 9 |  |  | 99 |  |  | 92 |  |  | 102 |
Total division | 75 |  |  | 78 |  |  | 91 |  |  | 2,775 |  |  | 2,564 |  |  | 2,496 |
Corporate | — |  |  | — |  |  | — |  |  | 98 |  |  | 121 |  |  | 123 |
Total | $ | 75 |  |  | $ | 78 |  |  | $ | 91 |  |  | $ | 2,873 |  |  | $ | 2,685 |  |  | $ | 2,619 |
Net revenue and long-lived assets by country are as follows:
| Net Revenue |  | Long-Lived Assets(a)
| 2023 |  | 2022 |  | 2021 |  | 2023 |  | 2022
United States | $ | 52,165 |  |  | $ | 49,390 |  |  | $ | 44,545 |  |  | $ | 41,234 |  |  | $ | 38,240 |
Mexico | 7,011 |  |  | 5,472 |  |  | 4,580 |  |  | 2,509 |  |  | 1,933 |
Canada | 3,722 |  |  | 3,536 |  |  | 3,405 |  |  | 2,815 |  |  | 2,678 |
Russia | 3,566 |  |  | 4,118 |  |  | 3,426 |  |  | 1,986 |  |  | 2,538 |
China | 2,703 |  |  | 2,752 |  |  | 2,679 |  |  | 1,510 |  |  | 1,517 |
United Kingdom | 1,946 |  |  | 1,844 |  |  | 2,102 |  |  | 868 |  |  | 847 |
Brazil | 1,779 |  |  | 1,617 |  |  | 1,252 |  |  | 573 |  |  | 446 |
South Africa | 1,707 |  |  | 1,837 |  |  | 2,008 |  |  | 1,305 |  |  | 1,327 |
All other countries | 16,872 |  |  | 15,826 |  |  | 15,477 |  |  | 11,226 |  |  | 12,439 |
Total | $ | 91,471 |  |  | $ | 86,392 |  |  | $ | 79,474 |  |  | $ | 64,026 |  |  | $ | 61,965 |
(a)Long-lived assets represent property, plant and equipment, indefinite-lived intangible assets, amortizable intangible assets, investments in noncontrolled affiliates and other investments included in other assets. See Notes 2 and 15 for further information on property, plant and equipment. See Notes 2 and 4 for further information on goodwill and other intangible assets. See Notes 9 and 15 for further information on other assets. These assets are reported in the country where they are primarily used.

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