What changed in this filing

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Item 7. Management’s Discussion and Analysis

2024-02-09 compared with 2023-02-09 · 489 added, 556 removed, 2073 unchanged (34% of the section changed)

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Our Liquidity and Capital Resources 51

Material Changes in Line Items in Our Consolidated Financial Statements 52

Changes in Line Items in Our Consolidated Financial Statements 54

Return on Invested Capital 54

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Note 13 – Acquisitions and Divestitures 109

Note 14 – Supply Chain Financing Arrangements 110

Note 15 – Supplemental Financial Information 111

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Executive Overview

PepsiCo is a leading global beverage and convenient food company with a complementary portfolio of brands, including Lay’s, Doritos, Cheetos, Gatorade, Pepsi-Cola, Mountain Dew, Quaker and SodaStream.

PepsiCo is a leading global convenient food and beverage company with a complementary portfolio of brands, including Lay’s, Doritos, Cheetos, Gatorade, Pepsi-Cola, Mountain Dew, Quaker and SodaStream.

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shifting consumer preferences and behaviors;

another year of the COVID-19 pandemic;

a worsening climate crisis;

ongoing climate issues;

a highly competitive operating environment;

a rapidly changing retail landscape, including the growth in e-commerce;

continued macroeconomic and political volatility, including the deadly conflict in Ukraine;

a rapidly changing retail landscape, including growth in e-commerce;

continued macroeconomic and political volatility, including the deadly conflicts in Ukraine and the Middle East;

and an evolving regulatory landscape.

To meet the challenges of today – and those of tomorrow – we are driven by an approach called pep+ (PepsiCo Positive).

pep+ is a strategic end-to-end transformation of our business, with sustainability and human capital at the center of how the company will strive to create growth and value by operating within planetary boundaries and inspiring positive change for the planet and people.

pep+ guides how we are working to transform our business operations, from sourcing ingredients and making and selling products in a more sustainable way, to leveraging our more than one billion connections with consumers each day to take sustainability mainstream and engage people to make choices that are better for themselves and the planet.

pep+ drives action and progress across three key pillars, bringing together a number of industry-leading 2030 sustainability goals under a comprehensive framework:

pep+ is a strategic end-to-end transformation of our business, with sustainability at the center of how the company will strive to create growth and value, while inspiring positive change for the planet and people.

pep+ guides how we are working to transform our business operations, and can be seen in such efforts as sourcing ingredients and making and selling products in a more sustainable way, to leveraging our more than one billion connections with consumers each day, to driving positive change across our value chain and inspiring people to make choices that are better for themselves and the planet.

pep+ drives action and progress across three key pillars:

Positive Agriculture :

We are working to spread regenerative practices to restore the earth across seven million acres of land, an area approximately equal to our entire agricultural footprint, sustainably source key crops and ingredients, and improve the livelihoods of more people in our agricultural supply chain.

In 2022, we elevated a number of external strategic partnerships and key engagements with this focus, including a partnership with Archer Daniels Midland Company (ADM) to scale regenerative agriculture across our shared supply chains, up to 2 million acres;

a research agreement with MIT to develop a more precise measurement of the greenhouse gas impact of regenerative agriculture practices;

a strategic engagement with Corteva focused on agriculture sustainability, new substrates, and affordability in food corn and vegetable oils;

and a joint effort with a start-up called N-Drip to scale advantaged micro irrigation technology that can provide water-saving, crop-enhancing benefits to farmers around the world.

We are working to expand and share regenerative practices across seven million acres (approximately equal to the company’s agricultural footprint, sustainably source key crops and ingredients, and improve the livelihoods of more people in our agricultural supply chain.

Understanding that scale and collaboration are essential to achieve these goals, in 2023, we expanded our partnership approach with new programs aimed at accelerating regenerative agriculture.

This included a $120 million investment with Walmart to support regenerative agriculture on more than two million acres of farmland in the United States and Canada and a $216 million investment with three of the most well-respected farmer-facing organizations—Practical Farmers of Iowa, the Soil and Water Outcomes Fund and the Illinois Corn Growers Association—to help drive adoption of regenerative agriculture practices across the United States.

Technology is also a key enabler.

Through the third year of our Positive Agriculture Outcomes Accelerator, we invested in a variety of practical advancements with farmers across the globe, including weather stations in Pakistan, on-farm water analysis in Iraq and sprinkler irrigation systems in Colombia.

We have continued developing new solutions, such as fertilizer produced from green hydrogen through a partnership with Fertiberia in Spain, aiming to reduce emissions by 15% in potato crops.

And through innovations such as Agroscout, which combines artificial intelligence and drone technology, we are able to identify crop diseases more efficiently, reducing pesticide use and improving crop yields.

Positive Value Chain :

We are working to build a circular and inclusive value chain through actions to:

We are working to help build a circular and inclusive value chain through actions aiming to:

achieve net-zero emissions by 2040;

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and introduce more sustainable packaging into the value chain.

Our packaging goals include cutting virgin plastic per serving, using more recycled content in our plastic packaging, and scaling our SodaStream business globally, potentially eliminating the need for more than 200 billion plastic bottles by 2030.

In 2022, we also announced a new global packaging goal intended to double the percentage of all beverage servings delivered through reusable models from 10% to 20% by 2030.

Additionally, we are making progress on our diversity, equity and inclusion journey around the world.

And we continue to empower each one of our approximately 315,000 employees to make a positive impact in their communities through our global workforce volunteering program, One Smile at a Time.

Our packaging goals include cutting virgin plastic per serving, using more recycled content in our plastic packaging, and scaling our reusable packaging offerings by 2030.

As we work to decarbonize our operations, alongside growing our use of electric and alternative low emission fuel vehicles, in 2023 we opened our first biomethane plant at our foods site in Manisa, Turkey, converting dried corn husks and potato peelings into biogas.

We are also embedding pep+ into our new facilities, including our $320 million manufacturing facility in Poland.

To support our customers on their sustainability journey, we launched pep+ Partners for Tomorrow in the United States to share training and initiatives on one platform.

We are focused on reducing virgin plastic through new launches of bottles made with recycled plastic in India and the United Arab Emirates, while also expanding paper options, such as our Quaker pots and Walkers multipacks in the United Kingdom.

In December 2023, Walkers Sunbites announced the introduction of new packaging made with 50% recycled plastic.

Through 2023, we continued to scale new business models that require little or no single-use packaging, including the iconic SodaStream, already sold in more than 40 countries.

We also offer returnable bottles in Mexico and Spain and are engaged in reusable cup pilots, including in the United States.

We are also making progress on our diversity, equity and inclusion journey around the world.

And we continue to empower each of our approximately 318,000 employees to make a positive impact in their communities through our global workforce volunteering program, One Smile at a Time.

Positive Choices :

We continue working to evolve our portfolio of convenient food & beverage products so that they are better for the planet and people, including by incorporating more diverse ingredients in both new and existing products, prioritizing chickpeas, plant-based proteins and whole grains;

expanding our position in the nuts & seeds category;

We continue working to evolve our portfolio of convenient food and beverage products so they continue to be positive for the planet and people, including by incorporating more diverse ingredients in both new and existing products, prioritizing legumes, plant-based proteins, whole grains and fruits and vegetables;

expanding our position in the nuts and seeds category;

accelerating our reduction of added sugars and sodium through the use of science-based targets across our portfolio;

and offering more products with healthier oils.

We are also continuing to scale new business models that require little or no single-use packaging, including the iconic SodaStream, already sold in more than 45 countries, and the new SodaStream Professional platform, allowing users to personalize their choices in reusable containers at home or on the go.

and cooking our food offerings with healthier oils.

In 2023, we announced two new ambitious nutrition goals, which aim to further reduce sodium and purposefully deliver 145 billion portions of diverse ingredients annually by 2030.

We believe these priorities will position our Company for long-term sustainable growth.

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These Board members do not participate in our vendor selection and negotiations nor in our customer negotiations.

Our transactions with these vendors and customers are in the normal course of business and are consistent with terms negotiated with other vendors and customers.

transactions with these vendors and customers are in the normal course of business and are consistent with terms negotiated with other vendors and customers.

In addition, certain of our employees serve on the boards of Pepsi Bottling Ventures LLC and other affiliated companies of PepsiCo and do not receive incremental compensation for such services.

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Risks Associated with Commodities and Our Supply Chain

During 2022, we continued to experience significantly higher operating costs, including on transportation, labor and commodity (including energy) costs, which we expect to continue in 2023.

During 2023, we continued to experience significantly higher operating costs, including on transportation, labor and commodity (including energy) costs, which may continue in 2024.

Many of the commodities used in the production and transportation of our products are purchased in the open market.

The prices we pay for such items are subject to fluctuation, and we manage this risk through the use of fixed-price contracts and purchase orders, pricing agreements and derivative instruments, including swaps and futures.

A number of external factors, including the deadly conflict in Ukraine, the COVID-19 pandemic, the inflationary cost environment, adverse weather conditions, supply chain disruptions

(including raw material shortages) and labor shortages, have impacted and may continue to impact transportation, labor and commodity availability and costs.

A number of external factors, including the ongoing conflict in Ukraine, the inflationary cost environment, adverse weather conditions, supply chain disruptions (including raw material shortages) and labor shortages, have impacted and may continue to impact transportation, labor and commodity availability and costs.

When prices increase, we may or may not pass on such increases to our customers without suffering reduced volume, revenue, margins and operating results.

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We are subject to risks in the normal course of business that are inherent to international operations.

During the periods presented in this report, certain jurisdictions in which our products are made, manufactured, distributed or sold, including in certain developing and emerging markets, operated in a challenging environment, experiencing unstable economic, political and social conditions, civil unrest, natural disasters, debt and credit issues and currency controls or fluctuations.

During the periods presented in this report, certain jurisdictions in which our products are made, manufactured, distributed or sold, including in certain developing and emerging markets, operated in a challenging environment, experiencing unstable economic, political and social conditions, civil unrest, geopolitical conflicts, acts of war, terrorist acts, natural disasters, debt and credit issues and currency controls or fluctuations.

We continue to monitor the economic, operating and political environment in these markets closely, including risks of additional impairments or write-offs, and to identify actions to potentially mitigate any unfavorable impacts on our future results.

See Notes 1 and 4 to our consolidated financial statements for a discussion of impairment charges recognized in the year ended December 31, 2022 .

See Notes 1 and 4 to our consolidated financial statements for a discussion of impairment charges recognized in the years ended December 30, 2023 and December 31, 2022.

Risks Associated with the Deadly Conflict in Ukraine

In addition to the risks associated with international operations discussed above, we continue to face risks associated with the deadly conflict in Ukraine.

The conflict has continued to result in worldwide geopolitical and macroeconomic uncertainty, and certain of our operations in Ukraine remain suspended.

In addition to the risks associated with international operations discussed above, we continue to face risks associated with the ongoing conflict in Ukraine.

The conflict and related sanctions imposed on Russia by

the United States and others has continued to result in worldwide geopolitical and macroeconomic uncertainty and has impacted our operations in Ukraine and Russia.

We have suspended sales to our customers of Pepsi-Cola and certain of our other global beverage brands, our discretionary capital investments and advertising and promotional activities in Russia, which has negatively impacted and could continue to negatively impact our business.

We continue to offer our other products in Russia.

Our operations in Russia accounted for 5% and 4% of our consolidated net revenue for the year ended December 31, 2022 and December 25, 2021, respectively.

Russia accounted for 4% and 5% of our consolidated assets, including 9% and 1% of our consolidated cash and cash equivalents, and 32% and 35% of our accumulated currency translation adjustment loss as of December 31, 2022 and December 25, 2021, respectively.

Our operations in Ukraine accounted for 0.2% and 0.5% of our consolidated net revenue for the year ended December 31, 2022 and December 25, 2021, respectively.

Ukraine accounted for 0.1% and 0.3% of our consolidated assets as of December 31, 2022 and December 25, 2021, respectively.

Our operations in Russia accounted for 4% and 5% of our consolidated net revenue for the years ended December 30, 2023 and December 31, 2022, respectively.

Russia accounted for 3% and 4% of our consolidated assets and 35% and 32% of our accumulated currency translation adjustment loss as of December 30, 2023 and December 31, 2022 , respectively.

Our operations in Ukraine accounted for 0.3% and 0.2% of our consolidated net revenue for the years ended December 30, 2023 and December 31, 2022, respectively.

Ukraine accounted for 0.1% of our consolidated assets as of December 30, 2023 and December 31, 2022.

The conflict has resulted and could continue to result in volatile commodity markets, supply chain disruptions, increased risk of cyber incidents or other disruptions to our information systems, reputational risks, heightened risks to employee safety, business disruptions (including labor shortages), significant volatility of the Russian ruble, limitations on access to credit markets and other corporate banking services, including working capital facilities, reduced availability and increased costs for transportation, energy, packaging, raw materials and other input costs, environmental, health and safety risks related to securing and maintaining facilities, additional sanctions, export controls and other legislation or regulations (including restrictions on the transfer of funds to and from Russia).

The ongoing conflict could result in the temporary or permanent loss of assets or additional impairment charges.

We cannot predict how and the extent to which the conflict will continue to affect our employees, customers, operations or business partners or our ability to achieve certain of our sustainability goals.

The ongoing conflict could result in the temporary or permanent loss of assets, including the nationalization or expropriation of assets, result in additional impairment charges or significantly affect our ability to manage our operations in these markets which could result in the deconsolidation of such businesses.

We cannot predict how and the extent to which the conflict will continue to affect our employees, customers, operations or business partners or impact our ability to achieve certain of our sustainability goals.

The conflict has adversely affected and could continue to adversely affect demand for our products and our global business.

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Further, some regulations apply to all products using certain types of packaging (e.g., plastic), while others are designed to increase the sustainability of packaging, encourage waste reduction and increased recycling rates or facilitate the waste management process or restrict the sale of products in certain packaging.

We sell a wide variety of beverages and convenient foods in more than 200 countries and territories and the profile of the products we sell, the amount of revenue attributable to such products and the type of packaging used vary by jurisdiction.

packaging used vary by jurisdiction.

Because of this, we cannot predict the scope or form potential taxes, regulations or other limitations on our products or their packaging may take, and therefore cannot predict the impact of such taxes, regulations or limitations on our financial results.

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We continue to monitor existing and proposed taxes and regulations in the jurisdictions in which our products are made, manufactured, distributed and sold and to consider actions we may take to potentially mitigate the unfavorable impact, if any, of such taxes, regulations or limitations, including advocating alternative measures with respect to the imposition, form and scope of any such taxes, regulations or limitations.

OECD Global Minimum Tax

Numerous countries have agreed to a statement in support of the OECD model rules that propose a global minimum tax rate of 15%.

Certain countries, including European Union member states, have enacted or are expected to enact legislation incorporating the agreed to global minimum tax with effect as early as 2024, and widespread implementation of a global minimum tax is expected as soon as 2025.

As the legislation becomes effective in countries in which we do business, our taxes could increase and negatively impact our provision for income taxes.

We will continue to monitor pending legislation and implementation by individual countries and evaluate the potential impact on our business in future periods.

Retail Landscape

Our industry continues to be affected by disruption of the retail landscape, including the continued growth in sales through e-commerce websites and mobile commerce applications, including through subscription services, the integration of physical and digital operations among retailers and the international expansion of hard discounters.

We have seen and expect to continue to see a further shift to e-commerce, online-to-

offline and other online purchasing by consumers, including as a result of the COVID-19 pandemic.

We have seen and expect to continue to see a further shift to e-commerce, online-to-offline and other online purchasing by consumers.

We continue to monitor changes in the retail landscape and seek to identify actions we may take to build our global e-commerce and digital capabilities, such as expanding our direct-to-consumer business, and distribute our products effectively through all existing and emerging channels of trade and potentially mitigate any unfavorable impacts on our future results.

The retail industry also continues to be impacted by the actions and increasing power of retailers, including as a result consolidation of ownership resulting in large retailers or buying groups with increased purchasing power, particularly in North America, Europe and Latin America.

We have seen and expect to continue to see retailers and buying groups impact our ability to compete in these jurisdictions.

We continue to monitor our relationships with retailers and buying groups and seek to identify actions we may take to maintain mutually beneficial relationships and resolve any significant disputes and potentially mitigate any unfavorable impacts on our future results.

See also “Item 1A.

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One of the Board’s primary responsibilities is overseeing and interacting with senior management with respect to key aspects of the Company’s business, including risk assessment and risk mitigation of the Company’s top risks.

Throughout the year, the Board and relevant Committees of the Board receive updates from management with respect to various enterprise risk management issues and dedicate a portion of their meetings to reviewing and discussing specific risk topics in greater detail, including risks related to cybersecurity, food safety, sustainability, human capital management (including diversity, equity and inclusion) and supply chain and commodity inflation.

The Board receives and provides feedback on regular updates from management regarding the Company’s top risks, including updates from members of management responsible for overseeing impacted areas (for example, the Global Chief Information Officer and Chief Information Security Officer), governance processes associated with managing these risks, the status of projects to strengthen the Company’s risk mitigation efforts and recent incidents impacting the industry and threat landscape.

Throughout the year, the Board and relevant Committees of the Board receive updates from management with respect to various enterprise risk

management issues and dedicate a portion of their meetings to reviewing and discussing specific risk topics in greater detail, including risks related to cybersecurity, food safety, sustainability, human capital management (including diversity, equity and inclusion) and supply chain and commodity inflation.

The Board receives and provides feedback on regular updates from management regarding the Company’s top risks, including updates from members of management responsible for overseeing impacted areas (for example, the Chief Strategy and Transformation Officer and Chief Information Security Officer), governance processes associated with managing these risks, the status of projects to strengthen the Company’s risk mitigation efforts and recent incidents impacting the industry and threat landscape.

Given that cybersecurity risks can impact various areas of responsibility of the Committees of the Board, the Board believes it is useful and effective for the full Board to maintain direct oversight over cybersecurity matters.

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The Board receives updates through presentations, memos and other written materials, teleconferences and other appropriate means of communication, with numerous opportunities for discussion and feedback, and continuously evaluates its approach in addressing top risks as circumstances evolve.

For example, as part of risk updates to the Board and relevant Committees during 2022, the Board or its relevant Committee were provided updates on the impact of disruptive events, such as the Russia-Ukraine conflict, COVID-19 and supply chain disruption and commodity inflation.

For example, as part of risk updates to the Board and relevant Committees during 2023, the Board or its relevant Committee were provided updates on the impact of disruptive events, such as the Russia-Ukraine conflict, supply chain disruption and commodity inflation.

The Board also receives periodic updates from external experts and advisers on global macroeconomic trends and conditions that may impact the Company’s strategy and financial performance, including geopolitical conflicts, economic instability, labor market trends, changing consumer behavior, retail disruption and digitalization.

The Board has tasked designated Committees of the Board with oversight of certain categories of risk management, and the Committees report to the Board regularly on these matters.

◦ The Audit Committee of the Board reviews and assesses the guidelines and policies governing PepsiCo’s risk management and oversight processes, and assists the Board’s

oversight of financial, compliance and employee safety risks facing PepsiCo.

◦ The Audit Committee of the Board reviews and assesses the guidelines and policies governing PepsiCo’s risk management and oversight processes, and assists the Board’s oversight of financial, compliance and employee safety risks facing PepsiCo.

The Audit Committee also assists the Board’s oversight of the Company’s compliance with legal and regulatory requirements and the Chief Compliance & Ethics Officer, who reports to the General Counsel, meets regularly with the Audit Committee, including in executive session without management present;

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• The PepsiCo Risk Committee (PRC) meets regularly to identify, assess, prioritize and address top strategic, financial, operating, compliance, safety, reputational and other risks.

The PRC is also responsible for reporting progress on our risk mitigation efforts to the Board.

The PRC is also

responsible for reporting progress on our risk mitigation efforts to the Board and designated Committees.

The PRC is comprised of a cross-functional, geographically diverse, senior management group, including PepsiCo’s Chairman of the Board of Directors and Chief Executive Officer, Chief Financial Officer, General Counsel, Sector Chief Executive Officers and the heads of Corporate Affairs, Human Resources, Research & Development, Information Technology, Sustainability, Strategy, Transformation, International Beverages, Commercial, Global Operations, Marketing and Financial Planning & Analysis;

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The fair value of our indefinite-lived intangible assets is impacted by changes in market conditions, including interest rates and inflationary, deflationary and recessionary conditions.

See “Our Critical Accounting Policies and Estimates” for a discussion of the exposure of our goodwill and other intangible assets and pension and retiree medical plan assets and liabilities to risks related to market fluctuations.

See “Our Critical Accounting Policies and

Estimates” for a discussion of the exposure of our goodwill and other intangible assets and pension and retiree medical plan assets and liabilities to risks related to market fluctuations.

Inflationary, deflationary and recessionary conditions impacting these market risks also impact the demand for and pricing of our products.

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Our commodity derivatives had a total notional value of $1.7 billion as of December 30, 2023 and $1.8 billion as of December 31, 2022.

At the end of 2022, the potential change in fair value of commodity derivative instruments, assuming a 10% decrease in the underlying commodity price, would have decreased our net unrealized gains in 2022 by $176 million, which would generally be offset by a reduction in the cost of the underlying commodity purchases.

At the end of 2023, the potential change in fair value of commodity derivative instruments, assuming a 10% decrease in the underlying commodity price, would have increased our net unrealized losses in 2023 by $157 million, which would generally be offset by a reduction in the cost of the underlying commodity purchases.

Foreign Exchange

Our operations outside of the United States generated 43% of our consolidated net revenue in 2022, with Mexico, Russia, Canada, China, the United Kingdom and South Africa, collectively, comprising approximately 23% of our consolidated net revenue in 2022.

Our operations outside of the United States generated 43% of our consolidated net revenue in 2023, with Mexico, Canada, Russia, China, the United Kingdom, Brazil and South Africa, collectively, comprising approximately 25% of our consolidated net revenue in 2023.

As a result, we are exposed to foreign exchange risks in the international markets in which our products are made, manufactured, distributed or sold.

Additionally, we are exposed to foreign exchange risk from net investments in foreign subsidiaries, foreign currency purchases, foreign currency assets and liabilities created in the normal course of business.

During 2022, unfavorable foreign exchange reduced net revenue growth by 3 percentage points, primarily due to declines in the Turkish lira, euro, Egyptian pound, British pound sterling and South African rand, partially offset by an appreciation of the Russian ruble.

During 2023, unfavorable foreign exchange reduced net revenue growth by 2 percentage points, primarily due to declines in the Russian ruble and Egyptian pound, partially offset by an appreciation of the Mexican peso.

Currency declines against the U.S.

dollar which are not offset could adversely impact our future financial results.

In addition, volatile economic, political and social conditions and civil unrest in certain markets in which our products are made, manufactured, distributed or sold, including in Argentina, Brazil, China, Mexico, the Middle East, Russia, Turkey and Ukraine, and currency controls or fluctuations in certain of these international markets, continue to, and the threat or imposition of new or increased tariffs or sanctions or other impositions in or related to these international markets may, result in challenging operating environments.

In addition, volatile economic, political and social conditions and civil unrest in certain markets in which our products are made, manufactured, distributed or sold, including in Argentina, Brazil, China, Mexico, the Middle East, Pakistan, Russia, Turkey and Ukraine, and currency controls or fluctuations in certain of these international markets, continue to, and the threat or imposition of new or increased tariffs or sanctions or other impositions in or related to these international markets may, result in challenging operating environments.

Our foreign currency derivatives had a total notional value of $3.8 billion as of December 30, 2023 and $3.0 billion as of December 31, 2022.

At the end of 2022, we estimate that an unfavorable 10% change in the underlying exchange rates would have decreased our net unrealized gains in 2022 by $298 million, which would be significantly offset by an inverse change in the fair value of the underlying exposure.

At the end of 2023, we estimate that an unfavorable 10% change in the underlying exchange rates would have increased our net unrealized losses in 2023 by $371 million, which would be significantly offset by an inverse change in the fair value of the underlying exposure.

The total notional amount of our debt instruments designated as net investment hedges was $3.0 billion as of December 30, 2023 and $2.9 billion as of December 31, 2022.

Interest Rates

Our interest rate derivatives had a total notional value of $1.3 billion as of December 31, 2022 and $2.1 billion as of December 25, 2021.

Our interest rate derivatives had a total notional value of $1.3 billion as of December 30, 2023 and December 31, 2022.

Assuming year-end 2023 investment levels and variable rate debt, a 1-percentage-point increase in interest rates would have decreased our net interest expense in 2023 by $57 million due to higher cash and cash equivalents and short-term investments levels, as compared with our variable rate debt.

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We believe volume provides additional information to facilitate the comparison of our historical operating performance and underlying trends, and provides additional transparency on how we evaluate our business because it measures demand for our products at the consumer level.

Beginning in 2022, unit volume growth adjusts for the impacts of acquisitions, divestitures and other structural changes.

Unit volume growth adjusts for the impacts of acquisitions and divestitures.

Acquisitions and divestitures, when used in this report, reflect mergers and acquisitions activity, as well as divestitures and other structural changes, including changes in ownership or control in consolidated subsidiaries and nonconsolidated equity investees.

Further, our fiscal 2022 results include an additional week (53 rd reporting week).

Unit volume growth excludes the impact of the 53 rd reporting week.

Unit volume growth excludes the impact of the 53 rd reporting week from 2022 results.

Beverage volume includes volume of concentrate sold to independent bottlers and volume of finished products bearing company-owned or licensed trademarks and allied brand products and joint venture trademarks sold by company-owned bottling operations.

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Operating profit grew 4% while operating margin declined 0.2 percentage points.

Operating profit growth was primarily driven by net revenue growth and productivity savings, partially offset by certain operating cost increases and a 42-percentage-point impact of higher commodity costs.

The loss of net revenue due to the Juice Transaction reduced operating profit growth by 3 percentage points and was partially offset by a 1-percentage-point contribution from the 53 rd reporting week.

Operating profit growth also reflects a 13-percentage-point unfavorable impact of impairment charges related to certain indefinite-lived intangible assets due to an increase in the weighted-average cost of capital as well as our most current estimates of future financial performance (other impairment charges), a 12-percentage-point unfavorable impact of the charges associated with the Russia-Ukraine conflict and a 6-percentage-point unfavorable impact of impairment on intangible assets, investment and property, plant and equipment and other charges as a result of management’s decision to reposition or discontinue the sale/distribution of certain brands and to sell an investment (brand portfolio impairment charges).

These impacts were partially offset by a 29-percentage-point contribution from the gain associated with the Juice Transaction.

The operating margin decline primarily reflects the unfavorable impacts of other impairment charges, the charges associated with the Russia-Ukraine conflict and the brand portfolio impairment charges, partially offset by the gain associated with the Juice Transaction.

Juice Transaction

In the first quarter of 2022, we sold our Tropicana, Naked and other select juice brands to PAI Partners, while retaining a 39% noncontrolling interest in TBG, operating across North America and Europe.

These juice businesses delivered approximately $3 billion in net revenue in 2021.

In the United States, PepsiCo acts as the exclusive distributor for TBG’s portfolio of brands for small-format and foodservice customers with chilled DSD.

See Note 13 to our consolidated financial statements for further information.

Operating profit growth was primarily driven by effective net pricing, productivity savings, an 11-percentage-point favorable impact of prior-year charges associated with the Russia-Ukraine conflict, and a 5-percentage-point favorable impact of prior-year impairment on intangible assets, investment and property, plant and equipment and other charges as a result of management’s decision to reposition or discontinue the sale/

distribution of certain brands and to sell an investment (brand portfolio impairment charges).

These impacts were partially offset by certain operating cost increases, a 26-percentage-point unfavorable impact of the prior-year gain associated with the Juice Transaction, a 22-percentage-point impact of higher commodity costs, a decrease in organic volume and higher advertising and marketing expenses.

Corporate unallocated expenses reflect an increase in expenses related to our ongoing business initiatives and higher contributions to The PepsiCo Foundation, Inc.

to fund charitable and social programs.

The 53 rd reporting week in the prior year reduced operating profit growth by 1 percentage point.

The operating margin decline primarily reflects the unfavorable impact of the prior-year gain associated with the Juice Transaction partially offset by the prior-year charges associated with the Russia-Ukraine conflict and the brand portfolio impairment charges.

Other Consolidated Results

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Net income attributable to PepsiCo per common share – diluted $ 6.56 $ 6.42 2 %

Other pension and retiree medical benefits income decreased $390 million, primarily due to higher settlement losses compared to the prior year.

Net interest expense and other decreased $924 million, reflecting the prior-year charge of $842 million related to our cash tender offers, higher interest rates on average cash balances and lower average debt balances, partially offset by losses on the market value of investments used to economically hedge a portion of our deferred compensation liability and higher interest rates on debt.

The reported tax rate decreased 5.7 percentage points, primarily reflecting the impact of the Juice Transaction and adjustments to reserves for uncertain tax positions as a result of the Internal Revenue Service (IRS) audit.

Other pension and retiree medical benefits income increased $118 million, primarily reflecting prior-year settlement charges of $318 million related to U.S.

defined benefit plans.

In addition, the increase in other pension and retiree medical benefits income reflects lower amortization of net losses on pension obligations and a higher rate of expected return on plan assets, partially offset by higher interest cost and recognition of fixed income losses on plan assets, all driven primarily by higher interest rates.

Net interest expense and other decreased $120 million , primarily due to higher interest rates on average cash balances, gains on the market value of investments used to economically hedge a portion of our deferred compensation liability and higher average cash balances, partially offset by higher interest rates on debt and higher average debt balances.

The reported tax rate increased 3.7 percentage points, primarily reflecting the prior-year adjustment to reserves for uncertain tax positions as a result of our agreement with the Internal Revenue Service (IRS) to settle one of the issues assessed in the 2014 to 2016 audit as well as the prior-year impact of the Juice Transaction .

Results of Operations — Division Review

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In the discussions of net revenue and operating profit below, “effective net pricing” reflects the year-over-year impact of discrete pricing actions, sales incentive activities and mix resulting from selling varying products in different package sizes and in different countries.

Additionally, “acquisitions and divestitures” reflect mergers and acquisitions activity, as well as divestitures and other structural changes, including changes in ownership or control in consolidated subsidiaries and nonconsolidated equity investees.

Net Revenue and Organic Revenue Growth

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FLNA 7 % — — 2 9 % (1) 10

QFNA 15 % 0.5 — (2) 13 % (3) 16

(2) % — — 2 1 % (5) 5

PBNA 5 % — — 1.5 7 % (5) 12

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(a) Amounts may not sum due to rounding.

(b) Excludes the impact of acquisitions, divestitures and other structural changes and the 53 rd reporting week.

In certain instances, the impact of organic volume growth on net revenue growth differs from the unit volume growth disclosed in the following divisional discussions due to the impacts of product mix, nonconsolidated joint venture volume, and, for our franchise-owned beverage businesses, temporary timing differences between BCS and CSE.

(b) Excludes the impact of acquisitions and divestitures and the 53 rd reporting week.

In certain instances, the impact of organic volume on net revenue growth differs from the unit volume change disclosed in the following divisional discussions due to the impacts of product mix, nonconsolidated joint venture volume, and, for our franchise-owned beverage businesses, temporary timing differences between BCS and CSE.

We report net revenue from our franchise-owned beverage businesses based on CSE.

The volume sold by our nonconsolidated joint ventures has no direct impact on our net revenue.

(c) Net revenue decline was impacted by product returns related to the Quaker Recall by 2 percentage points, as well as cessation of sales of products as a result of the Quaker Recall.

Operating Profit/(Loss), Operating Profit/(Loss) Adjusted for Items Affecting Comparability and Operating Profit/(Loss) Performance Adjusted for Items Affecting Comparability on a Constant Currency Basis

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Items Affecting Comparability (a)

Reported, GAAP Measure (b)

Mark-to-market net impact Restructuring and impairment charges Acquisition and divestiture-related charges Gain associated with the Juice Transaction Impairment and other charges Core,

Non-GAAP Measure (b)

Reported, GAAP Measure Mark-to-market net impact Restructuring and impairment charges Acquisition and divestiture-related charges Impairment and other charges Product recall-related impact Core,

Non-GAAP Measure

FLNA $ 6,755 $ — $ 42 $ — $ — $ — $ 6,797

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Items Affecting Comparability (a)

GAAP Measure (b)

Mark-to-market net impact Restructuring and impairment charges Acquisition and divestiture-related charges (c)

Non-GAAP Measure (b)

GAAP Measure Mark-to-market net impact Restructuring and impairment charges Acquisition and divestiture-related charges Gain associated with the Juice Transaction Impairment and other charges Core,

Non-GAAP Measure

$ 6,135 $ — $ 46 $ — $ — $ 88 $ 6,269

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(a) See “Items Affecting Comparability.”

(b) Includes charges taken as a result of the COVID-19 pandemic.

See Note 1 to our consolidated financial statements for further information.

(c) In 2021, income amount primarily relates to gains associated with the contingent consideration in connection with our acquisition of Rockstar Energy Beverages (Rockstar).

This impact is partially offset by divestiture-related charges associated with the Juice Transaction.

See Note 13 to our consolidated financial statements for further information.

Operating Profit/(Loss) Performance and Operating Profit/(Loss) Performance Adjusted for Items Affecting Comparability on a Constant Currency Basis

Impact of Items Affecting Comparability (a)

Reported % Change, GAAP Measure Mark-to-market net impact Restructuring and impairment charges Acquisition and divestiture-related charges Gain associated with the Juice Transaction Impairment and other charges Core

% Change, Non-GAAP Measure (b)

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LatAm 38 % — — — — (6) — 32 % (13) 19 %

Europe (207) % — 2 0.5 (23) 228 — % 7 7 %

Europe n/m — n/m n/m n/m n/m — 33 % 16 50 %

AMESA 21 % — 0.5 — — (28) — (6) % 21 15 %

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(b) Amounts may not sum due to rounding.

Net revenue grew 19%, primarily driven by effective net pricing and a 2-percentage-point contribution from the 53 rd reporting week.

Unit volume decreased 1%, primarily reflecting a double-digit decline in our Sabra joint venture products and a low-single-digit decline in variety packs, partially offset by low-single-digit growth in trademark Doritos and double-digit growth in trademark Popcorners.

Operating profit increased 9%, primarily reflecting the effective net pricing and productivity savings.

These impacts were partially offset by certain operating cost increases, including strategic initiatives, a 17-percentage-point impact of higher commodity costs, primarily cooking oil, potatoes and seasoning, and higher advertising and marketing expenses.

Additionally, impairment charges associated with a baked fruit convenient food brand reduced operating profit growth by 1.5 percentage points (other impairment charges).

The 53 rd reporting week contributed 2 percentage points to operating profit growth.

Net revenue grew 15%, primarily driven by effective net pricing and a 2-percentage-point contribution from the 53 rd reporting week, partially offset by a decrease in organic volume.

Unit volume declined 3%, primarily reflecting mid-single-digit declines in oatmeal and ready-to-eat cereals and a high-single-digit decline in pancake syrups and mixes, partially offset by mid-single-digit growth in rice/pasta sides and low-single-digit growth in bars.

Operating profit grew 4.5%, primarily reflecting the effective net pricing and productivity savings.

These impacts were partially offset by a 37-percentage-point impact of higher commodity costs, primarily grains and packaging materials, certain operating cost increases, including incremental transportation costs, the decrease in organic volume and higher advertising and marketing expenses.

The 53 rd reporting week contributed 2 percentage points to operating profit growth.

Net revenue increased 4%, primarily driven by effective net pricing and an increase in organic volume.

The 53 rd reporting week contributed 2 percentage points to net revenue growth offset by a 9-percentage-point unfavorable impact of lower net revenue due to the Juice Transaction.

Unit volume grew slightly, driven by a 1% increase in our NCB volume, offset by a 1% decrease in CSD volume.

The NCB volume increase primarily reflected a mid-single-digit increase in Gatorade sports drinks, partially offset by a double-digit decrease in our energy portfolio.

Operating profit increased 122%, primarily reflecting a 124-percentage-point impact of the gain of $3.0 billion associated with the Juice Transaction, partially offset by a 2-percentage-point impact of related transaction costs.

Operating profit growth was also driven by the net revenue growth and productivity savings, partially offset by certain operating cost increases, including incremental transportation and information technology costs, and a 42-percentage-point impact of higher commodity costs, primarily aluminum and resin.

A current-year gain associated with the sale of an asset and the 53 rd reporting week contributed 6 percentage points and 2 percentage points, respectively, to operating profit growth.

Additionally, operating profit growth was reduced by a 15-percentage-point impact of the lower net revenue due to the Juice Transaction.

As a result of our decision to terminate the agreement with Vital Pharmaceuticals, Inc.

to distribute Bang energy drin ks, we recorded impairment and other related charges which reduced operating profit growth by 7 percentage points (brand portfolio impairment charges).

Net revenue increased 21%, primarily reflecting effective net pricing and organic volume growth.

Convenient foods unit volume grew 3.5%, primarily reflecting mid-single-digit growth in Mexico, partially offset by a low-single-digit decline in Brazil.

Beverage unit volume grew 6%, primarily reflecting double-digit growth in Argentina.

Additionally, Brazil, Guatemala, Chile and Mexico each experienced mid-single-digit growth.

Operating profit increased 19%, primarily reflecting the net revenue growth, productivity savings and a 3-percentage-point favorable impact of lower charges taken as a result of the COVID-19 pandemic.

These impacts were partially offset by certain operating cost increases, a 41-percentage-point impact of higher commodity costs, primarily cooking oil, packaging materials and grains, and higher advertising and marketing expenses.

Additionally, impairment and other charges associated with the sale of certain non-strategic brands reduced operating profit growth by 4.5 percentage points (brand portfolio impairment charges).

Net revenue decreased 2%, reflecting a 9-percentage-point impact of unfavorable foreign exchange, an organic volume decline and a 4.5-percentage-point unfavorable impact of the Juice Transaction, partially offset by effective net pricing.

Convenient foods unit volume declined 4%, primarily reflecting double-digit declines in Russia and Ukraine and a mid-single-digit decline in Poland, partially offset by low-single-digit growth in the United Kingdom and France and mid-single-digit growth in Turkey.

Additionally, the Netherlands experienced a low-single-digit decline.

Beverage unit volume declined 7%, primarily reflecting double-digit declines in Russia, Ukraine and Germany, partially offset by low-single-digit growth in France.

Additionally, the United Kingdom experienced a low-single-digit decline and Turkey experienced a mid-single-digit decline.

Operating profit decreased 207%, primarily reflecting a 110-percentage-point unfavorable impact of charges associated with the Russia-Ukraine conflict, a 98-percentage-point unfavorable impact of impairment charges related to the SodaStream brand (other impairment charges) and a 20-percentage-point unfavorable impact primarily related to the impairment of intangible assets due to the discontinuation or repositioning of certain juice and dairy brands in Russia (brand portfolio impairment charges), partially offset by a 23-percentage-point favorable impact of the gain associated with the Juice Transaction.

Operating profit performance was also negatively impacted by a 91-percentage-point impact of higher commodity costs, primarily packaging materials, raw milk and potatoes, certain operating cost increases, the organic volume decline, a 4-percentage-point impact of less favorable settlements of promotional spending accruals compared to the prior year and a 4-percentage-point impact of payments to employees for a change in pension benefits.

These impacts were partially offset by the effective net pricing, productivity savings and lower advertising and marketing expenses.

Unfavorable foreign exchange negatively impacted operating profit performance by 7 percentage points.

Net revenue increased 6%, primarily reflecting effective net pricing and organic volume growth, partially offset by a 3-percentage-point unfavorable impact of an extra month of net revenue in 2021 as we aligned Pioneer Food Group Ltd.’s (Pioneer Foods) reporting calendar with that of our AMESA division.

Unfavorable foreign exchange reduced net revenue growth by 12 percentage points.

Convenient foods unit volume grew 2%, primarily reflecting double-digit growth in the Middle East and Pakistan and high-single-digit growth in India, partially offset by a low-single-digit decline in South Africa.

Beverage unit volume grew 14%, primarily reflecting double-digit growth in India.

Additionally, the Middle East experienced high-single-digit growth, Nigeria experienced low-single-digit growth and Pakistan experienced double-digit growth.

Operating profit decreased 22%, primarily reflecting a 19-percentage-point impact of impairment and other charges associated with our decision to sell or discontinue certain non-strategic brands and an investment (brand portfolio impairment charges) and a 4-percentage-point impact of impairment charges primarily related to certain juice brands from the Pioneer Foods acquisition (other impairment charges).

Operating profit performance was also negatively impacted by a 74-percentage-point impact of higher commodity costs, primarily packaging materials, grains and cooking oil, certain operating cost increases and higher advertising and marketing expenses, partially offset by the net revenue growth and productivity savings.

Unfavorable foreign exchange negatively impacted operating profit performance by 9 percentage points.

Net revenue increased 4%, primarily reflecting effective net pricing and organic volume growth, partially offset by a 2-percentage-point unfavorable impact of an extra month of net revenue in 2021 as we aligned Hangzhou Haomusi Food Co., Ltd.’s (Be & Cheery) reporting calendar with that of our APAC division.

Unfavorable foreign exchange reduced net revenue growth by 5 percentage points.

Convenient foods unit volume grew 3%, primarily reflecting low-single-digit growth in China and Australia and mid-single-digit growth in Thailand, partially offset by a low-single-digit decline in Taiwan.

Beverage unit volume grew 8%, primarily reflecting double-digit growth in Vietnam.

Additionally, China experienced mid-single-digit growth, Thailand experienced low-single-digit growth and the Philippines experienced high-single-digit growth.

Operating profit decreased 20%, primarily reflecting a 25-percentage-point impact of impairment charges related to the Be & Cheery brand (other impairment charges).

Operating profit performance was also

negatively impacted by a 25-percentage-point impact of higher commodity costs, primarily cooking oil and potatoes, certain operating cost increases and higher advertising and marketing expenses, partially offset by the net revenue growth and productivity savings.

Additionally, prior-year impairment charges associated with an equity method investment positively contributed 3 percentage points to operating profit performance.

Unfavorable foreign exchange negatively impacted operating profit performance by 4 percentage points.

n/m - Not meaningful due to the impact of impairment and other charges, resulting in an operating loss in 2022.

Net revenue grew 7%, primarily driven by effective net pricing, partially offset by the impact of the 53 rd reporting week in the prior year, which reduced net revenue by 2 percentage points.

Unit volume decreased 1%, primarily driven by a high-single-digit decline in dips, a mid-single-digit decline in trademark Tostitos and a low-single-digit decline in trademark Lay’s, partially offset by double-digit growth in Sunchips and mid-single-digit growth in trademark Cheetos.

Operating profit increased 10%, primarily reflecting the effective net pricing, productivity savings and a 2-percentage-point favorable impact of prior-year impairment charges associated with a baked fruit convenient food brand.

These impacts were partially offset by certain operating cost increases, including strategic initiatives, and a 10-percentage-point impact of higher commodity costs, primarily cooking oil, seasoning ingredients and potatoes.

The 53 rd reporting week in the prior year reduced operating profit growth by 2 percentage points.

Net revenue declined 2%, primarily driven by a decrease in organic volume and a 2-percentage-point negative impact of the 53 rd reporting week in the prior year, partially offset by effective net pricing.

The organic volume decline and effective net pricing collectively included a 2-percentage-point negative impact of the product returns from the Quaker Recall and was negatively impacted by cessation of sales of products as a result of the Quaker Recall.

Unit volume declined 5% primarily reflecting a high-single-digit decline in oatmeal, a double-digit decline in bars, a high-single-digit decline in rice/pasta sides and a low-single-digit decline in ready-to-eat cereals.

The unit volume decline in bars and ready-to-eat cereals was negatively impacted by the Quaker Recall.

Operating profit declined 19%, reflecting a 22-percentage-point impact of product returns and charges associated with the Quaker Recall, certain operating cost increases, the decrease in organic volume, a 9-percentage-point impact of higher commodity costs, higher advertising and marketing expenses and a 2-percentage-point unfavorable impact of the 53 rd reporting week in the prior year.

These impacts were partially offset by effective net pricing and productivity savings.

In 2024, unit volume, net revenue and operating profit will continue to be negatively impacted by the Quaker Recall due to lower sales and additional charges.

Net revenue increased 5%, primarily driven by effective net pricing, partially offset by a decrease in organic volume.

The 53 rd reporting week in the prior year reduced net revenue growth by 1.5 percentage points.

Unit volume decreased 5%, driven by a 6% decrease in non-carbonated beverage (NCB) volume and a 4% decrease in CSD volume.

The NCB volume decrease primarily reflected high-single-digit decreases in Gatorade sports drinks and our overall water portfolio.

Operating profit decreased 52%, primarily reflecting the unfavorable impact of the prior-year gain of $3.0 billion associated with the Juice Transaction and the current-year impairment charges of $321 million related to our TBG investment, partially offset by the prior-year impairment and other related charges of $160 million associated with our decision to terminate the agreement with Vital Pharmaceuticals, Inc.

to distribute Bang energy drinks.

Operating profit also decreased due to certain operating cost increases, the decrease in organic volume, an 18-percentage-point impact of higher commodity costs, primarily sweeteners and energy, a 5-percentage-point unfavorable impact due to a prior-year gain on an asset sale and higher advertising and marketing expenses.

Additionally, operating profit performance reflects a 2-percentage-point unfavorable impact of the 53 rd reporting week in the prior year.

These impacts were partially offset by the effective net pricing and productivity savings.

Net revenue increased 19%, primarily reflecting effective net pricing and a 9-percentage-point impact of favorable foreign exchange, partially offset by a net organic volume decline.

Convenient foods unit volume declined 4%, primarily reflecting a double-digit decline in Colombia.

Additionally, Mexico and Brazil experienced low-single-digit declines.

Beverage unit volume grew 3%, primarily reflecting low-single-digit growth in Mexico and mid-single-digit growth in Guatemala and Colombia, partially offset by a mid-single-digit decline in Argentina.

Additionally, Chile experienced slight growth and Brazil experienced low-single-digit growth.

Operating profit increased 38%, primarily reflecting the effective net pricing, productivity savings, a 13-percentage-point impact of favorable foreign exchange and a 6-percentage-point favorable impact of a

prior-year impairment and other charges associated with the sale of certain non-strategic brands.

These impacts were partially offset by certain operating cost increases, the net organic volume decline, an 11-percentage-point impact of higher commodity costs, primarily potatoes, sweeteners and other ingredients and higher advertising and marketing expenses.

Net revenue increased 4%, primarily reflecting effective net pricing, partially offset by an 8-percentage-point impact of unfavorable foreign exchange and an organic volume decline.

Convenient foods unit volume decreased slightly, primarily reflecting a high-single-digit decline in the United Kingdom, a double-digit decline in Spain, a mid-single-digit decline in France and a low-single-digit decline in the Netherlands, partially offset by double-digit growth in Russia and high-single-digit growth in Turkey.

Beverage unit volume declined 3%, primarily reflecting a double-digit decline in Germany, a high-single-digit decline in France and a low-single-digit decline in Russia, partially offset by double-digit growth in Turkey.

Additionally, the United Kingdom experienced a low-single-digit decline.

Operating profit improvement primarily reflects the favorable impact of prior-year charges associated with the Russia-Ukraine conflict and impairment of intangible assets related to the repositioning or discontinuation of certain juice and dairy brands in Russia (brand portfolio impairment charges) and the favorable impact of lower impairment charges related to the SodaStream business (other impairment charges), partially offset by the unfavorable impact of the prior-year gain associated with the Juice Transaction.

Operating profit improvement also reflects the effective net pricing and productivity savings.

These impacts were partially offset by certain operating cost increases, a 54-percentage-point impact of higher commodity costs, primarily sweeteners, packaging and potatoes, a 16-percentage-point impact of unfavorable foreign exchange, higher advertising and marketing expenses and the organic volume decline.

Net revenue declined 5%, primarily reflecting a 21-percentage-point impact of unfavorable foreign exchange, driven primarily by the weakening of the Egyptian pound, and a net organic volume decline, partially offset by effective net pricing.

Convenient foods unit volume declined 3.5%, primarily reflecting a high-single-digit decline in South Africa, partially offset by high-single-digit growth in the Middle East and low-single-digit growth in Pakistan.

Additionally, India experienced a low-single-digit decline.

Beverage unit volume grew 2%, primarily reflecting double-digit growth in India and low-single-digit growth in the Middle East, partially offset by a double-digit decline in Pakistan and a low-single-digit decline in Nigeria.

Operating profit grew 21%, primarily reflecting a 24-percentage-point favorable impact of impairment and other charges associated with our decision to sell or discontinue certain non-strategic brands and an investment in the prior year (brand portfolio impairment charges), a 4-percentage-point favorable impact of impairment charges primarily related to certain juice brands from the Pioneer Food Group Ltd.

(Pioneer Foods) acquisition in the prior year (other impairment charges), the effective net pricing and productivity savings.

These impacts were partially offset by a 70-percentage-point impact of higher commodity costs, primarily packaging materials, sweeteners and grains, largely driven by transaction-related foreign exchange, certain operating cost increases and a 21-percentage-point impact of unfavorable foreign exchange, primarily due to weakening of the Egyptian pound.

Net revenue grew slightly, primarily reflecting effective net pricing, partially offset by a 4-percentage-point impact of unfavorable foreign exchange and a net organic volume decline.

Convenient foods unit volume declined 2%, primarily reflecting a double-digit decline in Thailand and a low-single-digit decline in Australia, partially offset by low-single-digit growth in China.

Beverage unit volume grew 2.5%, primarily reflecting mid-single-digit growth in China, high-single-digit growth in Thailand and low-single-digit growth in Vietnam, partially offset by a mid-single-digit decline in the Philippines.

Operating profit grew 33%, primarily reflecting a 23-percentage-point favorable impact of lower impairment charges related to the Be & Cheery brand (other impairment charges), the effective net pricing and productivity savings.

These impacts were partially offset by certain operating cost increases, higher advertising and marketing expenses, the net organic volume decline, a 5-percentage-point impact of higher commodity costs and a 4-percentage-point impact of unfavorable foreign exchange.

Non-GAAP Measures

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charges related to restructuring plans;

charges associated with mergers, acquisitions, divestitures and other structural changes;

charges associated with acquisitions and divestitures;

gains associated with divestitures;

asset impairment charges (non-cash);

product recall-related impact;

pension and retiree medical-related amounts, including all settlement and curtailment gains and losses;

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Cost of sales, gross profit, selling, general and administrative expenses, gain associated with the Juice Transaction, impairment of intangible assets, other pension and retiree medical benefits income, net interest expense and other, provision for income taxes, net income attributable to noncontrolling interests and net income attributable to PepsiCo, each adjusted for items affecting comparability, operating profit and net income attributable to PepsiCo per common share – diluted, each adjusted for items affecting comparability, and the corresponding constant currency growth rates

comprised of Russia-Ukraine conflict charges, brand portfolio impairment charges and other impairment charges, the impact of settlement and curtailment gains and losses related to pension and retiree medical plans, a charge related to cash tender offers, tax benefit related to the IRS audit and tax expense related to the Tax Cuts and Jobs Act (TCJ Act) (see “Items Affecting Comparability” for a detailed description of each of these items).

These measures exclude the net impact of mark-to-market gains and losses on centrally managed commodity derivatives that do not qualify for hedge accounting, restructuring and impairment charges related to our 2019 Multi-Year Productivity Plan (2019 Productivity Plan), charges associated with our acquisitions and divestitures, the gain associated with the Juice Transaction, impairment and other charges comprised of Russia-Ukraine conflict charges, brand portfolio impairment charges and other impairment charges, product recall-related impact, the impact of settlement and curtailment gains and losses related to pension and retiree medical plans, a charge related to cash tender offers, tax benefit related to the IRS audit and tax expense related to the Tax Cuts and Jobs Act (TCJ Act) (see “Items Affecting Comparability” for a detailed description of each of these items).

We also evaluate performance on operating profit and net income attributable to PepsiCo per common share – diluted, each adjusted for items affecting comparability, on a constant currency basis, which measure our financial results assuming constant foreign currency exchange rates used for translation based on the rates in effect for the comparable prior-year period.

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Organic revenue growth

We define organic revenue growth as a measure that adjusts for the impacts of foreign exchange translation, acquisitions, divestitures and other structural changes, and every five or six years, the impact of the 53 rd reporting week, including in our 2022 financial results.

Adjusting for acquisitions and divestitures reflects mergers and acquisitions activity, including the impact in 2021 of an extra month of net revenue for our acquisitions of Pioneer Foods in our AMESA division and Be & Cheery in our APAC division as we aligned the reporting calendars of these acquisitions with those of our divisions, as well as divestitures and other structural changes, including changes in ownership or control in consolidated subsidiaries and nonconsolidated equity investees.

We define organic revenue growth as a measure that adjusts for the impacts of foreign exchange translation, acquisitions and divestitures, and every five or six years, the impact of the 53 rd reporting week, including in our 2022 financial results.

Adjusting for acquisitions and divestitures reflects mergers and acquisitions activity, as well as divestitures and other structural changes, including changes in ownership or control in consolidated subsidiaries and nonconsolidated equity investees.

We believe organic revenue growth provides useful information in evaluating the results of our business because it excludes items that we believe are not indicative of ongoing performance or that we believe impact comparability with the prior year.

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Free cash flow

We define free cash flow as net cash provided by operating activities less capital spending, plus sales of property, plant and equipment.

We define free cash flow as net cash from operating activities less capital spending, plus sales of property, plant and equipment.

Since net capital spending is essential to our product innovation initiatives and maintaining our operational capabilities, we believe that it is a recurring and necessary use of cash.

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We believe this metric serves as a measure of how well we use our capital to generate returns.

In addition, we use net ROIC, excluding items affecting comparability, to compare our performance over various reporting periods on a consistent basis because it removes from our operating results the impact of items that we believe are not indicative of our ongoing performance and reflects how management evaluates our

operating results and trends.

We define net ROIC, excluding items affecting comparability, as ROIC, adjusted for quarterly average cash, cash equivalents and short-term investments, after-tax interest income and items affecting comparability.

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Our reported financial results in this Form 10-K are impacted by the following items in each of the following years:

Cost of sales Gross profit Selling, general and administrative expenses Gain associated with the Juice Transaction Impairment of intangible assets Operating profit Other pension and retiree medical benefits income Provision for income taxes (a)

Cost of sales Gross profit Selling, general and administrative expenses Impairment of intangible assets Operating profit Other pension and retiree medical benefits income Provision for income taxes (a)

Net income attributable to noncontrolling interests Net income attributable to PepsiCo

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— — (41) — 41 — 18 — 23

Gain associated with the Juice Transaction — — — 3,321 — (3,321) — (433) — (2,888)

Impairment and other charges 5 (5) (308) (927) 1,230 — 284 — 946

Product recall-related impact (136) 136 — — 136 — 32 — 104

Pension and retiree medical-related impact

— — — — — 14 3 — 11

Tax benefit related to the IRS audit — — — — — — — 319 — (319)

Tax expense related to the TCJ Act

— — — — — — — (86) — 86

Core, Non-GAAP Measure $ 41,734 $ 49,737 $ 35,862 $ — $ 13,875 $ 263 $ 2,704 $ 82 $ 10,533

Cost of sales Gross profit Selling, general and administrative expenses Operating profit Other pension and retiree medical benefits income Net interest expense and other Provision for income taxes (a)

Net income attributable to noncontrolling interests Net income attributable to PepsiCo

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— — (74) — — 74 6 14 — 66

Gain associated with the Juice Transaction — — — 3,321 — (3,321) — (433) — (2,888)

Impairment and other charges (201) 201 (251) — (3,166) 3,618 — 671 — 2,947

Pension and retiree medical-related impact

— — — — — — 307 69 — 238

Charge related to cash tender offers — — — — — 842 165 — 677

Tax benefit related to the IRS audit — — — — — — — 319 — (319)

Tax expense related to the TCJ Act — — — — — — — (86) — 86

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Impairment and other charges 0.68 2.12

Product recall-related impact 0.07 —

Pension and retiree medical-related impact

Charge related to cash tender offers — 0.49

Tax benefit related to the IRS audit — (0.23)

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and simplify our organization and optimize our manufacturing and supply chain footprint.

To build on the successful

implementation of the 2019 Productivity Plan, in the fourth quarter of 2022, we expanded and extended the plan through the end of 2028 to take advantage of additional opportunities within the initiatives described above.

To build on the successful implementation of the 2019 Productivity Plan, in 2022, we expanded and extended the plan through the end of 2028 to take advantage of additional opportunities within the initiatives described above.

As a result, we expect to incur pre-tax charges of approximately $3.65 billion, including cash expenditures of approximately $2.9 billion.

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These charges will be funded primarily through cash from operations.

We expect to incur the majority of the remaining pre-tax charges and cash expenditures in our 2023 through 2024 financial results, with the balance to be incurred through 2028.

We expect to incur the majority of the remaining pre-tax charges and cash expenditures through 2025, with the balance to be incurred through 2028.

Charges include severance and other employee costs, asset impairments and other costs.

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Acquisition and Divestiture-Related Charges

Acquisition and divestiture-related charges primarily include fair value adjustments to the acquired inventory included in the acquisition-date balance sheets (recorded in cost of sales), merger and integration charges and costs associated with divestitures (recorded in selling, general and administrative expenses).

Acquisition and divestiture-related charges primarily include merger and integration charges and costs associated with divestitures.

Merger and integration charges include liabilities to support socioeconomic programs in South Africa, gains associated with contingent consideration, employee-related costs, contract termination costs, closing costs and other integration costs.

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Russia-Ukraine Conflict Charges

In connection with the deadly conflict in Ukraine, we recognized charges related to indefinite-lived intangible assets and property, plant and equipment impairment, allowance for expected credit losses, inventory write-downs and other costs.

In connection with the ongoing conflict in Ukraine, we recognized charges related to indefinite-lived intangible assets and property, plant and equipment impairment, allowance for expected credit losses, inventory write-downs and other costs.

We also recognized adjustments to the charges recorded in 2022.

See Notes 1 and 4 to our consolidated financial statements for further information.

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We recognized intangible asset, investment and property, plant and equipment impairments and other charges as a result of management’s decision to reposition or discontinue the sale/distribution of certain brands and to sell an investment.

We also recognized adjustments to the charges recorded in 2022.

See Notes 1 and 4 to our consolidated financial statements for further information.

Other Impairment Charges

We recognized impairment charges related to certain of our indefinite-lived intangible assets which reflect an increase in the weighted-average cost of capital as well as our most current estimates of future financial performance.

We recognized 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.

See Notes 1, 4 and 9 to our consolidated financial statements for further information.

Product Recall-Related Impact

We recognized product returns, inventory write-offs and customer and consumer-related costs in our QFNA division associated with a voluntary recall of certain bars and cereals.

See Note 1 to our consolidated financial statements for further information.

Pension and Retiree Medical-Related Impact

Pension and retiree medical-related impact primarily includes settlement charges related to lump sum distributions exceeding the total of annual service and interest costs, as well as curtailment gains.

Pension and retiree medical-related impact includes settlement charges related to lump sum distributions exceeding the total of annual service and interest costs, as well as curtailment gains.

See Notes 7 and 13 to our consolidated financial statements for further information.

Charge Related to Cash Tender Offers

As a result of the cash tender offers for some of our long-term debt, we recorded a charge primarily representing the tender price paid over the carrying value of the tendered notes and loss on treasury rate locks used to mitigate the interest rate risk on the cash tender offers.

See Note 8 to our consolidated financial statements for further information.

Tax Benefit Related to the IRS Audit

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See Note 5 to our consolidated financial statements for further information.

Charge Related to Cash Tender Offers

See Note 8 to our consolidated financial statements for further information.

Our Liquidity and Capital Resources

We believe that our cash generating capability and financial condition, together with our revolving credit facilities, working capital lines and other available methods of debt financing, such as commercial paper borrowings and long-term debt financing, will be adequate to meet our operating, investing and financing needs, including with respect to our net capital spending plans.

Our primary sources of liquidity include cash from operations, pre-tax cash proceeds of approximately $3.5 billion from the Juice Transaction, proceeds obtained from issuances of commercial paper and long-term debt, and cash and cash equivalents.

Our primary sources of liquidity include cash from operations, proceeds obtained from issuances of commercial paper and long-term debt, and cash and cash equivalents.

These sources of cash are available to fund cash outflows that have both a short- and long-term component, including debt repayments and related interest payments;

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See Note 5 to our consolidated financial statements for further discussion of the TCJ Act.

As part of our evolving market practices, we work with our suppliers to optimize our terms and conditions, which include the extension of payment terms.

Our current payment terms with a majority of our suppliers generally range from 60 to 90 days, which we deem to be commercially reasonable.

We will continue to monitor economic conditions and market practice working with our suppliers to adjust as necessary.

We also maintain voluntary supply chain finance agreements with several participating global financial institutions.

Under these agreements, our suppliers, at their sole discretion, may elect to sell their accounts receivable with PepsiCo to these participating global financial institutions.

Supplier participation in these financing arrangements is voluntary.

Our suppliers negotiate their financing agreements directly with the respective global financial institutions and we are not a party to these agreements.

These financing arrangements allow participating suppliers to leverage PepsiCo’s creditworthiness in establishing credit spreads and associated costs, which generally provides our suppliers with more favorable terms than they would be able to secure on their own.

Neither PepsiCo nor any of its subsidiaries provide any guarantees to any third party in connection with these financing arrangements.

We have no economic interest in our suppliers’ decision to participate in these agreements.

Our obligations to our suppliers, including amounts due and scheduled payment terms, are not impacted.

All outstanding amounts related to suppliers participating in such financing arrangements are recorded within accounts payable and other current liabilities in our consolidated balance sheet.

We were informed by the participating financial institutions that as of both December 31, 2022 and December 25, 2021, $1.5 billion of our accounts payable to suppliers who participate in these financing arrangements are outstanding.

These supply chain finance arrangements did not have a material impact on our liquidity or capital resources in the periods presented and we do not expect such arrangements to have a material impact on our liquidity or capital resources for the foreseeable future.

Supply chain financing arrangements did not have a material impact on our liquidity or capital resources in the periods presented and we do not expect such arrangements to have a material impact on our liquidity or capital resources for the foreseeable future.

See Note 14 to our consolidated financial statements for further discussion of supply chain financing arrangements.

Furthermore, our cash provided from operating activities is somewhat impacted by seasonality.

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In 2023, net cash provided by operating activities was $13.4 billion, compared to $10.8 billion in the prior year.

The decrease in operating cash flow primarily reflects unfavorable working capital comparisons and higher net cash tax payments, partially offset by favorable operating profit performance and lower pre-tax pension and retiree medical plan contributions in the current year.

The increase in operating cash flow primarily reflects favorable operating profit performance coupled with favorable working capital comparisons.

Investing Activities

In 2023, net cash used for investing activities was $5.5 billion, primarily reflecting net capital spending of $5.3 billion.

In 2022, net cash used for investing activities was $2.4 billion, primarily reflecting net capital spending of $5.0 billion and our investment in Celsius Holdings, Inc.

(Celsius) convertible preferred stock and agreement to distribute Celsius energy drinks of $0.8 billion, partially offset by proceeds associated with the Juice Transaction of $3.5 billion.

In 2021, net cash used for investing activities was $3.3 billion, primarily reflecting net capital spending of $4.5 billion, partially offset by maturities of short-term investments with maturities greater than three months of $1.1 billion.

See Note 1 to our consolidated financial statements for further discussion of capital spending by division;

see Notes 4 and 9 to our consolidated financial statements for further discussion of our agreement with and investment in Celsius;

and see Note 13 to our consolidated financial statements for further discussion of our acquisitions.

see Notes 4 and 9 to our consolidated financial statements for further discussion of our agreement with

and investment in Celsius;

and see Note 13 to our consolidated financial statements for further discussion of our acquisitions and divestitures.

We regularly review our plans with respect to net capital spending, including in light of the ongoing uncertainty caused by the Russia-Ukraine conflict on our business, and believe that we have sufficient liquidity to meet our net capital spending needs.

Financing Activities

In 2023, net cash used for financing activities was $3.0 billion, primarily reflecting the return of operating cash flow to our shareholders through dividend payments of $6.7 billion and share repurchases of $1.0 billion, as well as payments of long-term debt borrowings of $3.0 billion, partially offset by proceeds from issuances of long-term debt of $5.5 billion and net proceeds from short-term borrowings of $2.3 billion.

In 2022, net cash used for financing activities was $8.5 billion, primarily reflecting the return of operating cash flow to our shareholders through dividend payments of $6.2 billion and share repurchases of $1.5 billion, payments of long-term debt borrowings of $2.5 billion and debt redemptions/cash tender offers of $1.7 billion, partially offset by proceeds from issuances of long-term debt of $3.4 billion.

In 2021, net cash used for financing activities was $10.8 billion, primarily reflecting the return of operating cash flow to our shareholders largely through dividend payments of $5.8 billion, cash tender offers/debt redemption of $4.8 billion, payments of long-term debt borrowings of $3.5 billion and payments of acquisition-related contingent consideration of $0.8 billion, partially offset by proceeds from issuances of long-term debt of $4.1 billion.

See Note 8 to our consolidated financial statements for further discussion of debt obligations.

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Any downgrade of our credit ratings by a credit rating agency, especially any downgrade to below investment grade, whether or not as a result of our actions or factors which are beyond our control, could increase our future borrowing costs and impair our ability to access capital and credit markets on terms commercially acceptable to us, or at all.

In addition, any downgrade of our current short-term credit ratings could impair our ability to access the commercial paper market with the same flexibility that we have experienced historically, and therefore require us to rely more heavily on more expensive types of debt financing.

debt financing.

See “Item 1A.

Risk Factors,” “Our Business Risks” and Note 8 to our consolidated financial statements for further information.

Material Changes in Line Items in Our Consolidated Financial Statements

Material changes in line items in our consolidated statement of income are discussed in “Results of Operations – Consolidated Review,” “Results of Operations – Division Review” and “Items Affecting Comparability.”

Material changes in line items in our consolidated statement of cash flows are discussed in “Our Liquidity and Capital Resources.”

Material changes in line items in our consolidated balance sheet are discussed below:

2022 Change (a)

Decrease in cash and cash equivalents (b)

Increase in accounts and notes receivable, net (c)

Increase in inventories (d)

Decrease in assets held for sale (e)

Increase in property, plant and equipment, net (f)

Decrease in other indefinite-lived intangible assets (g)

Increase in investments in noncontrolled affiliates (h)

Increase in other assets (i)

Decrease in short-term debt obligations (j)

Increase in accounts payable and other current liabilities (k)

Decrease in liabilities held for sale (e)

Decrease in deferred income taxes (l)

Decrease in other liabilities (m)

Changes in Line Items in Our Consolidated Financial Statements

Changes in line items in our consolidated statement of income are discussed in “Results of Operations – Consolidated Review,” “Results of Operations – Division Review” and “Items Affecting Comparability.”

Changes in line items in our consolidated statement of cash flows are discussed in “Our Liquidity and Capital Resources.”

Changes in line items in our consolidated balance sheet are discussed below:

As of December 30, 2023, total assets were $100.5 billion, compared to $92.2 billion as of December 31, 2022.

The increase in total assets is primarily driven by the following line items:

Cash and cash equivalents $ 4.8 Statement of Cash Flows

Property, plant and equipment, net $ 2.7 Note 15

Other assets $ 1.4 Note 15

Total Liabilities

As of December 30, 2023, total liabilities were $81.9 billion, compared to $74.9 billion as of December 31, 2022.

The increase in total liabilities is primarily driven by the following line items:

Short-term debt obligations $ 3.1 Note 8

Accounts payable and other current liabilities $ 1.8 Note 15

Long-term debt obligations $ 1.9 Note 8

(a) In billions.

(b) See consolidated statement of cash flows.

See Note 14 to our consolidated financial statements for further information.

(d) Primarily reflects higher commodity costs in 2022.

See Note 14 to our consolidated financial statements for further information.

(e) Reflects closing of the Juice Transaction.

See Note 13 to our consolidated financial statements for further information.

(f) Primarily reflects capital spending, partially offset by depreciation.

See Notes 1 and 14 to our consolidated financial statements for further information.

(g) Primarily reflects impairments.

See Notes 1 and 4 to our consolidated financial statements for further information.

(h) Primarily reflects closing of the Juice Transaction.

See Note 13 to our consolidated financial statements for further information.

(i) Primarily reflects our investment in Celsius convertible preferred stock.

See Note 9 to our consolidated financial statements for further information.

(j) Primarily reflects debt payments and redemptions, partially offset by debt maturing within one year.

See Note 8 to our consolidated financial statements for further information.

(k) Primarily reflects higher commodity costs and capital expenditures in 2022.

See Note 14 to our consolidated financial statements for further information.

(l) Primarily reflects certain impairments and the capitalization of research and development expenses under the TCJ Act, partially offset by the deferred tax impacts of our Juice Transaction.

See Note 5 to our consolidated financial statements for further information.

(m) Primarily reflects changes related to pension and retiree medical plans.

See Note 7 to our consolidated financial statements for further information.

Material changes in equity line items are discussed in our consolidated statement of equity and notes 7 and 11 to our consolidated financial statements.

See our consolidated statement of equity and Notes 9 and 11 to our consolidated financial statements.

Return on Invested Capital

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Impairment and other charges 0.6 3.7

Product recall-related impact 0.2 —

Pension and retiree medical-related impact — 0.3

Charge related to cash tender offers (0.2) —

Tax benefit related to the IRS audit 0.1 (0.4)

Tax expense related to the TCJ Act (0.1) 0.1

Charge related to cash tender offers (0.2) (0.2)

Core Net ROIC, non-GAAP measure 20.4 % 19.6 %

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An appreciation of our critical accounting policies and estimates is necessary to understand our financial results.

These policies may require management to make difficult and subjective judgments regarding uncertainties, including the business and economic uncertainty resulting from the Russia-Ukraine conflict and the high interest rate and inflationary cost environment, and as a result, such estimates may significantly impact our financial results.

These policies may require management to make difficult and subjective judgments regarding uncertainties, including 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, and as a result, such estimates may significantly impact our financial results.

The precision of these estimates and the likelihood of future changes depend on a number of underlying variables and a range of possible outcomes.

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Our primary performance obligation (the distribution and sales of beverage and convenient food products) is satisfied upon the shipment or delivery of products to our customers, which is also when control is transferred.

The transfer of control of products to our customers is typically based on written sales terms that do not allow for a right of return.

However, our policy for DSD, including certain chilled products, is to remove and replace damaged and out-of-date products from store shelves to ensure that consumers receive the product quality and freshness they expect.

The transfer of control of products to our customers is typically based on written sales terms that generally do not allow for a right of return, except in the instance of a product recall or other limited circumstances that may allow for product returns.

Our policy for DSD, including certain chilled products, is to remove and replace damaged and out-of-date products from store shelves to ensure that consumers receive the product quality and

freshness they expect.

Similarly, our policy for certain warehouse-distributed products is to replace damaged and out-of-date products.

As a result, we record reserves, based on estimates, for anticipated damaged and out-of-date produc ts.

As a result, we record reserves, based on estimates, for product recall, anticipated damaged and out-of-date produc ts.

Our products are sold for cash or on credit terms.

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In a business combination, the consideration is first assigned to identifiable assets and liabilities, including brands and other intangible assets, based on estimated fair values, with any excess recorded as goodwill.

Determining fair value requires significant estimates and assumptions, including those related to the Russia-Ukraine conflict and a high interest rate and inflationary cost environment, based on an evaluation of a number of factors, such as marketplace participants, product life cycles, market share, consumer awareness, brand history and future expansion expectations, amount and timing of future cash flows and the discount rate applied to the cash flows.

We believe that a brand has an indefinite life if it has a history of strong revenue and cash flow performance and we have the intent and ability to support the brand with marketplace spending for the foreseeable future.

Determining fair value requires significant estimates and assumptions, including those related to the ongoing conflicts in Ukraine and the Middle East and a high interest rate and inflationary cost environment, based on an evaluation of a number of factors, such as marketplace participants, product life cycles, market share, consumer awareness, brand history and future expansion expectations, amount and timing of future cash flows and the discount rate applied to the cash flows.

We believe that a brand has an indefinite life if it has a history of strong revenue and cash flow

performance and we have the intent and ability to support the brand with marketplace spending for the foreseeable future.

If these indefinite-lived brand criteria are not met, brands are amortized over their expected useful lives, which generally range from 20 to 40 years.

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Where we use the qualitative assessment, first we determine if, based on qualitative factors, it is more likely than not that an impairment exists.

Factors considered include macroeconomic conditions (including those related to the Russia-Ukraine conflict and a high interest rate and inflationary cost environment), industry and competitive conditions, legal and regulatory environment, historical financial performance and significant changes in the brand or reporting unit.

Factors considered include macroeconomic conditions (including those related to the ongoing conflicts in Ukraine and the Middle East and a high interest rate and inflationary cost environment), industry and competitive conditions, legal and regulatory environment, historical financial performance and significant changes in the brand or reporting unit.

If the qualitative assessment indicates that it is more likely than not that an impairment exists, then a quantitative assessment is performed.

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Estimated fair value is determined using discounted cash flows and requires an analysis of several estimates including future cash flows or income consistent with management’s strategic business plans, annual sales growth rates, perpetuity growth assumptions and the selection of assumptions underlying a discount rate (weighted-average cost of capital) based on market data available at the time.

Significant management judgment is necessary to estimate the impact of competitive operating, macroeconomic and other factors (including those related to the Russia-Ukraine conflict and a high

interest rate and inflationary cost environment) to estimate future levels of sales, operating profit or cash flows.

Significant management judgment is necessary to estimate the impact of competitive operating, macroeconomic and other factors (including those related to the ongoing conflicts in Ukraine and the Middle East and a high interest rate and inflationary cost environment) to estimate future levels of sales, operating profit or cash flows.

All assumptions used in our impairment evaluations for indefinite-lived intangible assets and goodwill, such as forecasted growth rates (including perpetuity growth assumptions) and weighted-average cost of capital, are based on the best available market information and are consistent with our internal forecasts and operating plans.

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Risk Factors” and “Our Business Risks.”

In 2022, we recorded $1.3 billion ($1.1 billion after-tax or $0.78 per share) of indefinite-lived intangible asset impairment charges related to the SodaStream brand in Europe.

As a result, its carrying value as of December 31, 2022 is equal to its fair value and the brand is at a heightened risk of future impairment if certain assumptions and estimates were to change.

For example, a mutually exclusive 100-basis-point increase in the discount rate and a 100-basis-point decrease in the perpetuity growth rate used to estimate the fair value of the SodaStream brand would result in an additional estimated impairment charge of approximately $0.2 billion and $0.1 billion, respectively.

We will continue to monitor the performance of the SodaStream brand and goodwill, as well as all of our indefinite-lived intangible assets.

In 2023, we recorded $0.6 billion ($0.4 billion after-tax or $0.32 per share) of indefinite-lived intangible asset impairment charges related to the SodaStream brand and $0.3 billion ($0.3 billion after-tax or $0.22 per share) of goodwill impairment charges related to the SodaStream reporting unit in Europe.

As a result, the carrying value of the SodaStream reporting unit as of December 30, 2023 is equal to its fair value and the SodaStream reporting unit is at a heightened risk of future goodwill impairment if certain assumptions and estimates were to change.

For example, a mutually exclusive 100-basis-point increase in the discount rate and a 100-basis-point decrease in the perpetuity growth rate used to estimate the fair value of the

SodaStream reporting unit would result in an additional estimated impairment charge of approximately $0.2 billion and $0.1 billion, respectively.

We will continue to monitor the performance of the SodaStream reporting unit, as well as all of our indefinite-lived intangible assets.

Amortizable intangible assets are only evaluated for impairment upon a significant change in the operating or macroeconomic environment.

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• the spot rates along the yield curve used to determine service and interest costs and the present value of liabilities.

• for pension expense, the rate of salary increases for plans where benefits are based on earnings;

• for retiree medical expense, health care cost trend rates.

Certain assumptions reflect our historical experience and management’s best judgment regarding future expectations.

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Although we review our expected long-term rates of return on an annual basis, our asset returns in a given year do not significantly influence our evaluation of long-term rates of return.

The health care trend rate used to determine our retiree medical plans’ obligation and expense is reviewed annually.

Our review is based on our claims experience, information provided by our health plans and actuaries, and our knowledge of the health care industry.

Our review of the trend rate considers factors such as demographics, plan design, new medical technologies and changes in medical carriers.

Weighted-average assumptions for pension and retiree medical expense are as follows:

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7.0 % 7.0 % 6.3 %

Expected rate of salary increases 3.3 % 3.1 % 3.1 %

Retiree medical

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Expected rate of return on plan assets 7.1 % 7.1 % 5.7 %

Current health care cost trend rate 5.5 % 5.8 % 5.5 %

(a) 2022 rates reflect remeasurement of a U.S.

qualified defined benefit pension plan in the second quarter of 2022.

In 2022, lump sum distributions exceeded the total of annual service and interest cost and triggered pre-tax settlement charges for certain U.S defined pension plans.

In addition, we expect the recognition of fixed income losses on plan assets, partially offset by higher discount rates, to increase our pension and retiree medical expense in 2023.

We expect our pension and retiree medical expense to remain consistent in 2024 primarily reflecting the change in demographic experience, offset by the recognition of gains on plan assets and impact of discretionary plan contributions.

Sensitivity of Assumptions

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We made a discretionary contribution of $150 million to a U.S.

qualified defined benefit plan in January 2023 and expect to make an additional $125 million in the third quarter of 2023.

qualified defined benefit plan in January 2024.

Our pension and retiree medical plan contributions are subject to change as a result of many factors, such as changes in interest rates, deviations between actual and expected asset returns and changes in tax or other benefit laws.

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Net pension and retiree medical adjustments ( 358 ) 389 770

Other 4 22 ( 1 )

Net change on available-for-sale debt securities and other 465 4 22

( 232 ) ( 408 ) 578

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Impairment and other charges 1,230 3,618 —

Product recall-related impact 136 — —

Operating lease right-of-use asset amortization 570 517 505

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More than three months - maturities 556 150 1,135

More than three months - sales 12 — —

Three months or less, net 3 24 ( 58 )

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Other financing ( 73 ) ( 72 ) ( 47 )

Net Cash (Used for)/Provided by Financing Activities ( 8,523 ) ( 10,780 ) 3,819

Net Cash Used for Financing Activities ( 3,009 ) ( 8,523 ) ( 10,780 )

Effect of exchange rate changes on cash and cash equivalents and restricted cash ( 277 ) ( 465 ) ( 114 )

Net (Decrease)/Increase in Cash and Cash Equivalents and Restricted Cash ( 607 ) ( 2,547 ) 2,684

Net Increase/(Decrease) in Cash and Cash Equivalents and Restricted Cash 4,661 ( 607 ) ( 2,547 )

Cash and Cash Equivalents and Restricted Cash, Beginning of Year 5,100 5,707 8,254

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Accounts and notes receivable, net

Inventories 5,222 4,347

10,815 10,163

Raw materials and packaging 2,388 2,366

Work-in-process 104 114

Finished goods 2,842 2,742

Prepaid expenses and other current assets 798 806

Assets held for sale — 1,788

Total Current Assets

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25,137 23,371

Liabilities held for sale — 753

Total Current Liabilities

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Balance, beginning of year 67,800 65,165 63,443

Cumulative effect of accounting changes — — ( 34 )

Net income attributable to PepsiCo 9,074 8,910 7,618

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See accompanying notes to the consolidated financial statements.

Notes to Consolidated Financial Statements

Notes to the Consolidated Financial Statements

Note 1 — Basis of Presentation and Our Divisions

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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 Russia - Ukraine conflict and the high interest rate and inflationary cost environment has made such estimates and assumptions more difficult to calculate.

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.

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This change did not have a material impact on our consolidated financial statements.

The following chart details our quarterly reporting schedule for 2022, reflecting the additional week in the fourth quarter:

The following chart details our quarterly reporting schedule:

Quarter United States and Canada International

First Quarter 12 weeks January, February

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 17 weeks September, October, November and December

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.

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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, Russia, Canada, China, the United Kingdom and South Africa.

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:

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FLNA $ 24,914 $ 23,291 $ 19,608 $ 6,755 $ 6,135 $ 5,633

QFNA 3,160 2,751 2,742 604 578 669

3,101 3,160 2,751 492 604 578

LatAm 9,779 8,108 6,942 1,627 1,369 1,033

27,626 26,213 25,276 2,584 5,426 2,442

6,438 6,078 4,573 666 858 600

LatAm 11,654 9,779 8,108 2,252 1,627 1,369

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

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(a) See below for impairment and other charges taken related to the Russia-Ukraine conflict, brand portfolio impairment and other impairment.

(b) 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.

(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.

(c) In 2021, the increase in net revenue in our AMESA and APAC divisions reflect our acquisitions of Pioneer Foods and Be & Cheery, respectively.

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 approximate 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:

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

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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 approximately 35 % of our consolidated net revenue in 2022 and approximately 40 % of our consolidated net revenue in 2021 and 2020.

(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.

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A summary of pre-tax charges taken in 2022 in our Europe division as a result of the Russia-Ukraine conflict is as follows:

Russia-Ukraine conflict charges

Cost of sales Selling, general and administrative expenses Impairment of intangible assets (a)

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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:

Brand portfolio impairment charges

Cost of sales Selling, general and administrative expenses Impairment of intangible assets (a)

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For information on our policies for indefinite-lived intangible assets, see Note 2.

A summary of pre-tax impairment charges taken in 2022 as a result of our quantitative assessments of certain of our indefinite-lived intangible assets is as follows:

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

Impairment of intangible assets (a)

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

Europe 1,264 Related to the SodaStream brand

AMESA 31 Primarily related to certain juice brands from the Pioneer Foods acquisition

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

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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, inventory write-downs, product returns and other expenses.

These pre-tax charges by division are as follows:

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 2020

FLNA $ 25 $ 56

23 ( 11 ) 304

LatAm 15 64 102

Europe 5 21 88

Total $ 95 $ 148

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(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 2022, the change in assets was primarily due to a decrease in cash and cash equivalents.

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:

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Mexico 7,011 5,472 4,580 2,509 1,933

Russia 4,118 3,426 3,009 2,538 3,751

Canada 3,722 3,536 3,405 2,815 2,678

2,752 2,679 1,732 1,517 1,745

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

South Africa (c)

1,837 2,008 1,282 1,327 1,389

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

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See Notes 2 and 4 for further information on goodwill and other intangible assets.

See Note 14 for further information on other assets.

Investments in noncontrolled affiliates are evaluated for impairment upon a significant change in the operating or macroeconomic environment.

See Notes 9 and 15 for further information on other assets.

These assets are reported in the country where they are primarily used.

(b) In 2021, the increase in net revenue reflects our acquisition of Be & Cheery.

See Note 13 for further information.

Note 2 — Our Significant Accounting Policies

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In addition, we exclude from net revenue all sales, use, value-added and certain excise taxes assessed by government authorities on revenue producing transactions.

The transfer of control of products to our customers is typically based on written sales terms that do not allow for a right of return.

Similarly, our policy for certain warehouse-distributed products

is to replace damaged and out-of-date products.

As a result, we record reserves, based on estimates, for anticipated damaged and out-of-date produc ts.

Our policy for DSD, including certain chilled products, is to remove and replace damaged and out-of-date products from store shelves to ensure that consumers receive the product quality and freshness they expect.

Similarly, our policy for certain warehouse-distributed products is to replace damaged and out-of-date products.

As a result, we record reserves, based on estimates, for product recall, anticipated damaged and out-of-date produc ts.

Our products are sold for cash or on credit terms.

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Our annual consolidated financial statements are not impacted by this interim allocation methodology.

Advertising and other marketing activities, reported as selling, general and administrative expenses, totaled $ 5.2 billion in 2022, $ 5.1 billion in 2021 and $ 4.6 billion in 2020, including advertising expenses of $ 3.5 billion in both 2022 and 2021, and $ 3.0 billion in 2020.

Advertising and other marketing activities, reported as selling, general and administrative expenses, totaled $ 5.7 billion in 2023, $ 5.2 billion in 2022 and $ 5.1 billion in 2021, including advertising expenses of $ 3.8 billion in 2023 and $ 3.5 billion in both 2022 and 2021.

Deferred advertising costs are not expensed until the year first used and consist of:

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Where we use the qualitative assessment, first we determine if, based on qualitative factors, it is more likely than not that an impairment exists.

historical financial performance and significant changes in the brand or reporting unit.

If the qualitative assessment indicates that it is more likely than not that an impairment exists, then a quantitative assessment is performed.

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Significant management judgment is necessary to estimate the impact of competitive operating, macroeconomic and other factors (including those related to the Russia-Ukraine conflict and a high interest rate and inflationary cost environment) to estimate future levels of sales, operating profit or cash flows.

with our internal forecasts and operating plans.

A deterioration in these assumptions could adversely impact our results.

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• Cash Equivalents – Cash equivalents are highly liquid investments with original maturities of three months or less.

• Inventories – Note 14.

Inventories are valued at the lower of cost or net realizable value.

• Inventories – Inventories are valued at the lower of cost or net realizable value.

Cost is determined using the average;

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or, in limited instances, last-in, first-out (LIFO) methods.

For inventories valued under the LIFO method, the differences between the LIFO and FIFO methods of valuing inventories are not material.

• Property, Plant and Equipment – Note 15.

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Adjustments resulting from translating net assets are reported as a separate component of accumulated other comprehensive loss within common shareholders’ equity as currency translation adjustment.

Recently Issued Accounting Pronouncements - Not Yet Adopted

Recently Issued Accounting Pronouncements

In September 2022, the Financial Accounting Standards Board (FASB) issued guidance to enhance the transparency of supplier finance programs to allow financial statement users to understand the effect on working capital, liquidity and cash flows.

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Other requirements include the disclosure of the amount that remains unpaid as of the end of the reporting period, a description of where these obligations are presented in the balance sheet and a rollforward of the obligation during the annual period.

The guidance is effective in the first quarter of 2023, except for the rollforward, which is effective in 2024.

Early adoption is permitted.

We will adopt the guidance when effective.

We adopted the guidance in the first quarter of 2023, except for the rollforward, which is effective in fiscal year 2024 with early adoption permitted.

We will adopt the rollforward guidance when effective, in our 2024 annual reporting.

See Note 14 for disclosures currently required under this guidance.

Not Yet Adopted

In December 2023, the FASB issued guidance to enhance transparency of income tax disclosures.

On an annual basis, the new guidance requires a public entity to disclose:

(1) specific categories in the rate reconciliation, (2) additional information for reconciling items that are equal to or greater than 5% of the amount computed by multiplying income (or loss) from continuing operations before income tax expense (or benefit) by the applicable statutory income tax rate, (3) income taxes paid (net of refunds received) disaggregated by federal (national), state, and foreign taxes, with foreign taxes disaggregated by individual jurisdictions in which income taxes paid is equal to or greater than 5% of total income taxes paid, (4) income (or loss) from continuing operations before income tax expense (or benefit) disaggregated between domestic and foreign, and (5) income tax expense (or benefit) from continuing operations disaggregated between federal (national), state and foreign.

The guidance is effective for fiscal year 2025 annual reporting, with early adoption permitted, to be applied on a prospective basis, with retrospective application permitted.

We will adopt the guidance when it becomes effective, in our 2025 annual reporting, on a prospective basis.

In November 2023, the FASB issued guidance to enhance disclosure of expenses of a public entity’s reportable segments.

The new guidance requires a public entity to disclose:

(1) on an annual and interim basis, significant segment expenses that are regularly provided to the chief operating decision maker (CODM) and included within each reported measure of segment profit or loss, (2) on an annual and interim basis, an amount for other segment items (the difference between segment revenue less the significant expenses disclosed under the significant expense principle and each reported measure of segment profit or loss), including a description of its composition, (3) on an annual and interim basis, information about a reportable segment’s profit or loss and assets previously required to be disclosed only on an annual basis, and (4) the title and position of the CODM and an explanation of how the CODM uses the reported measure(s) of segment profit or loss in assessing segment performance and how to allocate resources.

The new guidance also clarifies that if the CODM uses more than one measure of a segment’s profit or loss, one or more of those measures may be reported and requires that a public entity that has a single reportable segment provide all the disclosures required by the amendments in this update and all existing segment disclosures.

The guidance is effective for fiscal year 2024 annual reporting, and in the first quarter of 2025 for interim period reporting, with early adoption permitted.

Upon adoption, this guidance should be applied retrospectively to all prior periods presented.

We will adopt the guidance when it becomes effective, in our 2024 annual reporting.

Note 3 — Restructuring and Impairment Charges

2019 Multi-Year Productivity Plan

We publicly announced a multi-year productivity plan on February 15, 2019 (2019 Productivity Plan) that will leverage new technology and business models to further simplify, harmonize and automate processes;

We publicly announced a multi-year productivity plan on February 15, 2019 that will leverage new technology and business models to further simplify, harmonize and automate processes;

re-engineer our go-to-market and information systems, including deploying the right automation for each market;

and simplify our organization and optimize our manufacturing and supply chain footprint.

To build on the successful implementation of the 2019 Productivity Plan, in the fourth quarter of 2022, we expanded and extended the plan through the end of 2028 to take advantage of additional opportunities within the initiatives described above.

As a result, we expect to incur pre-tax charges of approximately $ 3.65 billion, including cash expenditures of approximately $ 2.9 billion.

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Selling, general and administrative expenses 433 347 208

Other pension and retiree medical benefits expense 31 10 20

Other pension and retiree medical benefits (income)/expense (a)

Total restructuring and impairment charges $ 445 $ 411 $ 247

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446 380 237 1,803

Other pension and retiree medical benefits income 31 10 20 98

Other pension and retiree medical benefits (income)/expense (a)

( 1 ) 31 10 97

Total $ 445 $ 411 $ 247 $ 1,900

(a) Income amount represents adjustments for changes in estimates of previously recorded amounts.

through 12/30/2023

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Severance and other employee costs primarily include severance and other termination benefits, as well as voluntary separation arrangements.

Other costs primarily include costs associated with the implementation of our initiatives, including contract termination costs, consulting and other professional fees.

Other costs primarily include costs associated with the implementation of our initiatives, including consulting and other professional fees, as well as contract termination costs.

A summary of our 2019 Productivity Plan is as follows:

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$ 188 $ — $ 9 $ 197

(a) Excludes cash expenditures of $ 1 million in 2022 and $ 2 million in both 2021 and 2020, reported in the cash flow statement in pension and retiree medical plan contributions.

Substantially all of the restructuring accrual at December 31, 2022 is expected to be paid by the end of 2023.

(a) Excludes cash expenditures of $ 1 million in 2023, $ 1 million in 2022 and $ 2 million in 2021, reported in the cash flow statement in pension and retiree medical plan contributions.

The majority of the restructuring accrual at December 30, 2023 is expected to be paid by the end of 2024.

Other Productivity Initiatives

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We regularly evaluate different productivity initiatives beyond the productivity plan and other initiatives described above.

For information on additional impairment charges, see Notes 1 and 4 for brand portfolio impairment charges, other impairment charges and Russia-Ukraine conflict charges.

For information on additional impairment charges, see Notes 1, 4 and 9 for impairment and other charges taken related to the Russia-Ukraine conflict, brand portfolio impairment charges and other impairment charges.

Note 4 — Intangible Assets

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Amortization Net

Acquired franchise rights (a)

Acquired franchise rights 56 – 60

$ 840 $ ( 214 ) $ 626 $ 837 $ ( 200 ) $ 637

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Amortization expense $ 75 $ 78 $ 91

(a) Decrease is primarily due to the write-off of our distribution rights for Bang energy drinks.

See Note 1 for further information.

Amortization is recognized on a straight-line basis over an intangible asset’s estimated useful life.

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Indefinite-Lived Intangible Assets

As discussed in Note 2, we perform our annual impairment assessment on indefinite-lived intangible assets during our third quarter.

The annual impairment assessment on indefinite-lived intangible assets performed in the third quarter of 2023, based on best available market information and our internal forecasts and operating plans at the time, did not result in any material impairment charges.

In the fourth quarter of 2023, macroeconomic conditions, including higher interest rates, inflationary costs, and the ongoing conflict in the Middle East, and recent business performance indicated a deterioration of the significant inputs used to determine the fair value of our indefinite-lived intangible assets in various markets, primarily assumptions underlying the weighted-average cost of capital and the impact of economic uncertainty on current and future financial performance, and required us to perform a quantitative assessment on certain assets.

The fair value of our indefinite-lived intangible assets was estimated using discounted cash flows under the income approach, which we consider to be a Level 3 measurement.

We determined that the carrying value exceeded the fair value, which reflects the increase in the weighted-average cost of capital as well as our most current estimates of future sales and their contributions to operating profit and expected future cash flows (including perpetuity growth assumptions).

As a result of the quantitative assessment, we recorded pre-tax impairment charges of $ 0.6 billion ($ 0.5 billion after-tax or $ 0.35 per share) for brands and $ 0.3 billion ($ 0.3 billion after-tax or $ 0.22 per share) for goodwill, both in impairment of intangible assets, primarily related to the SodaStream brand and reporting unit in our Europe division, in the year ended December 30, 2023.

See Note 1 for further information.

In the first quarter of 2022, we discontinued or repositioned certain juice and dairy brands in Russia in our Europe division.

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See Note 1 for further information.

In the second quarter of 2022, macroeconomic factors, sanctions and other regul ations as a result of the Russia-Ukraine conflict indicated a material deterioration of the significant inputs used to determine the fair value of our indefinite-lived intangible assets in Russia, primarily assumptions underlying the weighted-average cost of capital.

In the second quarter of 2022, macroeconomic factors, sanctions and other regulations as a result of the Russia-Ukraine conflict indicated a material deterioration of the significant inputs used to determine the fair value of our indefinite-lived intangible assets in Russia, primarily assumptions underlying the weighted-average cost of capital.

These factors required us to perform a quantitative assessment, despite the absence of a material adverse impact on these assets’ financial performance (e.g., sales, operating profit, cash flows).

The fair value of our indefinite-lived intangible assets in Russia was estimated using discounted cash flows under the income approach, which we consider to be a Level 3 measurement.

We determined that the carrying value exceeds the fair value, with the decrease in the fair value primarily attributable to a significant increase in the weighted-average cost of capital, which reflects the macroeconomic uncertainty in Russia.

As a result of the quantitative assessment, we recorded pre-tax impairment charges of $ 1.2 billion ($ 958 million after-tax or $ 0.69 per share) in impairment of intangible assets, related to our juice and dairy brands in Russia in our Europe division, in the year ended December 31, 2022.

We determined that the carrying value exceeded the fair value, with the decrease in the fair value primarily attributable to a significant increase in the weighted-average cost of capital, which reflected the macroeconomic uncertainty in Russia.

As a result of the quantitative assessment, we recorded pre-tax

impairment charges of $ 1.2 billion ($ 958 million after-tax or $ 0.69 per share) in impairment of intangible assets, related to our juice and dairy brands in Russia in our Europe division, in the year ended December 31, 2022.

See Note 1 for further information.

As discussed in Note 2, we perform our annual impairment assessment on indefinite-lived intangible assets during our third quarter.

The annual impairment assessment on indefinite-lived intangible assets performed in the third quarter of 2022, based on best available market information and our internal forecasts and operating plans at the time, resulted in no impairment.

In the fourth quarter of 2022, macroeconomic conditions including a high interest rate and inflationary cost environment, coupled with recent business performance, indicated a deterioration of the significant inputs used to determine the fair value of our indefinite-lived intangible assets in various markets, primarily assumptions underlying the weighted-average cost of capital and the impact of economic uncertainty on current and future financial performance, and required us to perform a quantitative assessment on certain assets.

The fair value of our indefinite-lived intangible assets was estimated using discounted cash flows under the income approach, which we consider to be a Level 3 measurement.

As a result of the quantitative assessment, we recorded pre-tax impairment charges of $ 1.6 billion ($ 1.3 billion after-tax or $ 0.94 per share) in impairment of intangible assets, primarily related to the SodaStream brand in our Europe division, in the year ended December 31, 2022.

We determined that the carrying value exceeded the fair value, which reflected the increase in the weighted-average cost of capital as well as our most current estimates of future sales and their contributions to operating profit and expected future cash flows (including perpetuity growth assumptions).

As a result of the quantitative assessment, we recognized pre-tax impairment charges of $ 1.6 billion ($ 1.3 billion after-tax or $ 0.94 per share) in impairment of intangible assets, primarily related to the SodaStream brand in our Europe division, in the year ended December 31, 2022.

See Note 1 for further information.

As of December 31, 2022, the estimated fair values of our indefinite-lived reacquired and acquired franchise rights recorded at PBNA exceeded their carrying values.

However, there could be an impairment of the carrying value of PBNA’s reacquired and acquired franchise rights, as well as further impairment to the carrying value of the SodaStream brand and goodwill, if future sales and their contributions to operating profit do not achieve our expected future cash flows (including perpetuity growth assumptions) or if macroeconomic conditions result in a future increase in the weighted-average cost of capital used to estimate fair value.

We did not recognize any impairment charges for goodwill in each of the years ended December 31, 2022, December 25, 2021 and December 26, 2020.

We did not recognize any impairment charges for goodwill in each of the years ended December 31, 2022 and December 25, 2021.

We did not recognize any impairment charges for indefinite-lived intangible assets in the year ended December 25, 2021.

In 2020, we recognized pre-tax impairment charges of $ 42 million, primarily related to a coconut water brand in PBNA.

As of December 30, 2023, the estimated fair values of our indefinite-lived reacquired and acquired franchise rights recorded at PBNA exceeded their carrying values.

However, there could be an impairment of the carrying value of PBNA’s reacquired and acquired franchise rights, as well as further impairment to the carrying value of the SodaStream reporting unit goodwill, if future sales and their contributions to operating profit do not achieve our expected future cash flows (including perpetuity growth assumptions) or if macroeconomic conditions result in a future increase in the weighted-average cost of capital used to estimate fair value.

For further information on our policies for indefinite-lived intangible assets, see Note 2.

The change in the book value of indefinite-lived intangible assets is as follows:

2021 Acquisitions/(Divestitures) Translation

2022 Acquisitions Impairment Translation

and Other Balance,

2021 Acquisitions/(Divestitures) Impairment Translation

2022 Acquisitions Impairment Translation

and Other Balance,

Goodwill $ 458 $ — $ — $ ( 7 ) $ 451 $ — $ — $ 2 $ 453

Brands 340 — — 340 — ( 88 ) ( 1 ) 251

340 — ( 88 ) ( 1 ) 251 — — — 251

Total 798 — ( 88 ) ( 8 ) 702 — — 2 704

Goodwill 189 — — — 189 — — — 189

Brands — — — — — — — —

Total 189 — — — 189 — — — 189

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Reacquired franchise rights 7,107 — — ( 46 ) 7,061 36 — 17 7,114

Acquired franchise rights 1,536 1 1 1,538 230 — ( 10 ) 1,758

Acquired franchise rights (b)

1,538 230 — ( 10 ) 1,758 14 — ( 35 ) 1,737

2,508 — — — 2,508 — — — 2,508

Total 23,127 230 — ( 83 ) 23,274 54 — ( 8 ) 23,320

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Total 533 — ( 29 ) 7 511 — — 31 542

3,806 ( 28 ) ( 78 ) 3,700 — — ( 54 ) 3,646

Reacquired franchise rights (f)

Goodwill (d)(e)

3,700 — — ( 54 ) 3,646 — ( 290 ) ( 190 ) 3,166

Acquired franchise rights (f)

Reacquired franchise rights 441 — — ( 20 ) 421 — — ( 2 ) 419

Acquired franchise rights

158 — ( 1 ) ( 9 ) 148 — — 6 154

Brands (g) (h)

4,254 — ( 2,684 ) 94 1,664 — ( 572 ) 32 1,124

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Goodwill 564 — — ( 46 ) 518 — — ( 10 ) 508

Brands (c) (j)

476 — ( 172 ) ( 37 ) 267 — ( 59 ) ( 4 ) 204

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Total $ 35,508 $ 244 $ ( 3,010 ) $ ( 231 ) $ 32,511 $ 88 $ ( 927 ) $ ( 214 ) $ 31,458

(a) Acquisitions/divestitures in 2021 primarily reflect purchase price allocation adjustments related to our acquisition of BFY Brands, Inc.

(BFY Brands).

Impairment in 2022 is related to a baked fruit convenient food brand.

(b) Acquisitions/divestitures in 2021 primarily reflect assets reclassified as held for sale in connection with our Juice Transaction.

See Note 13 for further information.

Acquisitions/divestitures in 2022 primarily reflect our agreement with Celsius to distribute Celsius energy drinks in the United States.

See Note 9 for further information.

(c) Translation and other in 2021 primarily reflects the allocation of the Rockstar brand to the respective divisions, which was finalized in 2021 as part of purchase price allocation.

(d) Impairment in 2022 is related to the sale of certain non-strategic brands.

(a) Impairment in 2022 is related to a baked fruit convenient food brand.

(b) Acquisitions in 2022 primarily reflect our agreement with Celsius to distribute Celsius energy drinks in the United States.

Translation and other in 2023 primarily reflects adjustments to previously recorded amounts related to our agreement with Celsius.

See Note 9 for further information.

(e) Acquisitions/divestitures in 2021 primarily reflect assets reclassified as held for sale in connection with our Juice Transaction.

See Note 1 for further information.

(f) Translation and other primarily reflects the depreciation of the euro in 2021 and the depreciation of British pound and euro, partially offset by appreciation of the Russian ruble in 2022.

(g) Impairment in 2022 is related to the SodaStream brand, the decrease in fair value as a result of the Russia-Ukraine conflict and the discontinuation or repositioning of certain juice and dairy brands in Russia.

(h) Translation and other in 2021 reflects the allocation of the Rockstar brand from PBNA, which was finalized in 2021 as part of purchase price allocation, partially offset by the depreciation of the euro.

(i) Impairment in 2022 is primarily related to certain juice brands from the Pioneer Foods acquisition.

(j) Impairment in 2022 is related to the Be & Cheery brand.

(d) Translation and other in 2023 primarily reflects the depreciation of the Russian ruble, partially offset by appreciation of the euro and British pound.

(e) Impairment in 2022 is related to the SodaStream brand, the decrease in fair value as a result of the Russia-Ukraine conflict and the discontinuation or repositioning of certain juice and dairy brands in Russia.

Impairments in 2023 are related to SodaStream goodwill and brand.

(f) Impairment is related to brands from the Pioneer Foods acquisition.

(g) Impairment in 2022 and 2023 is related to the Be & Cheery brand.

Note 5 — Income Taxes

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In 2021, we recorded $ 190 million ($ 0.14 per share) of net tax expense related to the TCJ Act as a result of adjustments related to the final assessment of the 2014 through 2016 IRS audit.

There were no tax amounts recognized in 2020 related to the TCJ Act.

As of December 30, 2023, our mandatory transition tax liability was $ 2.3 billion, which must be paid through 2026 under the provisions of the TCJ Act.

We reduced our liability through cash payments and application of tax overpayments by $ 309 million in 2022, $ 309 million in 2021 and $ 78 million in 2020.

We reduced our liability through cash payments and application of tax overpayments by $ 309 million in each of 2023, 2022 and 2021.

We currently expect to pay approximately $ 579 million of this liability in 2024.

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Tax years 2014 through 2019 remain under audit for other issues.

On August 16, 2022, the “Inflation Reduction Act” (H.R.

5376) was signed into law in the United States.

We do not currently expect the Inflation Reduction Act to have a material impact on our financial results, including on our annual estimated effective tax rate or on our liquidity.

On May 19, 2019, a public referendum held in Switzerland passed the Federal Act on Tax Reform and AHV Financing (TRAF), effective January 1, 2020.

The enactment of certain provisions of the TRAF resulted in adjustments to our deferred taxes.

During 2020, we recorded a net tax benefit of $ 72 million ($ 0.05 per share) related to the adoption of the TRAF in the Swiss Canton of Bern.

Deferred tax liabilities and assets are comprised of the following:

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We accrue interest related to reserves for income taxes in our provision for income taxes and any associated penalties are recorded in selling, general and administrative expenses.

The gross amount of interest accrued, reported in other liabilities, was $ 292 million as of December 31, 2022, of which $ 4 million of tax benefit was recognized in 2022.

The gross amount of interest accrued, reported in other liabilities, was $ 390 million as of December 30, 2023, of which $ 102 million of tax expense was recognized in 2023.

The gross amount of interest accrued, reported in other liabilities, was $ 292 million as of December 31, 2022, of which $ 4 million of tax benefit was recognized in 2022.

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Carryforwards and Allowances

Operating loss carryforwards totaling $ 32.2 billion as of December 31, 2022 are being carried forward in a number of foreign and state jurisdictions where we are permitted to use tax operating losses from prior periods to reduce future taxable income.

These operating losses will expire as follows:

$ 0.2 billion in 2023, $ 27.6 billion between 2024 and 2041 and $ 4.4 billion may be carried forward indefinitely.

establish valuation allowances for our deferred tax assets if, based on the available evidence, it is not more likely than not that some portion or all of the deferred tax assets will be realized.

Operating loss carryforwards and income tax credits totaling $ 34.7 billion as of December 30, 2023 are being carried forward in a number of foreign and state jurisdictions where we are permitted to use tax operating losses and income tax credits from prior periods to reduce future taxable income or income tax liabilities.

These operating losses and income tax credits will expire as follows:

$ 0.4 billion in 2024, $ 29.8

billion between 2025 and 2041 and $ 4.5 billion may be carried forward indefinitely.

We establish valuation allowances for our deferred tax assets if, based on the available evidence, it is not more likely than not that some portion or all of the deferred tax assets will be realized.

Undistributed International Earnings

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The fair value of share-based award grants is amortized to expense over the vesting period, primarily three years .

Awards to employees eligible for retirement prior to the award becoming fully vested are amortized to expense over the period through the date that the employee first becomes eligible to retire and is no longer required to provide service to earn the award.

In addition, we use historical data to estimate

forfeiture rates and record share-based compensation expense only for those awards that are expected to vest.

longer required to provide service to earn the award.

In addition, we use historical data to estimate forfeiture rates and record share-based compensation expense only for those awards that are expected to vest.

We do not backdate, reprice or grant share-based compensation awards retroactively.

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Weighted-Average Exercise

Price Weighted-Average Contractual

Price Per Unit Weighted-Average Contractual

Life Remaining

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Weighted-Average

Grant-Date Fair Value Weighted-Average Contractual Life

Grant-Date Fair Value Per Unit Weighted-Average Contractual Life

Remaining (years) Aggregate

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2,162 2,422 2,157

Weighted-average grant-date fair value of options granted $ 19.72 $ 9.88 $ 8.31

Weighted-average grant-date fair value per unit of options granted $ 29.81 $ 19.72 $ 9.88

Total intrinsic value of options exercised (a)

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2,151 2,263 2,636

Weighted-average grant-date fair value of RSUs/PSUs granted $ 163.02 $ 131.81 $ 131.21

Weighted-average grant-date fair value per unit of RSUs/PSUs granted $ 171.11 $ 163.02 $ 131.81

Total intrinsic value of RSUs/PSUs converted (a)

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Actuarial gains and losses of the merged plan will be amortized over the average remaining life expectancy of participants.

There is no material impact to pre-tax pension benefits expense from this merger.

There was no material impact to pre-tax pension benefits expense from this merger.

In 2022, we transferred pension and retiree medical obligations of $ 145 million and related assets to TBG in connection with the Juice Transaction.

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In 2020, we adopted an amendment to the U.S.

defined benefit pension plans to freeze benefit accruals for salaried participants, effective December 31, 2025.

Since 2011, salaried new hires are not eligible to participate in the defined benefit plan.

After the effective date, all salaried participants receive an employer contribution to the 401(k) savings plan based on age and years of service regardless of employee contribution and the opportunity to receive employer contributions to match employee contributions up to defined limits.

As a result of this amendment, pre-tax pension benefits expense decreased $ 70 million in 2021, primarily impacting corporate unallocated expenses.

In 2020, we approved an amendment to reorganize the U.S.

qualified defined benefit pension plans that resulted in the transfer of certain participants from Plan A to Plan I and to a newly created plan, PepsiCo Employees Retirement Hourly Plan (Plan H), effective January 1, 2021.

The accrued benefits offered to the plans’ participants were unchanged.

The reorganization facilitated a more targeted investment strategy and provided additional flexibility in evaluating opportunities to reduce risk and volatility.

There was no material impact to pre-tax pension benefits expense as a result of this reorganization.

In 2020, we adopted an amendment, effective January 1, 2021, to enhance the pay credit benefits of certain participants in Plan H.

As a result of this amendment, pre-tax pension benefits expense increased $ 45 million in 2021, primarily impacting service cost expense.

qualified defined benefit plans to freeze benefit accruals for salaried participants, effective December 31, 2025.

Gains and losses resulting from actual experience differing from our assumptions, including the difference between the actual and expected return on plan assets, as well as changes in our assumptions, are determined at each measurement date.

These differences are recognized as a component of net gain or loss in accumulated other comprehensive loss within common shareholders’ equity.

If this net accumulated gain or loss exceeds 10 % of the greater of the market-related value of plan assets or plan obligations, a portion of the net gain or loss is included in other pension and retiree medical benefits (expense)/income for the following year based upon the average remaining service life for participants in Plan A (approximately 9 years), Plan H (approximately 11 years) and retiree medical (approximately 9 years), and the remaining life expectancy for participants in Plan I (approximately 27 years).

In 2023, we expect the average remaining service life for participants in Plan H to be approximately 11 years and the average remaining life expectancy for participants in Plan I to be approximately 26 years.

The cost or benefit of plan changes that increase or decrease benefits for prior employee service (prior service cost/(credit)) is included in other pension and retiree medical benefits (expense)/income on a straight-line basis over the average remaining service life for participants in Plan H, and the remaining life expectancy for participants in Plan I, except that prior service cost/(credit) for salaried participants subject to the freeze is amortized on a straight-line basis over the period up to the effective date of the freeze.

If this net accumulated gain or loss exceeds 10 % of the greater of the market-related value of plan assets or plan obligations, a portion of the net gain or loss is included in other pension and retiree medical benefits income for the following year based upon the average remaining service life for participants in PepsiCo Employees Retirement Hourly Plan (Plan H) (approximately 11 years) and retiree medical (approximately 10 years), and the remaining life expectancy for participants in Plan I (approximately 26 years).

The cost or benefit of plan changes that increase or decrease benefits for prior employee service (prior service cost/(credit)) is included in other pension and retiree medical benefits income on a straight-line basis over the average remaining service life for participants in Plan H, and the remaining life expectancy for participants in Plan I, except that prior service cost/(credit) for salaried participants subject to the benefit accruals freeze effective December 31, 2025 is amortized on a straight-line basis over the period up to the effective date of the freeze.

Selected financial information for our pension and retiree medical plans is as follows:

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Participant contributions — — 2 2 — —

Experience gain ( 3,989 ) ( 215 ) ( 1,284 ) ( 178 ) ( 198 ) ( 17 )

Experience loss/(gain) 603 ( 3,989 ) 194 ( 1,284 ) ( 22 ) ( 198 )

Benefit payments ( 1,006 ) ( 412 ) ( 116 ) ( 127 ) ( 80 ) ( 81 )

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Net loss/(gain) $ 3,596 $ 3,337 $ 707 $ 571 $ ( 323 ) $ ( 320 )

Prior service credit ( 21 ) ( 63 ) ( 9 ) ( 11 ) ( 25 ) ( 34 )

Prior service cost/(credit) 18 ( 21 ) ( 8 ) ( 9 ) ( 19 ) ( 25 )

Total $ 3,614 $ 3,316 $ 699 $ 562 $ ( 342 ) $ ( 345 )

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Amortization and settlement recognition ( 74 ) ( 467 ) ( 23 ) ( 30 ) 27 14

Foreign currency translation gain — — ( 55 ) ( 3 ) — —

Foreign currency translation loss/(gain) — — 40 ( 55 ) — —

Total $ 259 $ ( 213 ) $ 136 $ ( 125 ) $ ( 3 ) $ ( 100 )

Accumulated benefit obligation at end of year $ 11,653 $ 11,104 $ 2,835 $ 2,483

The net loss arising in the current year is primarily attributable to a decrease in the actual return on plan assets offset by the impact of higher discount rates.

The amount we report in operating profit as pension and retiree medical cost is service cost, which is the

value of benefits earned by employees for working during the year.

The net loss arising in the current year is primarily attributable to the impact of lower discount rates, partially offset by an increase in the actual return on plan assets.

The amount we report in operating profit as pension and retiree medical cost is service cost, which is the value of benefits earned by employees for working during the year.

The amounts we report below operating profit as pension and retiree medical cost consist of the following components:

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Expected return on plan assets ( 851 ) ( 912 ) ( 970 ) ( 192 ) ( 218 ) ( 231 ) ( 13 ) ( 16 ) ( 15 )

Amortization of prior service (credit)/cost ( 28 ) ( 31 ) 12 ( 1 ) ( 2 ) — ( 8 ) ( 11 ) ( 12 )

Amortization of prior service credits ( 26 ) ( 28 ) ( 31 ) ( 1 ) ( 1 ) ( 2 ) ( 6 ) ( 8 ) ( 11 )

Amortization of net losses/(gains) 70 149 224 13 29 77 ( 27 ) ( 14 ) ( 14 )

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Total $ 116 $ 489 $ 114 $ 14 $ ( 35 ) $ 11 $ 19 $ 2 $ 8

(a) In 2022 and 2020, U.S.

includes a settlement charge of $ 318 million ($ 246 million after-tax or $ 0.18 per share) and $ 205 million ($ 158 million after-tax or $ 0.11 per share), respectively, related to lump sum distributions exceeding the total of annual service and interest cost.

(a) In 2022, U.S.

includes a settlement charge of $ 318 million ($ 246 million after-tax or $ 0.18 per share) related to lump sum distributions exceeding the total of annual service and interest cost.

The following table provides the weighted-average assumptions used to determine net periodic benefit cost and projected benefit obligation for our pension and retiree medical plans:

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We made a discretionary contribution of $ 150 million to a U.S.

qualified defined benefit plan in January 2023 and expect to make an additional contribution of $ 125 million in the third quarter of 2023.

qualified defined benefit plan in January 2024.

In addition, in 2024, we expect to make non-discretionary contributions of approximately $ 99 million to our U.S.

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For 2024 and 2023, our expected long-term rate of return on U.S.

plan assets is 7.4 % and 6.7 %, respectively.

plan assets is 7.4 %.

Our target investment allocations for U.S.

plan assets for both 2023 and 2022 are as follows:

plan assets are as follows:

Fixed income 55 % 56 %

equity 22 % 22 %

International equity 19 % 18 %

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(c) These investments are based on quoted bid prices for comparable securities in the marketplace and broker/dealer quotes in active markets.

Corporate bonds of U.S.-based companies represents 32 % of total U.S.

plan assets for 2022 and 2021.

Corporate bonds of U.S.-based companies represents 31 % and 32 % of total U.S.

plan assets for 2023 and 2022, respectively.

(d) Based on the fair value of the contracts as determined by the insurance companies using inputs that are not observable.

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Year of ultimate projected increase

These assumed health care cost trend rates have an impact on the retiree medical plan expense and obligation, however the cap on our share of retiree medical costs limits the impact.

Annually, we review external data and our historical experience to estimate assumed health care cost trend rates that impact our retiree medical plan obligation and expense, however the cap on our share of retiree medical costs limits the impact.

employees are eligible to participate in a 401(k) savings plan, which is a voluntary defined contribution plan.

The plan is designed to help employees accumulate savings for retirement and we make Company matching contributions for certain employees on a portion of employee contributions based on years of service.

salaried employees, who are not eligible to participate in a defined benefit pension plan, are also eligible to receive an employer contribution based on age and years of service regardless of employee contribution.

employees, who are either not eligible to participate in a defined benefit pension plan or whose benefit is capped, are also eligible to receive an employer contribution based on either years of service or age and years of service regardless of employee contribution.

In 2023, 2022 and 2021, our total Company contributions were $ 356 million, $ 283 million and $ 246 million, respectively.

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Current maturities of long-term debt $ 3,924 $ 3,096

Commercial paper ( 0.1 % and 0.1 %)

Commercial paper ( 5.5 %)

Other borrowings ( 7.8 % and 15.0 %)

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As of December 30, 2023 and December 31, 2022, our international debt of $ 279 million and $ 304 million, respectively, was related to borrowings from external parties, including various lines of credit.

of credit are subject to normal banking terms and conditions and are fully committed at least to the extent of our borrowings.

These lines of credit are subject to normal banking terms and conditions and are fully committed at least to the extent of our borrowings.

In 2023, we issued the following senior notes:

Interest Rate Maturity Date Principal Amount (a)

3.200 % July 2029 £ 300 (b)

3.550 % July 2034 £ 450 (b)

Floating Rate February 2026 $ 350

4.550 % February 2026 $ 500

3.900 % July 2032 $ 1,250

4.200 % July 2052 $ 500

4.450 % May 2028 $ 650

4.450 % February 2033 $ 1,000

4.650 % February 2053 $ 500

Floating Rate November 2024 $ 1,000

5.250 % November 2025 $ 800

5.125 % November 2026 $ 700

(a) Excludes debt issuance costs, discounts and premiums.

(b) These notes, issued in British pounds, were designated as net investment hedges to partially offset the effects of foreign currency on our investments in certain of our foreign subsidiaries.

The net proceeds from the issuances of the above notes were used for general corporate purposes, including the repayment of commercial paper, except for an amount equivalent to the net proceeds from our 3.900 % senior notes due 2032 that will be allocated to fund, in whole or in part, eligible green projects in the categories of investments in recycling and sustainable plastics and packaging, decarbonizing our operations and supply chain, water sustainability, and regenerative agriculture, which promote our selected Sustainable Development Goals, as defined by the United Nations.

The net proceeds from the issuances of the above notes will be used for general corporate purposes, including the repayment of commercial paper.

In 2023, we entered into a new five-year unsecured revolving credit agreement (Five-Year Credit Agreement), which expires on May 26, 2028.

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As of December 30, 2023, there were no outstanding borrowings under the Five-Year Credit Agreement or the 364-Day Credit Agreement.

In 2022, we paid $ 750 million to redeem all $ 750 million outstanding principal amount of our 2.25 % senior notes due May 2022, we paid $ 800 million to redeem all $ 800 million outstanding principal amount of our 3.10 % senior notes due July 2022 and we paid $ 154 million to redeem all $ 133 million outstanding principal amount of our subsidiary, Pepsi-Cola Metropolitan Bottling Company, Inc.’s 7.00 % senior notes due March 2029 and 5.50 % notes due May 2035.

Additionally, we deposited $ 102 million of U.S.

government securities with the Bank of New York Mellon, as trustee, in legal defeasance of $ 94 million outstanding principal amount of certain notes originally issued by our subsidiary, The Quaker Oats Company (Quaker notes).

PepsiCo will be deemed to have paid and discharged the Quaker notes on April 12, 2023.

In 2023, we discharged via legal defeasance $ 94 million outstanding principal amount of certain notes originally issued by our subsidiary, The Quaker Oats Company, following the deposit of $ 102 million of U.S.

government securities with the Bank of New York Mellon, as trustee, in the fourth quarter of 2022.

principal amount of our subsidiary, Pepsi-Cola Metropolitan Bottling Company, Inc.’s 7.00 % senior notes due March 2029 and 5.50 % notes due May 2035.

In 2021, we completed cash tender offers to redeem $ 4.1 billion principal amount of certain notes, with maturity dates ranging from May 2035 to March 2060 and interest rates ranging from 3.375 % to 5.500 %, for $ 4.8 billion in cash.

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Also in 2021, we paid $ 750 million to redeem all $ 750 million outstanding principal amount of our 1.70 % senior notes due 2021 and terminated the associated interest rate swap with a notional amount of $ 250 million.

In 2020, we paid $ 1.1 billion to redeem all $ 1.1 billion outstanding principal amount of our 2.15 % senior notes due 2020 and terminated associated interest rate swaps with a notional amount of $ 0.8 billion.

Also in 2020, one of our international consolidated subsidiaries borrowed 21.7 billion South African rand, or approximately $ 1.3 billion, from our two unsecured bridge loan facilities (Bridge Loan Facilities) to fund our acquisition of Pioneer Foods.

These borrowings were fully repaid in April 2020 and no further borrowings under these Bridge Loan Facilities are permitted.

Note 9 — Financial Instruments

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Gains or losses on derivatives designated as cash flow hedges are recorded in accumulated other comprehensive loss within common shareholders’ equity and reclassified to our income statement when the hedged transaction affects earnings.

If it becomes probable that the hedged transaction will not occur,

we immediately recognize the related hedging gains or losses in earnings;

such gains or losses reclassified during the year ended December 31, 2022 were not material.

If it becomes probable that the hedged transaction will not occur, we immediately recognize the related hedging gains or losses in earnings;

there were no such gains or losses reclassified during the year ended December 30, 2023.

Cash flows from derivatives used to manage commodity price, foreign exchange or interest rate risks are classified as operating activities in the cash flow statement.

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Our foreign currency derivatives had a total notional value of $ 3.8 billion as of December 30, 2023 and $ 3.0 billion as of December 31, 2022.

The total notional amount of our debt instruments designated as net

investment hedges was $ 2.9 billion as of December 31, 2022 and $ 2.1 billion as of December 25, 2021.

The total notional amount of our debt instruments designated as net investment hedges was $ 3.0 billion as of December 30, 2023 and $ 2.9 billion as of December 31, 2022.

For foreign currency derivatives that do not qualify for hedge accounting treatment, gains and losses were offset by changes in the underlying hedged items, resulting in no material net impact on earnings.

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These instruments effectively change the interest rate and currency of specific debt issuances.

The notional amount, interest payment and maturity date of the interest rate and cross-currency interest rate swaps match the principal, interest payment and maturity date of the related debt.

Our cross-currency interest rate swaps have terms of no more than twelve years .

The notional amount, interest payment and maturity date of our cross-currency interest rate swaps match the principal, interest payment and maturity date of the related debt.

Our cross-currency interest rate swaps have terms of no more than

twelve years .

Our Treasury locks and swap locks are entered into to protect against unfavorable interest rate changes relating to forecasted debt transactions.

Our interest rate derivatives had a total notional value of $ 1.3 billion as of December 31, 2022 and $ 2.1 billion as of December 25, 2021.

Our interest rate derivatives had a total notional value of $ 1.3 billion as of December 30, 2023 and December 31, 2022.

As of December 30, 2023, approximately 9 % of total debt was subject to variable rates, compared to approximately 1 %, after the impact of the related interest rate derivative instruments, as of December 31, 2022.

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Highly liquid debt securities with original maturities of three months or less are recorded as cash equivalents.

As of December 31, 2022, we had no investments in held-to-maturity debt securities.

Our held-to-maturity debt securities consist of commercial paper.

As of December 30, 2023, we had $ 309 million of investments in commercial paper recorded in cash and cash equivalents.

As of December 31, 2022, we had no investments in held-to-maturity debt securities.

Held-to-maturity debt securities are recorded at amortized cost, which approximates fair value, and realized gains or losses are reported in earnings.

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The preferred shares automatically convert into Celsius common shares after six years if certain market-based conditions are met, or can be redeemed after seven years.

Shares underlying the transaction were priced at $ 75 per share,

and the preferred shares are entitled to a 5 % annual dividend, payable either in cash or in-kind.

Shares underlying the transaction were priced at $ 75 per share, and the preferred shares are entitled to a 5 % annual dividend, payable either in cash or in-kind.

Given our redemption right, we classified our investment in the convertible preferred stock as an available-for-sale debt security.

There were no unrealized gains and losses on our investment as of December 31, 2022.

There were no impairment charges related to our investment in the year ended December 31, 2022.

Fair Value Measurements

As of December 31, 2022, the fair value of this investment was classified as Level 2, based primarily on the transaction price.

There were no unrealized gains and losses on our investment in the year ended December 31, 2022.

In the year ended December 30, 2023, we transferred $ 558 million from Level 2 to Level 3 as unobservable inputs to the fair value became more significant and subsequently recorded an unrealized gain of $ 612 million in other comprehensive income and a decrease in the investment of $ 14 million due to cash dividends received.

There were no impairment charges related to our investment in the years ended December 30, 2023 and December 31, 2022.

TBG Investment

In the first quarter of 2022, we sold our Tropicana, Naked and other select juice brands to PAI Partners, while retaining a 39 % noncontrolling interest in TBG, operating across North America and Europe.

We have significant influence over our investment in TBG and account for our investment under the equity method, recognizing our proportionate share of TBG’s earnings on our income statement (recorded in selling, general and administrative expenses).

See Note 13 for further information.

In 2023, we recorded our proportionate share of TBG’s earnings, which includes an impairment of TBG’s indefinite-lived intangible assets, and recorded an other-than-temporary impairment of our investment, both of which resulted in pre-tax impairment charges of $ 321 million ($ 243 million after-tax or $ 0.18 per share), recorded in selling, general and administrative expenses in our PBNA division.

We estimated the fair value of our ownership in TBG using discounted cash flows and an option pricing model related to our liquidation preference in TBG, which we categorized as Level 3 (significant unobservable inputs) in the fair value hierarchy.

Recurring Fair Value Measurements

The fair values of our financial assets and liabilities as of December 30, 2023 and December 31, 2022 are categorized as follows:

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$ 38 $ 51 $ 32 $ 72

$ 32 $ 72 $ 54 $ 29

Total derivatives at fair value (h)

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Financial liabilities are classified on our balance sheet within accounts payable and other current liabilities and other liabilities.

(b) Primarily related to our investment in Celsius convertible preferred stock.

The fair value of our investment approximates the transaction price and any accrued dividends, as well as the amortized cost.

(b) Includes Level 2 assets of $ 178 million and Level 3 assets of $ 1,156 million as of December 30, 2023, and Level 2 assets of $ 660 million as of December 31, 2022.

As of December 30, 2023, $ 1,334 million was classified as other assets.

As of December 31, 2022, $ 3 million, $ 104 million and $ 553 million were classified as cash equivalents, short-term investments and other assets, respectively.

The fair values of these Level 2 investments approximate the transaction price and any accrued dividends, as well as the amortized cost.

The fair value of our Level 3 investment in Celsius is estimated using probability-weighted discounted future cash flows based on a Monte Carlo simulation using significant unobservable inputs such as an 80 % probability that a certain market-based condition will be met and an average estimated discount rate of 8.1 % based on Celsius’ estimated synthetic credit rating.

An increase in the probability that certain market-based conditions will be met or a decrease in the discount rate would result in a higher fair value measurement, while a decrease in the probability that certain market-based conditions will be met or an increase in the discount rate would result in a lower fair value measurement.

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The fair value of our debt obligations as of December 30, 2023 and December 31, 2022 was $ 41 billion and $ 35 billion, respectively, based upon prices of identical or similar instruments in the marketplace, which are considered Level 2 inputs.

Losses/(gains) on our hedging instruments are categorized as follows:

Fair Value/Non-

designated Hedges Cash Flow and Net Investment Hedges

Losses/(Gains)

Recognized in

Income Statement (a)

Losses/(gains) on our cash flow and net investment hedges are categorized as follows:

Losses/(Gains)

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Comprehensive Loss

Statement (b)

Statement (a)

2023 2022 2023 2022

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Total $ 330 $ ( 42 ) $ 155 $ ( 129 )

(a) Foreign exchange derivative losses/gains are included in selling, general and administrative expenses.

Commodity derivative gains included in cost of sales totaled $ 8 million in 2022 and $ 109 million in 2021 and commodity derivative gains included in selling, general and administrative expenses totaled $ 171 million in 2022 and $ 109 million in 2021.

(b) Foreign exchange derivative losses/gains are included in net revenue and cost of sales.

(a) Foreign exchange derivative losses/gains are included in net revenue and cost of sales.

Interest rate derivative losses/gains on cross-currency interest rate swaps are included in selling, general and administrative expenses.

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Based on current market conditions, we expect to reclassify net losses of $ 112 million related to our cash flow hedges from accumulated other comprehensive loss within common shareholders’ equity into net income during the next 12 months.

Losses/(gains) recognized in the income statement related to our non-designated hedges are categorized as follows:

Cost of Sales Selling, general and administrative expenses Total Cost of Sales Selling, general and administrative expenses Total

Foreign exchange $ ( 1 ) $ 41 $ 40 $ — $ ( 58 ) $ ( 58 )

Commodity 39 33 72 ( 8 ) ( 171 ) ( 179 )

Total $ 38 $ 74 $ 112 $ ( 8 ) $ ( 229 ) $ ( 237 )

Note 10 — Net Income Attributable to PepsiCo per Common Share

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(b) The dilutive effect of these securities is calculated using the treasury stock method.

The weighted-average amount of antidilutive securities excluded from the calculation of diluted earnings per common share was immaterial for the years ended December 31, 2022, December 25, 2021 and December 26, 2020.

The weighted-average amount of antidilutive securities excluded from the calculation of diluted earnings per common share was 3 million for the year ended December 30, 2023 and immaterial for the years ended December 31, 2022 and December 25, 2021.

Note 11 — Accumulated Other Comprehensive Loss Attributable to PepsiCo

The changes in the balances of each component of accumulated other comprehensive loss attributable to PepsiCo are as follows:

Currency Translation Adjustment Cash Flow Hedges Pension and Retiree Medical Other (a)

Currency Translation Adjustment Cash Flow Hedges Pension and Retiree Medical Available-for-sale debt securities and other (a)

Accumulated Other Comprehensive Loss Attributable to PepsiCo

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$ ( 11,940 ) $ 4 $ ( 3,520 ) $ ( 20 ) $ ( 15,476 )

Other comprehensive income/(loss) before reclassifications (c)

Other comprehensive (loss)/income before reclassifications (c)

( 340 ) 248 702 22 632

Amounts reclassified from accumulated other comprehensive loss 18 ( 48 ) 299 — 269

Net other comprehensive income/(loss) ( 710 ) 10 ( 676 ) ( 1 ) ( 1,377 )

Net other comprehensive (loss)/income ( 322 ) 200 1,001 22 901

Tax amounts ( 47 ) ( 45 ) ( 231 ) — ( 323 )

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$ ( 13,255 ) $ ( 31 ) $ ( 2,719 ) $ 471 $ ( 15,534 )

(a) The change in 2021 primarily comprises fair value increases in available-for-sale securities.

(a) The changes primarily represent fair value increases in available-for-sale debt securities, including our investment in Celsius convertible preferred stock in 2023.

See Note 9 for further information.

(b) Pension and retiree medical amounts are net of taxes of $ 1,514 million as of December 26, 2020, $ 1,283 million as of December 25, 2021, $ 1,184 million as of December 31, 2022 and $ 1,282 million as of December 30, 2023.

(d) Currency translation adjustment primarily reflects depreciation of the Turkish lira, Swiss franc and Mexican peso.

(e) Currency translation adjustment primarily reflects depreciation of the Egyptian pound and British pound sterling.

(d) Currency translation adjustment primarily reflects depreciation of the Egyptian pound and British pound sterling.

(e) Currency translation adjustment primarily reflects depreciation of the Russian ruble and South African rand, partially offset by the appreciation of the Mexican peso.

The following table summarizes the reclassifications from accumulated other comprehensive loss to the income statement:

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Commodity contracts ( 1 ) ( 15 ) ( 4 ) Selling, general and administrative expenses

Net gains before tax ( 129 ) ( 48 ) ( 116 )

Net losses/(gains) before tax 146 ( 129 ) ( 48 )

Tax amounts ( 39 ) 23 11

Net (gains) after tax $ ( 106 ) $ ( 37 ) $ ( 87 )

Net losses/(gains) after tax $ 107 $ ( 106 ) $ ( 37 )

Pension and retiree medical items:

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Present value of lease liabilities $ 2,956

Finance leases were not material as of December 30, 2023, December 31, 2022 and December 25, 2021.

We have various arrangements for certain foodservice and vending equipment under which we are the lessor.

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In return for these services, TBG is required to pay certain agreed upon fees to reimburse us for our costs without markup.

As of December 25, 2021, $ 1.8 billion of assets, primarily accounts receivable, net, and inventories of $ 0.5 billion, goodwill and other intangible assets of $ 0.6 billion and property, plant and equipment of $ 0.5 billion, and liabilities of $ 0.8 billion, primarily accounts payable and other liabilities of $ 0.6 billion and deferred income taxes of $ 0.2 billion, related to the Juice Transaction were reclassified as held for sale in our consolidated balance sheet.

The Juice Transaction did not meet the criteria to be classified as discontinued operations.

As of December 31, 2022, there were no amounts classified as held for sale.

2020 Acquisitions

On March 23, 2020, we acquired all of the outstanding shares of Pioneer Foods, a food and beverage company in South Africa with exports to countries across the globe, for 110.00 South African rand per share in cash.

The total consideration transferred was approximately $ 1.2 billion and was funded by two unsecured bridge loan facilities entered into by one of our international consolidated subsidiaries, which were fully repaid in April 2020.

In connection with our acquisition of Pioneer Foods, we have made certain commitments to the South Africa Competition Commission, including a commitment to provide the equivalent of 8.8 billion South African rand, or approximately $ 0.5 billion as of the acquisition date, in value for the benefit of our employees, agricultural development, education, developing Pioneer Foods’ operations and enterprise development programs in South Africa.

Included in this commitment is 2.3 billion South African rand, or approximately $ 0.1 billion, relating to the implementation of an employee ownership plan and an agricultural, entrepreneurship and educational development fund, which is an irrevocable condition of the acquisition.

This commitment was recorded in selling, general and administrative expenses primarily in the year ended December 26, 2020 and was primarily settled in the fourth quarter of 2021.

The remaining commitment of 6.5 billion South African rand, or approximately $ 0.4 billion as of the acquisition date, relates to capital expenditures and/or business-related costs which will be incurred and recorded over a five-year period from the acquisition date.

On April 24, 2020, we acquired Rockstar, an energy drink maker with whom we had a distribution agreement prior to the acquisition, for an upfront cash payment of approximately $ 3.85 billion and contingent consideration related to estimated future tax benefits associated with the acquisition of approximately $ 0.88 billion.

In the fourth quarter of 2021, we exercised our option to accelerate all remaining payments due under the contingent consideration arrangement.

On June 1, 2020, we acquired all of the outstanding shares of Be & Cheery, one of the largest online convenient food companies in China, from Haoxiangni Health Food Co., Ltd.

The total consideration transferred was approximately $ 0.7 billion.

We accounted for the 2020 transactions as business combinations.

We recognized and measured the identifiable assets acquired and liabilities assumed at their estimated fair values on the respective dates of acquisition.

The purchase price allocations for each of the 2020 acquisitions were finalized in the second quarter of 2021.

The fair value of identifiable assets acquired and liabilities assumed in the acquisitions of Pioneer Foods, Rockstar and Be & Cheery and the resulting goodwill as of the respective acquisition dates is summarized as follows:

Pioneer Foods Rockstar Be & Cheery

Acquisition date March 23, 2020 April 24, 2020 June 1, 2020

Inventories $ 229 $ 52 $ 45

Property, plant and equipment 379 8 60

Amortizable intangible assets 52 — 98

Nonamortizable intangible assets 183 2,400 309

Other assets and liabilities ( 53 ) ( 9 ) ( 24 )

Net deferred income taxes ( 117 ) — ( 99 )

Noncontrolling interest ( 5 ) — —

Total identifiable net assets 668 2,451 389

Goodwill 558 2,278 309

Total purchase price $ 1,226 $ 4,729 $ 698

Goodwill is calculated as the excess of the aggregate of the fair value of the consideration transferred over the fair value of the net assets recognized.

The goodwill recorded as part of the acquisition of Pioneer Foods primarily reflects synergies expected to arise from our combined brand portfolios and distribution networks, and is not deductible for tax purposes.

All of the goodwill is recorded in the AMESA division.

The goodwill recorded as part of the acquisition of Rockstar primarily represents the value of PepsiCo’s expected new innovation in the energy category and is deductible for tax purposes.

All of the goodwill is recorded in the PBNA division.

The goodwill recorded as part of the acquisition of Be & Cheery primarily reflects growth opportunities for PepsiCo as we leverage Be & Cheery’s direct-to-consumer and supply chain capabilities and is not deductible for tax purposes.

All of the goodwill is recorded in the APAC division.

As of December 30, 2023 and December 31, 2022, there were no amounts classified as held for sale.

In the year ended December 30, 2023, we recognized i mpairment charges related to our TBG investment.

See Notes 1 and 9 for further information.

Acquisition and Divestiture-Related Charges

Acquisition and divestiture-related charges primarily include merger and integration charges and costs associated with divestitures.

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2023 2022 2021

Cost of sales $ — $ 1 $ 32

Selling, general and administrative expenses (a)

FLNA $ — $ — $ 2

PBNA 16 51 11

Corporate (b)

Other pension and retiree medical benefits expense — 6 —

Total $ 80 $ ( 4 ) $ 255

After-tax amount (b)

Total acquisition and divestiture-related charges $ 41 $ 80 $ ( 4 )

After-tax amount (d)

$ 23 $ 66 $ ( 27 )

Impact on net income attributable to PepsiCo per common share $ ( 0.02 ) $ ( 0.05 ) $ 0.02

(a) The income amount primarily relates to the acceleration payment made in the fourth quarter of 2021 under the contingent consideration arrangement associated with our acquisition of Rockstar, which is partially offset by other acquisition and divestiture-related charges.

(b) In 2021, includes a tax benefit related to contributions to socioeconomic programs in South Africa.

2022 2021 2020 Transaction

FLNA $ — $ 2 $ 29 BFY Brands

PBNA 51 11 66 Juice Transaction, Rockstar

Europe 14 8 — Juice Transaction

AMESA 3 10 173 Pioneer Foods, Other

APAC — 4 7 Be & Cheery

Corporate (a)

6 ( 39 ) ( 20 ) Juice Transaction, Rockstar

Total 74 ( 4 ) 255

Other pension and retiree medical benefits expense 6 — — Juice Transaction

Total acquisition and divestiture-related charges $ 80 $ ( 4 ) $ 255

(a) In 2021, the income amount primarily relates to the acceleration payment made in the fourth quarter of 2021 under the contingent consideration arrangement associated with our acquisition of Rockstar, which is partially offset by divestiture-related charges associated with the Juice Transaction.

In 2020, the income amount primarily relates to the change in the fair value of the Rockstar contingent consideration.

(a) Income amount represents adjustments for changes in estimates of previously recorded amounts.

(b) Income amount primarily relates to the acceleration payment made in the fourth quarter of 2021 under the contingent consideration arrangement associated with our acquisition of Rockstar, which is partially offset by divestiture-related charges associated with the Juice Transaction.

(d) The amount in 2021 includes a tax benefit related to contributions to socioeconomic programs in South Africa.

Note 14 — Supply Chain Financing Arrangements