What changed in this filing

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Item 7. Management’s Discussion and Analysis

2025-02-04 compared with 2024-02-09 · 668 added, 659 removed, 1903 unchanged (41% of the section changed)

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Note 15 – Supplemental Financial Information 113

Note 16 – Legal Contingencies 114

REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM 115

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Executive Overview

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.

As a global company with deep local ties, we faced many of the same challenges in 2023 as our consumers, customers, and competitors across the world, including supply chain disruptions;

inflationary pressures;

shifting consumer preferences and behaviors;

ongoing climate issues;

a highly competitive operating environment;

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

achieve net-zero emissions by 2040;

become net water positive by 2030;

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 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 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 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.

See also “Item 1A.

Risk Factors” for further information about risks and uncertainties that the Company faces.

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

We operate through various channels, including authorized bottlers, contract manufacturers, and other third parties, to produce, market, distribute, and sell a wide array of beverages and convenient foods.

Our reach extends to customers and consumers in more than 200 countries and territories around the world.

As a global company with strong local connections, we faced many of the same challenges in 2024 as our consumers, customers, and competitors worldwide.

These included ongoing supply chain disruptions, persistent inflationary pressures, evolving consumer preferences and behaviors, an intensely competitive business environment, the continued expansion of e-commerce in a rapidly changing retail landscape, ongoing macroeconomic and political volatility, and an increasingly complex regulatory environment.

In response to these challenges, we have continued to adapt and innovate, reinforcing our resilience and continued focus on growth.

We are focused on improving our productivity, optimizing our operations and harnessing our scale and capabilities across our markets, and further elevating the needs, occasions, and channels of consumers in our strategies to lead and shape the future of our categories.

This is underpinned by our pep+ (PepsiCo Positive) transformation, now in its fourth year.

A Strategy for the Future:

pep+ is our strategy to transform our company to create sustainable growth and value – today, tomorrow, and many years into the future.

It is the way we are transforming our supply chain, evolving our portfolio, and making sure we have the right capabilities to support our people and our business throughout the world.

As a food and agricultural leader, we are working to help farmers adapt to climate change through investments in regenerative agriculture, training programs, and innovative technologies.

We are operating net-zero water and energy facilities across many markets, electrifying our transport fleets, and accelerating the use of recycled plastics, so we can try to build a more sustainable business while reducing operational costs.

Our leadership in regenerative agriculture not only supports farmers and the planet, but also strengthens our supply chain, helping us become more resilient while positioning us to deliver long-term value for shareholders.

And thanks to the diversification across our portfolio, our categories, and the geographies in which we operate, we are better equipped to capitalize on opportunities across a wide range of consumer needs.

Our pep+ initiatives and ambitions are geared toward driving growth across every aspect of our operations, so that we can strengthen our business and deliver more value for our stakeholders.

Transforming Our Portfolio:

Our consumer-centric portfolio transformation revolves around three key elements:

our work to evolve our recipes to reduce sodium, saturated fat, and added sugar, while

incorporating more diverse ingredients;

our efforts to find innovative ways to deliver new occasions and engagements for consumers across our existing portfolio;

and the strategic acquisition of brands that help us incorporate new and complementary foods and beverages into our portfolio.

Bringing Our Business Closer to the Consumer:

We are continuously making investments that aim to help us provide consumers with more value, more personalization, and more choices.

We will continue to innovate to create foods, beverages, and experiences that meet consumer needs without compromising the taste or quality they expect.

We are making changes to our organization to help us further increase productivity, sharpen our focus on growth and value, and create opportunities to better harness the expertise and scale of our food and beverage operations across markets.

In the United States, we are reorganizing our U.S.

Foods and Beverages businesses into one unified North America Region to harness scale, unlock synergies, and accelerate growth through category-leading brands and innovative products.

Internationally, we are realigning our international beverages and foods businesses to ensure each category is distinctly managed and has the right resources and capabilities to meet the unique needs of consumers in every market.

North America Business:

As part of the changes to our organizational structure, we’re working to enhance our connection with North American consumers, bringing sales and consumer insights closer together, so we can identify and act efficiently on shifts in demand.

Combining supply chain operations allows us to harness scale, reduce duplication, and create a more cohesive system for managing inventory and logistics, thereby optimizing our go-to-market strategy and helping drive consistent best practices across the business.

At the same time, the company is focused on expanding our better-for-you offerings and product innovations in both foods and drinks to meet evolving consumer preferences.

Through advanced technologies like artificial intelligence, we are optimizing our supply chain, reducing waste, and improving speed to market.

These steps ensure the company operates with more precision while protecting margins in an inflationary environment.

The immediate focus is on meeting consumer needs, operational excellence, competing for market share, and maintaining agility and resilience.

These efforts are foundational to the North America business and driving near-term growth, while setting the stage for long-term success.

Productivity Fuels our Ability to Perform:

In 2024, we delivered record productivity.

Increases in automation in our plants and warehouses have empowered frontline decision-making, improved optimization across our transportation and fleet networks, and allowed greater focus on cost management and waste elimination.

These efforts fuel our ability to reinvest in our brands and capabilities, so that we are well-positioned to support areas in which our business is performing well, while simultaneously allowing us to develop in new ways across our markets and our categories.

Focus on Growth:

We remain focused on delivering growth and fueling innovation by driving positive action for people and the planet.

By improving our productivity and aligning our operations and strategy to meet consumer needs, we aim to be well positioned to navigate the complexities of the global market and deliver sustainable, long-term value to our consumers and stakeholders.

Our Operations

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

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

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.

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

During 2024, we continued to experience higher operating costs, including on transportation and labor costs, which may continue in 2025.

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 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.

A number of external factors, including volatile geopolitical conditions, the inflationary cost environment, adverse weather conditions, supply chain disruptions and labor shortages, have impacted and may continue to impact transportation and labor costs.

When prices increase, we may or may not pass on such increases to our customers, which may result in reduced volume, revenue, margins and operating results.

See Note 9 to our consolidated financial statements for further information on how we manage our exposure to commodity prices.

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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, 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 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 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 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, 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.

See Notes 1 and 4 to our consolidated financial statements for a discussion of the Russia-Ukraine conflict charges, including i mpairment charges, recognized in the year ended December 31, 2022.

The extent of the impact of these tragic events on our business remains uncertain and will continue to depend on numerous evolving factors that we are not able to accurately predict, including the duration and scope of the conflic t, regional instability and ongoing and additional financial and economic sanctions, export controls and other legislation imposed by governments.

We will continue to monitor and assess the situation as circumstances evolve and to identify actions to potentially m itigate any unfavorable impacts on our future results.

During the periods presented in this report, volatile economic, political, social and geopolitical conditions, civil unrest and wars and other military conflicts, acts of terrorism and natural disasters and other catastrophic events 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, continue to result in challenging operating environments and have resulted in and could continue to result in changes in how we operate in certain of these markets.

Debt and credit issues, currency controls or fluctuations in certain of these international markets (including restrictions on the transfer of funds to and from certain markets), as well as the threat or imposition of new, expanded or retaliatory tariffs (including recent U.S.

tariffs imposed or threatened to be imposed on China, Canada and Mexico and other countries and any retaliatory actions taken by such countries), sanctions or export controls have also continued to impact our operations in certain of these international markets.

We continue to closely monitor the

economic, operating and political environment in the markets in which we operate, including risks of additional impairments or write-offs and currency devaluation, and to identify actions to potentially mitigate any unfavorable impacts on our future results.

Our operations in Russia accounted for 4% of our consolidated net revenue for each of the years ended December 28, 2024 and December 30, 2023.

Russia accounted for 3% and 3% of our consolidated assets, 10% and 6% of our consolidated cash and cash equivalents, and 41% and 35% of our accumulated currency translation adjustment loss as of December 28, 2024 and December 30, 2023 , respectively.

Our operations in Ukraine accounted for less than 1% of our consolidated net revenue for each of the years ended December 28, 2024 and December 30, 2023 and of our consolidated assets as of December 28, 2024 and December 30, 2023.

See Notes 1 and 4 to our consolidated financial statements for a discussion of i mpairment and other charges recognized in the years ended December 28, 2024, December 30, 2023, and December 31, 2022 .

Imposition of Taxes and Regulations on our Products

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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.

In addition, certain jurisdictions in which our snack products are sold have either imposed or are considering imposing, new or increased taxes on the manufacture, distribution or sale of certain of our snack products as a result of ingredients (such as sugar, sodium or saturated fat) contained in our products.

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.

In addition, taxes, regulations and limitations may impact us and our competitors differently.

We expect continued scrutiny of certain ingredients and substances present in certain of our products and packaging.

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.

Numerous countries, including European Union member states, have enacted, or are expected to enact, legislation incorporating the OECD model rules for a global minimum tax rate of 15%.

Widespread implementation is expected by the end of 2025, with certain countries that have not yet enacted potentially applying the legislation as of a retroactive date.

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

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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.

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 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.

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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 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.

example, as part of risk updates to the Board and relevant Committees during 2024, the Board or its relevant Committee were provided updates on the impact of disruptive events, including geopolitical events and tensions in certain international markets, such as the Russia-Ukraine conflict.

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.

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◦ The Nominating and Corporate Governance Committee assists the Board in its oversight of the Company’s governance structure and other corporate governance matters, including succession planning;

◦ The Sustainability, Diversity and Public Policy Committee of the Board assists the Board in its oversight of PepsiCo’s policies, programs and related risks that concern key sustainability (including climate change), diversity, equity and inclusion, and public policy matters.

• 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 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;

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 Enterprise Risk, Corporate Affairs, Human Resources, Research & Development, Information Technology, Sustainability, Strategy, Transformation, International Beverages, Commercial, Global Operations and Marketing;

• Division and key market risk committees, comprised of cross-functional senior management teams, meet regularly to identify, assess, prioritize and address division and country-specific business risks;

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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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Commodity Prices

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 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.

Our commodity derivative contracts had a total notional value of $1.4 billion as of December 28, 2024 and $1.7 billion as of December 30, 2023.

At the end of 2024, the potential change in fair value of commodity derivative contracts, assuming a 10% decrease in the underlying commodity price, would have increased our net unrealized losses in 2024 by $140 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 2023, with Mexico, Canada, Russia, China, the United Kingdom, Brazil and South Africa, collectively, comprising approximately 25% of our consolidated net revenue in 2023.

Our operations outside of the United States generated 44% of our consolidated net revenue in 2024, with Mexico, Russia, Canada, China, the United Kingdom, South Africa and Brazil, collectively, comprising approximately 25% of our consolidated net revenue in 2024.

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 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.

During 2024, unfavorable foreign exchange reduced net revenue performance by 1.5 percentage points,

primarily due to declines in the Egyptian pound, Russian ruble, Mexican peso and Brazilian real.

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, 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.

Our foreign exchange derivative contracts had a total notional value of $3.1 billion as of December 28, 2024 and $3.8 billion as of December 30, 2023.

At the end of 2024, we estimate that an unfavorable 10% change in the underlying exchange rates would have decreased our net unrealized gains in 2024 by $319 million, which would be significantly offset by an inverse change in the fair value of the underlying exposure.

Our cross-currency swap contracts had a total notional value of $1.2 billion as of December 28, 2024 and $1.3 billion as of December 30, 2023.

At the end of 2024, we estimate that an unfavorable 10% change in the underlying exchange rates would have increased our net unrealized losses in 2024 by $107 million, which would be significantly offset by an inverse change in the fair value of the underlying exposure.

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Interest Rates

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

Our interest rate swap contracts had a total notional value of $2.0 billion as of December 28, 2024.

Assuming year-end 2024 investment levels and variable rate debt, a 1-percentage-point increase in interest rates would have decreased our net interest expense in 2024 by $32 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.

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

Unit volume performance 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 from 2022 results.

Further, unit volume performance excludes the impact of a 53 rd reporting week, where applicable.

Our fiscal year ends on the last Saturday of each December, resulting in an additional reporting week every five or six years (53 rd reporting week).

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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While our net revenue is not entirely based on BCS volume due to the independent bottlers in our supply chain, we believe that BCS is a better measure of the consumption of our beverage products.

PBNA, LatAm, Europe, AMESA and APAC, either independently or in conjunction with third parties, make, market, distribute and sell ready-to-drink tea products through a joint venture with Unilever (under the Lipton brand name), and PBNA, either independently or in conjunction with third parties, makes, markets, distributes and sells ready-to-drink coffee products through a joint venture with Starbucks.

the Lipton brand name), and PBNA, either independently or in conjunction with third parties, makes, markets, distributes and sells ready-to-drink coffee products through a joint venture with Starbucks.

Convenient food volume includes volume sold by us and our noncontrolled affiliates of convenient food products bearing company-owned or licensed trademarks.

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FLNA makes, markets, distributes and sells Sabra refrigerated dips and spreads through a joint venture with Strauss Group.

In December 2024, we acquired the Strauss Group’s 50% ownership in Sabra and Sabra became a wholly-owned subsidiary.

Consolidated Net Revenue and Operating Profit

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See “Results of Operations – Division Review” for a tabular presentation and discussion of key drivers of net revenue.

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

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.

Operating profit increased 8% and operating margin improved 0.9 percentage points.

Operating profit growth was primarily driven by effective net pricing, productivity savings and an 18-percentage-point impact of prior-year impairment charges related to the SodaStream business.

These impacts were partially offset by certain operating cost increases, a decline in organic volume, an 8-percentage-point impact of higher impairment and other charges associated with our TBG investment and Juice Transaction-related receivables, a 5-percentage-point impact of higher restructuring charges and a 4-percentage-point unfavorable impact of an indirect tax reserve.

Corporate unallocated expenses reflect a 3-percentage-point favorable impact driven primarily by a decrease in corporate expenses and prior-year contributions to The PepsiCo Foundation, Inc.

Other Consolidated Results

2024 2023 Change

Other pension and retiree medical benefits income $ 250 $ 132 $ 118

Other pension and retiree medical benefits (expense)/income $ (22) $ 250 $ (272)

Net interest expense and other $ 919 $ 819 $ 100

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Net income attributable to PepsiCo per common share – diluted $ 6.95 $ 6.56 6 %

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 .

Other pension and retiree medical benefits expense increased $272 million, primarily reflecting higher settlement charges due to lump sum distributions to retired or terminated employees and the purchase of a group annuity contract whereby a third-party insurance company assumed the obligation to pay and administer future benefit payments for certain retirees.

Net interest expense and other increased $100 million, primar ily due to higher interest rates on debt and higher average debt balances, partially offset by higher average cash balances and higher interest rates on average cash balances.

The reported tax rate decreased 0.4 percentage points, primarily reflecting a reduction in the state tax rate.

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.

Net Revenue and Organic Revenue Growth

Organic revenue growth is a non-GAAP financial measure.

Net Revenue and Organic Revenue Performance

Organic revenue performance is a non-GAAP financial measure.

For further information on this measure, see “Non-GAAP Measures.”

Impact of Impact of

% Change, GAAP Measure Foreign exchange translation Acquisitions and divestitures 53 rd reporting week

% Change, GAAP Measure Foreign exchange translation Acquisitions and divestitures Organic

% Change, Non-GAAP Measure (a )

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(a) Amounts may not sum due to rounding.

(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.

(b) Excludes the impact of acquisitions and divestitures.

In certain instances, the impact of organic volume on net revenue performance 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

Operating profit/(loss) adjusted for items affecting comparability and operating profit/(loss) performance adjusted for items affecting comparability on a constant currency basis are both non-GAAP financial measures.

(c) Net revenue decline was impacted by a previously announced voluntary recall of certain bars and cereals in our QFNA division (Quaker Recall).

Operating Profit, Operating Profit Adjusted for Items Affecting Comparability and Operating Profit Performance Adjusted for Items Affecting Comparability on a Constant Currency Basis

Operating profit adjusted for items affecting comparability and operating profit performance adjusted for items affecting comparability on a constant currency basis are both non-GAAP financial measures.

For further information on these measures, see “Non-GAAP Measures” and “Items Affecting Comparability.”

Operating Profit/(Loss) and Operating Profit/(Loss) Adjusted for Items Affecting Comparability

Operating Profit and Operating Profit Adjusted for Items Affecting Comparability

Items Affecting Comparability (a)

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,

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 Indirect tax impact Core,

Non-GAAP Measure

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Items Affecting Comparability (a)

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,

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

Non-GAAP Measure

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(a) See “Items Affecting Comparability.”

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

Operating Profit Performance and Operating Profit 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 Product recall-related impact Core

Reported % Change, GAAP Measure Mark-to-market net impact Restructuring and impairment charges Acquisition and divestiture-related charges Impairment and other charges/credits Product recall-related impact Indirect tax impact Core

% Change, Non-GAAP Measure (b)

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LatAm — % — 1 — — — 10 10 % 3 13 %

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

Europe 163 % — (17) — (122) — — 24 % 3 27 %

AMESA (1) % — — 0.5 1 — — — % 8 9 %

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(b) Amounts may not sum due to rounding.

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.

Net revenue decreased 1%, primarily driven by a decrease in organic volume, partially offset by effective net pricing.

Unit volume declined 2.5%, primarily driven by mid-single-digit declines in trademark Cheetos and trademark Tostitos and low-single-digit declines in trademark Lay’s and variety packs, partially offset by double-digit growth in trademark Chester’s and trademark Miss Vickie’s.

Operating profit decreased 7%, primarily reflecting certain operating cost increases, including strategic initiatives, and the decrease in organic volume.

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

Net revenue decreased 14%, primarily driven by a decrease in organic volume, which was negatively impacted by the loss of sales from products included in the Quaker Recall.

Unit volume declined 14%, primarily driven by double-digit declines in bars, oatmeal, pancake syrup and mix and ready-to-eat cereals.

The unit volume decline in bars and ready-to-eat cereals was negatively impacted by the loss of sales from products included in the Quaker Recall.

Operating profit decreased 38%, primarily reflecting the decrease in organic volume, certain operating cost increases and a 14-percentage-point impact of charges associated with the Quaker Recall, partially offset by productivity savings, a 12-percentage-point favorable impact of an insurance recovery related to the Quaker Recall, lower advertising and marketing expenses and effective net pricing.

Net revenue increased 0.5%, primarily driven by effective net pricing, partially offset by an organic volume decline.

Unit volume declined 3%, driven by a 4% decline in non-carbonated beverage (NCB) volume and a 2% decline in CSD volume.

The NCB volume decline primarily reflected a mid-single-digit decline in our overall water portfolio, a low-single-digit decline in Gatorade sports drinks and a high-single-digit decline in our Lipton ready-to-drink tea portfolio.

Operating profit decreased 11%, primarily driven by certain operating cost increases, the decline in organic volume, a 9-percentage-point impact of higher impairment and other charges associated with our TBG investment and Juice Transaction-related receivables, a 7-percentage-point impact of higher restructuring charges and higher advertising and marketing expenses.

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.

Net revenue increased 0.5%, reflecting effective net pricing, partially offset by a 3-percentage-point impact of unfavorable foreign exchange translation and a net decline in organic volume.

Convenient foods unit volume declined 2%, primarily reflecting double-digit declines in Peru and Argentina, partially offset by low-single-digit growth in Brazil.

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

Beverage unit volume grew slightly, primarily reflecting mid-single-digit growth in Brazil and low-single-digit growth in Mexico, Guatemala and Chile, partially offset by a double-digit decline in Colombia and high-single-digit declines in Argentina and Peru.

Operating profit decreased slightly, primarily reflecting certain operating cost increases, a 10-percentage-point unfavorable impact of an indirect tax reserve, the net organic volume decline, higher advertising and marketing expenses and a 3-percentage-point impact of unfavorable foreign exchange translation, partially offset by the effective net pricing, productivity savings and a 5-percentage-point impact of lower commodity costs.

Net revenue increased 5%, primarily reflecting effective net pricing and organic volume growth, partially offset by a 2-percentage-point impact of unfavorable foreign exchange translation.

Convenient foods unit volume grew 2%, primarily reflecting mid-single-digit growth in Russia and low-single-digit growth in the United Kingdom, partially offset by a high-single-digit decline in France and a mid-single-digit decline in the Netherlands.

Additionally, Turkey experienced low-single-digit growth.

Beverage unit volume grew 2%, primarily reflecting mid-single-digit growth in Russia and low-single-digit growth in Turkey, partially offset by a double-digit decline in France and a slight decline in Germany.

Additionally, the United Kingdom experienced low-single-digit growth.

Operating profit increased 163%, primarily reflecting a 148-percentage-point favorable impact of the prior-year impairment charges related to the SodaStream business, the net revenue growth, productivity savings and a 17-percentage-point favorable impact of lower restructuring charges.

These impacts were partially offset by certain operating cost increases, a 23-percentage-point impact of impairment and other charges associated with our TBG investment and Juice Transaction-related receivables, an 8-percentage-point impact of higher commodity costs and higher advertising and marketing costs.

Net revenue increased 1%, primarily reflecting effective net pricing and organic volume growth, partially offset by a 9-percentage-point impact of unfavorable foreign exchange translation.

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

Beverage unit volume grew 1%, primarily reflecting double-digit growth in India, partially offset by a low-single-digit decline in the Middle East, a mid-single-digit decline in Pakistan and a high-single-digit decline in Nigeria.

Operating profit decreased 1%, primarily reflecting certain operating cost increases, a 33-percentage-point impact of higher commodity costs, primarily packaging materials, potatoes and other ingredients, largely driven by transaction-related foreign exchange and an 8-percentage-point impact of unfavorable foreign exchange translation.

These impacts were partially offset by the net revenue growth and productivity savings.

Net revenue increased 1%, primarily reflecting organic volume growth, partially offset by a 2-percentage-point impact of unfavorable foreign exchange translation and unfavorable net pricing.

Convenient foods unit volume grew 4%, primarily reflecting double-digit growth in Thailand and mid-single-digit growth in China.

Additionally, Australia experienced mid-single-digit growth.

Beverage unit volume grew 1%, primarily reflecting high-single-digit growth in Vietnam, mid-single-digit growth in Thailand and low-single-digit growth in the Philippines, partially offset by a low-single-digit decline in China.

Operating profit increased 14%, primarily reflecting productivity savings, the organic volume growth, a 9-percentage-point favorable impact of impairment charges related to the Be & Cheery brand in the prior year and a 5-percentage-point impact of lower commodity costs.

These impacts were partially offset by certain operating cost increases and the unfavorable net pricing.

Non-GAAP Measures

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and remeasurements of net monetary assets.

Prior to the fourth quarter of 2021, certain immaterial pension and retiree medical-related settlement and curtailment gains and losses were not considered items affecting comparability.

Pension and retiree medical-related service cost, interest cost, expected return on plan assets, and other net periodic pension costs continue to be reflected in our core results.

See below and “Items Affecting Comparability” for a description of adjustments to our GAAP financial measures in this Form 10-K.

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The following non-GAAP financial measures contained in this Form 10-K are discussed below:

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

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).

Cost of sales, gross profit, selling, general and administrative expenses, impairment of intangible assets, other pension and retiree medical benefits expense/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

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, impairment and other charges/credits, product recall-related impact, indirect tax expense related to an international audit and the impact of settlement and curtailment gains and losses related to pension and retiree medical plans (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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We believe these measures provide useful information in evaluating the results of our business because they exclude items that we believe are not indicative of our ongoing performance or that we believe impact comparability with the prior year.

Organic revenue growth

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.

Organic revenue performance

We define organic revenue performance 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.

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.

See “Net Revenue and Organic Revenue Growth” in “Results of Operations – Division Review” for further information.

We believe organic revenue performance 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.

See “Net Revenue and Organic Revenue Performance” in “Results of Operations – Division Review” for further information.

Free cash flow

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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 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

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

Net income attributable to PepsiCo

Reported, GAAP Measure $ 41,744 $ 50,110 $ 37,190 $ 33 $ 12,887 $ (22) $ 2,320 $ 9,578

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Product recall-related impact (176) 176 (8) — 184 3 44 143

Indirect tax impact (218) 218 — — 218 — — 218

Pension and retiree medical-related impact

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Core, Non-GAAP Measure $ 41,243 $ 50,611 $ 35,913 $ — $ 14,698 $ 286 $ 2,771 $ 11,246

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)

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 (201) 201 (251) — (3,166) 3,618 — 671 — 2,947

Impairment and other charges/credits 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

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Acquisition and divestiture-related charges

Gain associated with the Juice Transaction — (2.08)

Impairment and other charges 0.68 2.12

Impairment and other charges/credits 0.38 0.68

Product recall-related impact 0.10 0.07

Indirect tax impact 0.16 —

Pension and retiree medical-related impact

Tax benefit related to the IRS audit — (0.23)

Tax expense related to the TCJ Act

Core net income attributable to PepsiCo per common share – diluted, non-GAAP measure $ 7.62 (a)

Core net income attributable to PepsiCo per common share – diluted, non-GAAP measure $ 8.16

Impact of foreign exchange translation 2

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We centrally manage commodity derivatives on behalf of our divisions.

These commodity derivatives include agricultural products, energy and metals.

These commodity derivatives include agricultural products, metals, and energy.

Commodity derivatives that do not qualify for hedge accounting treatment are marked to market each period with the resulting gains and losses recorded in corporate unallocated expenses as either cost of sales or selling, general and administrative expenses, depending on the underlying commodity.

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2019 Multi-Year Productivity Plan

The 2019 Productivity Plan, publicly announced on February 15, 2019, 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 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.

The 2019 Productivity Plan leverages new technology and business models to further simplify, harmonize and automate processes;

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

and simplifies our organization and optimizes our manufacturing and supply chain footprint.

To build on the successful implementation of the 2019 Productivity Plan, in the fourth quarter of 2024, we further expanded and extended the plan through the end of 2030 to take advantage of additional opportunities within the initiatives described above.

As a result, we expect to incur

pre-tax charges of approximately $6.15 billion, including cash expenditures of approximately $5.1 billion, as compared to our previous estimate of pre-tax charges of approximately $3.65 billion, including cash expenditures of approximately $2.9 billion.

Plan to date through December 28, 2024, we have incurred pre-tax charges of $2.6 billion, including cash expenditures of $1.9 billion.

In our 2024 financial results, we expect to incur pre-tax charges and cash expenditures of approximately $500 million each.

In our 2025 financial results, we expect to incur pre-tax charges of approximately $900 million, including cash expenditures of approximately $800 million.

These charges will be funded primarily through cash from operations.

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Acquisition and Divestiture-Related Charges

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.

Divestiture-related charges reflect transaction expenses, including consulting, advisory and other professional fees.

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

Gain Associated with the Juice Transaction

We recognized a gain associated with the Juice Transaction in our PBNA and Europe divisions.

Acquisition and divestiture-related charges primarily include transaction expenses, such as consulting, advisory and other professional fees, and merger and integration charges.

Merger and integration charges include employee-related costs, contract termination costs, closing costs and other integration costs.

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

Impairment and Other Charges

Impairment and Other Charges/Credits

We recognized Russia-Ukraine conflict charges, brand portfolio impairment charges and other impairment charges as described below.

Russia-Ukraine Conflict Charges

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.

We also recognized adjustments to these charges in 2023.

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

Brand Portfolio Impairment Charges

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.

We also recognized adjustments to these charges in 2023.

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

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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.

In addition, we recorded allowance for expected credit losses related to outstanding receivables from TBG associated with the Juice Transaction.

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

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

Indirect Tax Impact

We recognized additional expenses related to an indirect tax reserve in our LatAm division.

Pension and Retiree Medical-Related Impact

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.

Pension and retiree medical-related impact includes settlement charges due to lump sum distributions to retired or terminated employees and the purchase of a group annuity contract whereby a third-party insurance company assumed the obligation to pay and administer future benefit payments for certain retirees.

The settlement charge was triggered when the aggregate of the cumulative lump sum distributions and the annuity contract premium exceeded the total annual service and interest costs.

Pension and retiree medical-related impact also includes curtailment losses due to restructuring actions as part of our 2019 Productivity Plan.

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

Tax Benefit Related to the IRS Audit

We recognized a non-cash tax benefit resulting from our agreement with the IRS to settle one of the issues assessed in the 2014 through 2016 tax audit.

The agreement covers tax years 2014 through 2019.

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

Tax Expense Related to the TCJ Act

Tax expense related to the TCJ Act reflects adjustments to the mandatory transition tax liability under the TCJ Act.

See Note 5 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.

Our Liquidity and Capital Resources

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operating leases;

purchase, marketing, and other contractual commitments, including capital expenditures and the transition tax liability under the TCJ Act.

purchase, marketing, and other contractual commitments, including capital expenditures and the transition tax liability under the Tax Cuts and Jobs Act (TCJ Act).

In addition, these sources of cash fund other cash outflows including anticipated dividend payments and share repurchases.

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

Our sources and uses of cash were not materially adversely impacted by the Russia-Ukraine conflict and, to date, we have not identified any material liquidity deficiencies as a result of the conflict.

Based on the information currently available to us, we do not expect the impact of the Russia-Ukraine conflict to have a material impact on our future liquidity.

We will continue to monitor and assess the impact the Russia-Ukraine conflict may have on our business and financial results.

See “Item 1A.

Risk Factors,” “Our Business Risks” and Note 1 to our consolidated financial statements for further information related to the impact of the Russia-Ukraine conflict on our business and financial results.

As of December 28, 2024, cash, cash equivalents and short-term investments in our consolidated subsidiaries subject to currency controls or currency exchange restrictions were not material.

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we currently expect to pay approximately $772 million of this liability in 2025.

Any additional guidance issued by the IRS may impact our recorded amounts for this transition tax liability.

Any additional guidance issued by the Internal Revenue Service (IRS) may impact our recorded amounts for this transition tax liability.

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

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In 2024, net cash provided by operating activities was $12.5 billion, compared to $13.4 billion in the prior year.

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

The decrease in operating cash flow primarily reflects unfavorable working capital comparisons.

Investing Activities

In 2024, net cash used for investing activities was $5.5 billion, primarily reflecting net capital spending of $5.0 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.

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 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.

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

See Note 1 to our consolidated financial statements for further discussion of capital spending by division and see Note 13 to our consolidated financial statements for further discussion of our acquisitions.

We regularly review our plans with respect to net capital spending 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 2024, net cash used for financing activities was $7.6 billion, primarily reflecting the return of operating cash flow to our shareholders through dividend payments and share repurchases of $8.2 billion, as well as payments of long-term debt borrowings of $3.9 billion, partially offset by proceeds from the issuances of long-term debt of $4.0 billion.

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 and share repurchases of $7.7 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.

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.

See “Item 1A.

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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:

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

Changes in line items in the cash flow statement are discussed in “Our Liquidity and Capital Resources.”

Changes in line items in the balance sheet are discussed below:

As of December 28, 2024, total assets were $99.5 billion, compared to $100.5 billion as of December 30, 2023.

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

The decrease in total assets is primarily driven by the following line item:

Cash and cash equivalents (b)

(a) In billions.

(b) Refer to the cash flow statement for further information.

Total Liabilities

As of December 28, 2024, total liabilities were $81.3 billion, compared to $81.9 billion as of December 30, 2023.

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.

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

There were no material line item changes.

See Notes 8 and 13 for further information regarding our liabilities.

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

Return on Invested Capital

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Tax on interest expense (357)

$ 10,192 $ 9,781

Average debt obligations (a)

$ 42,668 $ 39,595

Average common shareholders’ equity (b)

17,837 17,785

Average invested capital $ 63,742

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Tax on interest income 0.2

Mark-to-market net impact — 0.1

Restructuring and impairment charges 0.4 0.3

Acquisition and divestiture-related charges — 0.1

Gain associated with the Juice Transaction 0.9 (3.3)

Impairment and other charges 0.6 3.7

Product recall-related impact 0.2 —

Pension and retiree medical-related impact — 0.3

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)

Mark-to-market net impact (a)

Restructuring and impairment charges (a)

Acquisition and divestiture-related charges (a)

Impairment and other charges/credits (a)

Product recall-related impact (a)

Indirect tax impact (a)

Pension and retiree medical-related impact (a)

Core Net ROIC, non-GAAP measure 20.4 %

(a) See “Items Affecting Comparability” for a detailed description.

OUR CRITICAL ACCOUNTING POLICIES AND ESTIMATES

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 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.

These policies may require management to make difficult and subjective judgments regarding uncertainties, including the business and economic uncertainty resulting from volatile geopolitical conditions 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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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.

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.

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These accruals are based on contract terms and our historical experience with similar programs and require management judgment with respect to estimating customer and consumer participation and performance levels.

Differences between estimated expense and actual incentive costs are normally insignificant and are recognized in earnings in the period such differences are determined.

Differences between estimated expense and actual incentive costs are normally insignificant and

are recognized in earnings in the period such differences are determined.

In addition, certain advertising and marketing costs are also based on annual targets and recognized during the year as incurred.

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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 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.

Determining fair value requires significant estimates and assumptions, including those related to volatile geopolitical conditions 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 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.

Factors considered include macroeconomic conditions (including those related to volatile geopolitical conditions 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 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.

Significant management judgment is necessary to estimate the impact of competitive operating, macroeconomic and other factors (including those related to volatile geopolitical conditions 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.

A deterioration in these assumptions could adversely impact our results.

Additionally, indefinite-lived intangible assets acquired in recent acquisitions are more susceptible to impairment because they are recorded at fair value at the time of acquisition.

These assumptions could be adversely impacted by certain of the risks described in “Item 1A.

Risk Factors” and “Our Business Risks.”

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.

As of December 28, 2024, the estimated fair value of the SodaStream reporting unit narrowly exceeded its carrying value.

Given the low coverage, there could be further impairment to the carrying value of the SodaStream reporting unit goodwill if future sales and operating profit results are not in line with the forecasted future cash flows of the business and/or if macroeconomic conditions worsen and drive an increase in the weighted-average cost of capital used to estimate its fair value.

We 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.

If an evaluation of the undiscounted future cash flows indicates impairment, the asset is written down to its estimated fair value, which is based on its discounted future cash flows.

See Notes 2 and 4 to our consolidated financial statements for further information.

See Note 2 and Note 4 to our consolidated financial statements for further information.

Income Tax Expense and Accruals

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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.

Deferred tax liabilities generally represent tax expense recognized in our consolidated financial statements for which payment has been deferred, or expense for which we have already taken a deduction in our tax return but have not yet recognized as expense in our consolidated financial statements.

in our tax return but have not yet recognized as expense in our consolidated financial statements.

In 2024, our annual tax rate was 19.4% compared to 19.8% in 2023.

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2025 2024 2023

Service cost discount rate (a)

5.4 % 5.5 % 3.2 %

Interest cost discount rate (a)

5.1 % 5.4 % 2.9 %

Expected rate of return on plan assets (a)

7.0 % 7.0 % 6.3 %

Service cost discount rate 6.0 % 5.4 % 5.5 %

Interest cost discount rate 5.4 % 5.1 % 5.4 %

Expected rate of return on plan assets 7.1 % 7.0 % 7.0 %

Retiree medical

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

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

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

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.

In 2024, the aggregate of lump sum distributions and the purchase of a group annuity contract 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 2025.

Sensitivity of Assumptions

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Operating Profit 12,887 11,986 11,512

Other pension and retiree medical benefits income 250 132 522

Other pension and retiree medical benefits (expense)/income ( 22 ) 250 132

Net interest expense and other ( 919 ) ( 819 ) ( 939 )

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Net income $ 9,626 $ 9,155 $ 8,978

Other comprehensive (loss)/income, net of taxes:

Other comprehensive loss, net of taxes:

Net currency translation adjustment ( 1,962 ) ( 307 ) ( 643 )

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Net change on available-for-sale debt securities and other ( 234 ) 465 4

( 232 ) ( 408 ) 578

Total other comprehensive loss, net of taxes ( 2,078 ) ( 232 ) ( 408 )

Comprehensive income 7,548 8,923 8,570

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Impairment and other charges 714 1,230 3,618

Indirect tax impact 218 — —

Product recall-related impact 187 136 —

Cash payments for product recall-related impact ( 148 ) — —

Operating lease right-of-use asset amortization 655 570 517

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Cash payments for restructuring charges ( 436 ) ( 434 ) ( 224 )

Acquisition and divestiture-related charges 41 80 ( 4 )

Cash payments for acquisition and divestiture-related charges ( 41 ) ( 46 ) ( 176 )

Pension and retiree medical plan expenses 150 419 123

Pension and retiree medical plan expense 414 150 419

Pension and retiree medical plan contributions ( 348 ) ( 410 ) ( 384 )

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Payments of long-term debt ( 3,886 ) ( 3,005 ) ( 2,458 )

Debt redemptions/cash tender offers — ( 1,716 ) ( 4,844 )

Debt redemptions — — ( 1,716 )

Short-term borrowings, by original maturity:

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Three months or less, net 392 ( 29 ) ( 31 )

Payments of acquisition-related contingent consideration

Cash dividends paid ( 7,229 ) ( 6,682 ) ( 6,172 )

Share repurchases - common ( 1,000 ) ( 1,500 ) ( 106 )

Share repurchases ( 1,000 ) ( 1,000 ) ( 1,500 )

Proceeds from exercises of stock options 166 116 138

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Effect of exchange rate changes on cash and cash equivalents and restricted cash ( 687 ) ( 277 ) ( 465 )

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

Net (Decrease)/Increase in Cash and Cash Equivalents and Restricted Cash ( 1,208 ) 4,661 ( 607 )

Cash and Cash Equivalents and Restricted Cash, Beginning of Year 9,761 5,100 5,707

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Net income attributable to PepsiCo 9,578 9,074 8,910

Cash dividends declared - common (a)

Cash dividends declared (a)

( 7,347 ) ( 6,839 ) ( 6,275 )

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Balance, beginning of year ( 15,534 ) ( 15,302 ) ( 14,898 )

Other comprehensive (loss)/income attributable to PepsiCo ( 232 ) ( 404 ) 578

Other comprehensive loss attributable to PepsiCo ( 2,078 ) ( 232 ) ( 404 )

Balance, end of year ( 17,612 ) ( 15,534 ) ( 15,302 )

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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 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.

Additionally, the business and economic uncertainty resulting from volatile geopolitical conditions and changes in the interest rate and inflationary cost environment have made such estimates and assumptions more difficult to calculate.

As future events and their effect cannot be determined with precision, actual results could differ significantly from those estimates.

Our fiscal year ends on the last Saturday of each December, resulting in a 53 rd reporting week every five or six years, including in our 2022 financial results.

While our North America financial results are reported on a weekly calendar basis, substantially all of our international operations reported on a monthly calendar basis prior to the fourth quarter of 2021.

Beginning in the fourth quarter of 2021, all of our international operations reported on a monthly calendar basis.

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

While our North America financial results are reported on a weekly calendar basis, our international operations are reported on a monthly calendar basis.

The following chart details our quarterly reporting schedule:

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

Changes to Organizational Structure

The division amounts and discussions included in this Form 10-K reflect the reportable segments that existed through the end of 2024.

Effective beginning with our first quarter of 2025, we realigned certain of our reportable segments to be consistent with certain changes to our organizational structure and how the Chief Executive Officer will monitor the performance of these segments.

In North America, the food businesses, FLNA and QFNA, will be reported together as PepsiCo Foods North America.

These changes do not impact our PBNA segment.

Internationally, the foods businesses in LatAm, Europe, AMESA and APAC will be reorganized into three reportable segments:

Latin America Foods, Europe, Middle East and Africa (EMEA), and Other International Foods.

Other International Foods will include the foods businesses in APAC and India, currently part of AMESA.

Our international franchise beverage businesses that were part of our LatAm, Europe, AMESA and APAC segments will be reported as International Beverages Franchise.

The company-owned bottling businesses operating internationally are all located within EMEA and will be reported in the newly created EMEA segment.

Our historical segment reporting will be recast beginning first quarter 2025 to reflect the new organizational structure.

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, South Africa and Brazil.

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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Our divisions are held accountable for share-based compensation expense and, therefore, this expense is allocated to our divisions as an incremental employee compensation cost.

The allocation of share-based compensation expense of each division is as follows:

2023 2022 2021

FLNA 13 % 13 % 13 %

QFNA 1 % 1 % 1 %

PBNA 18 % 20 % 19 %

LatAm 6 % 6 % 5 %

Europe 10 % 11 % 13 %

AMESA 5 % 5 % 6 %

APAC 3 % 3 % 2 %

Corporate unallocated expenses 44 % 41 % 41 %

The expense allocated to our divisions excludes any impact of changes in our assumptions during the year which reflect market conditions over which division management has no control.

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We centrally manage commodity derivatives on behalf of our divisions.

These commodity derivatives include agricultural products, energy and metals.

These commodity derivatives include agricultural products, metals, and energy.

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These derivatives hedge underlying commodity price risk and were not entered into for trading or speculative purposes.

Net Revenue and Operating Profit/(Loss)

Net revenue and operating profit/(loss) of each division are as follows:

Net Revenue Operating Profit/(Loss)

2023 2022 2021 2023 (a)

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

Net Revenue, Significant Expenses and Operating Profit/(Loss) by Division

Our chief operating decision maker (CODM) is our Chairman and Chief Executive Officer.

Our CODM uses division operating profit/(loss) as the profit measure to evaluate division performance and allocate resources across divisions.

Corporate unallocated expenses, other pension and retiree medical benefits (expense)/income and net interest expense and other are centrally managed costs and are therefore excluded from this profit measure to provide better transparency of our division operating results.

Our CODM considers variances of actual performance to our annual operating plan and periodic forecasts when making decisions.

Significant expenses are expenses which are regularly provided to the CODM and are included in division operating profit/(loss).

These consist of segment cost of sales, segment selling, general and administrative expenses, and various items affecting comparability.

Segment cost of sales includes raw materials, direct labor and plant overhead, as well as purchasing and receiving costs, costs directly related to production planning, inspection costs and raw materials handling facilities, excluding the impact of items affecting comparability.

Segment selling, general and administrative expenses include the costs to execute sales to customers, distribution costs, including the costs of shipping and handling activities, which include certain merchandising activities, costs related to brand and product marketing to consumers, other ongoing operating costs that are not directly related to manufacturing, distribution, selling, advertising or marketing activities as well as other income or expense items, excluding the impact of items affecting comparability.

Items affecting comparability include restructuring and impairment charges, acquisition and divestiture-related charges, impairment and other charges/credits, product recall-related impact, indirect tax impact and gain associated with the Juice Transaction.

Asset and other balance sheet information for divisions is not provided to the CODM.

Net revenue, significant expenses and operating profit/(loss) of each division are as follows:

FLNA QFNA PBNA LatAm Europe AMESA APAC Total

Net revenue $ 24,755 $ 2,676 $ 27,769 $ 11,718 $ 13,874 $ 6,217 $ 4,845 $ 91,854

Segment cost of sales (a)

8,786 1,459 12,701 4,762 7,219 3,885 2,431

Segment selling, general and administrative expenses (a)(b)

9,494 710 11,964 4,442 4,368 1,515 1,589

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

Restructuring and impairment charges (c)

150 11 238 51 123 14 10

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

Acquisition and divestiture-related charges (d)

9 — 8 — — 5 —

Impairment and other charges (e)

— 9 556 — 145 — 4

Product recall-related impact (f)

— 184 — — — — —

Indirect tax impact (g)

— — — 218 — — —

Division operating profit $ 6,316 $ 303 $ 2,302 $ 2,245 $ 2,019 $ 798 $ 811 $ 14,794

Corporate unallocated expenses ( 1,907 )

Total $ 91,471 $ 86,392 $ 79,474 $ 11,986 $ 11,512 $ 11,162

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

(b) In 2023, operating profit included a pre-tax charge of $ 136 million ($ 104 million after-tax or $ 0.07 per share) in cost of sales for product returns, inventory write-offs and customer and consumer-related costs associated with the Quaker Recall.

(c) In 2022, we recorded a gain of $ 3,029 million and $ 292 million in our PBNA and Europe divisions, respectively, associated with the Juice Transaction.

Operating profit 12,887

Other pension and retiree medical benefits expense ( 22 )

Net interest expense and other ( 919 )

Income before income taxes $ 11,946

FLNA QFNA PBNA LatAm Europe AMESA APAC Total

Net revenue $ 24,914 $ 3,101 $ 27,626 $ 11,654 $ 13,234 $ 6,139 $ 4,803 $ 91,471

Segment cost of sales (a)

8,829 1,603 12,856 4,958 7,178 3,888 2,422

Segment selling, general and administrative expenses (a)

9,288 870 11,808 4,413 4,213 1,434 1,601

Restructuring and impairment charges (c)

42 — 41 29 223 15 8

Acquisition and divestiture-related charges (d)

— — 16 — ( 2 ) 2 —

Impairment and other charges/credits (e)

— — 321 2 855 ( 7 ) 59

Product recall-related impact (f)

— 136 — — — — —

Division operating profit $ 6,755 $ 492 $ 2,584 $ 2,252 $ 767 $ 807 $ 713 $ 14,370

Corporate unallocated expenses ( 2,384 )

Operating profit 11,986

Other pension and retiree medical benefits income 250

Net interest expense and other ( 819 )

Income before income taxes $ 11,417

FLNA QFNA PBNA LatAm Europe AMESA APAC Total

Net revenue $ 23,291 $ 3,160 $ 26,213 $ 9,779 $ 12,724 $ 6,438 $ 4,787 $ 86,392

Segment cost of sales (a)

8,183 1,673 12,154 4,490 7,173 4,108 2,509

Segment selling, general and administrative expenses (a)

8,839 876 11,383 3,559 4,168 1,459 1,548

Restructuring and impairment charges (c)

46 7 68 32 109 12 16

Acquisition and divestiture-related charges (d)

— — 51 — 14 3 —

Gain associated with the Juice Transaction (h)

— — ( 3,029 ) — ( 292 ) — —

Impairment and other charges (e)

88 — 160 71 2,932 190 177

Division operating profit/(loss) $ 6,135 $ 604 $ 5,426 $ 1,627 $ ( 1,380 ) $ 666 $ 537 $ 13,615

Corporate unallocated expenses ( 2,103 )

Operating profit 11,512

Other pension and retiree medical benefits income 132

Net interest expense and other ( 939 )

Income before income taxes $ 10,705

(a) Does not include items recorded in the cost of sales or selling, general and administrative expenses lines on our income statement that are presented in the restructuring and impairment charges, acquisition and divestiture-related charges, impairment and other charges/credits, product recall-related impact and indirect tax impact lines of these tables.

(b) We recognized a pre-tax gain of $ 122 million ($ 92 million after-tax or $ 0.07 per share) in our FLNA division, recorded in selling, general and administrative expenses, related to the remeasurement of our previously held 50 % equity ownership in Sabra at fair value.

See Note 13 for further information.

(d) See Note 13 for further information related to acquisitions and divestiture-related charges.

(e) See below and Note 4 for impairment and other charges taken related to the Russia-Ukraine conflict, brand portfolio impairment and other impairment.

(f) In 2024, we recorded a pre-tax charge of $ 187 million ($ 143 million after-tax or $ 0.10 per share) associated with the Quaker Recall with $ 176 million recorded in cost of sales related to property, plant and equipment write-offs, employee severance costs and other costs, $ 8 million recorded in selling, general and administrative expenses and $ 3 million recorded in other pension and retiree medical benefits (expense)/income, which is not included in operating profit.

In 2023, we recorded 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.

(g) We recorded a pre-tax charge of $ 218 million ($ 218 million after-tax or $ 0.16 per share) in cost of sales related to an indirect tax reserve in our LatAm division.

(h) 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.

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PepsiCo 42 % 58 % 41 % 59 % 42 % 58 %

(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.

(a) Beverage revenue from company-owned bottlers, which primarily includes our consolidated bottling operations in our PBNA and Europe divisions, is 35 % of our consolidated net revenue in both 2024 and 2023, and 37 % of our consolidated net revenue in 2022.

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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In 2023, a pre-tax credit of $ 7 million ($ 7 million after-tax or $ 0.01 per share) was recorded in our Europe division, primarily in selling, general and administrative expenses, representing adjustments for changes in estimates of previously recorded amounts.

In addition, a tax benefit of $ 68 million ($ 0.05 per share) was recorded in our Europe division related to the impairment of certain consolidated investments.

A summary of pre-tax charges taken in 2022 as a result of our decision to reposition or discontinue the sale/distribution of certain brands and to sell an investment is as follows:

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

Cost of sales Selling, general and administrative expenses Impairment of intangible assets Total

PBNA $ 26 $ 8 $ 126 $ 160 Impairment and other charges associated with distribution rights and inventory due to the termination of Bang energy drinks distribution agreement

LatAm — 35 36 71 Loss on sale and impairment of intangible assets related to the sale of certain non-strategic brands

Europe 1 10 242 253 Primarily impairment of intangible assets related to the discontinuation or repositioning of certain juice and dairy brands in Russia

Europe 1 10 242 253 Primarily impairment of intangible assets related to the discontinuation or repositioning of certain juice and dairy brands in Russia (a)

AMESA 29 121 9 159 Primarily impairment of investment, property, plant and equipment and intangible assets related to the sale or discontinuation of non-strategic investment and brands

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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

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

Total Impairment of intangible assets (a)

FLNA $ — $ — $ — $ 88 Related to a baked fruit convenient food brand

PBNA 321 — 321 — Includes our proportionate share of TBG’s indefinite-lived intangible assets impairment and other-than-temporary impairment of our investment in TBG

Europe — 862 862 1,264 Related to the SodaStream brand and goodwill

AMESA — 6 6 31 Related to brands from the Pioneer Foods acquisition

APAC — 59 59 172 Related to the Be & Cheery brand

A summary of pre-tax other impairment charges taken as a result of our quantitative assessments is as follows:

2024 2023 2022

FLNA $ — $ — $ 88 Related to a baked fruit convenient food brand (recorded in impairment of intangible assets)

QFNA 9 — — Related to a nutrition bar brand (recorded in impairment of intangible assets)

PBNA 556 321 — 2024 includes other-than-temporary impairment of our remaining investment in TBG and allowance for expected credit losses related to receivables associated with the Juice Transaction (recorded in selling, general and administrative expenses).

2023 includes our proportionate share of TBG’s indefinite-lived intangible assets impairment and other-than-temporary impairment of our investment in TBG (recorded in selling, general and administrative expenses) (a)

Europe 145 862 1,264 2024 primarily includes other-than-temporary impairment of our investment in TBG and allowance for expected credit losses related to certain receivables from TBG (recorded in selling, general and administrative expenses).

2023 and 2022 are related to the SodaStream brand and goodwill (recorded in impairment of intangible assets) (a)(b)

AMESA — 6 31 Related to brands from the Pioneer Food Group Ltd.

acquisition (recorded in impairment of intangible assets)

APAC 4 59 172 Primarily related to the Be & Cheery brand (recorded in impairment of intangible assets)

Total $ 714 $ 1,248 $ 1,555

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Impact on net income attributable to PepsiCo per common share $ ( 0.42 ) $ ( 0.75 ) $ ( 0.94 )

(a) See Note 4 for further information.

(a) See Note 9 for further information regarding our proportionate share of TBG’s indefinite-lived intangible assets impairment and other-than temporary impairment of our investment in TBG.

In 2024, we recorded an allowance for expected credit losses of $ 193 million, primarily related to outstanding receivables associated with the Juice Transaction.

(b) See Note 4 for further information regarding impairment of intangible assets.

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

COVID-19 Charges

Operating profit includes certain pre-tax charges taken as a result of the COVID-19 pandemic related to incremental employee compensation costs, such as certain leave benefits and labor costs, employee protection costs, allowances for expected credit losses and upfront payments to customers and their related adjustments for changes in estimates as conditions improve.

These pre-tax charges were not significant in 2023.

In 2022 and 2021, these pre-tax charges by division were as follows:

COVID-19 charges

FLNA $ 25 $ 56

Total $ 95 $ 148

(a) Income amount primarily relates to adjustments for changes in estimates of allowances for expected credit losses and upfront payments to customers, due to improved projected default rates and lower at-risk balances.

Corporate Unallocated Expenses

Corporate unallocated expenses include costs of our corporate headquarters, centrally managed initiatives such as commodity derivative gains and losses, foreign exchange transaction gains and losses, our ongoing business transformation initiatives, unallocated research and development costs, unallocated insurance and benefit programs, tax-related contingent consideration, certain acquisition and divestiture-related charges, certain gains and losses on equity investments, as well as certain other items.

Other Division Information

Total assets and capital spending of each division are as follows:

Total Assets Capital Spending

2023 2022 2023 2022 2021

FLNA $ 12,176 $ 11,042 $ 1,341 $ 1,464 $ 1,411

QFNA 1,199 1,245 103 93 92

PBNA 41,355 40,286 1,723 1,714 1,275

LatAm 9,281 7,886 841 581 461

Europe 15,615 16,230 551 668 752

AMESA 6,389 6,143 391 307 325

APAC 5,630 5,452 284 241 203

Total division 91,645 88,284 5,234 5,068 4,519

Corporate (a)

8,850 3,903 284 139 106

Total $ 100,495 $ 92,187 $ 5,518 $ 5,207 $ 4,625

(a) Corporate assets consist principally of certain cash and cash equivalents, restricted cash, short-term investments, derivative instruments, property, plant and equipment, pension plan assets and tax assets.

In 2023, the change in assets was primarily due to an increase in cash and cash equivalents.

Amortization of intangible assets and depreciation and other amortization of each division are as follows:

Amortization of

Capital spending, amortization of intangible assets, and depreciation and other amortization of each division are as follows:

Capital Spending Amortization of

Intangible Assets Depreciation and

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Mexico 7,123 7,011 5,472 2,392 2,509

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

Russia 3,880 3,566 4,118 1,667 1,986

Canada 3,764 3,722 3,536 2,681 2,815

China 2,709 2,703 2,752 1,538 1,510

United Kingdom 2,063 1,946 1,844 871 868

Brazil 1,779 1,617 1,252 573 446

South Africa 1,859 1,707 1,837 1,302 1,305

Brazil 1,765 1,779 1,617 497 573

All other countries 17,023 16,872 15,826 11,179 11,226

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(a) Long-lived assets represent property, plant and equipment, indefinite-lived intangible assets, amortizable intangible assets, investments in noncontrolled affiliates and other investments included in other assets.

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

See Notes 2 and 15 for further information on property, plant and equipment.

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

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

Corporate Unallocated Expenses

Corporate unallocated expenses include costs of our corporate headquarters, centrally managed initiatives such as commodity derivative gains and losses, foreign exchange transaction gains and losses, our ongoing business transformation initiatives, unallocated research and development costs, unallocated insurance and benefit programs, certain gains and losses on equity investments, as well as certain other items.

Note 2 — Our Significant Accounting Policies

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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.

Merchandising activities are performed after a customer obtains control of the product, are accounted for as fulfillment of our performance obligation to ship or deliver product to our customers and are recorded in selling, general and administrative expenses.

administrative expenses.

Merchandising activities are immaterial in the context of our contracts.

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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 $ 5.7 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.

Advertising and other marketing activities, reported as selling, general and administrative expenses, totaled $ 5.9 billion in 2024, $ 5.7 billion in 2023 and $ 5.2 billion in 2022, including advertising expenses of $ 3.9 billion in 2024, $ 3.8 billion in 2023 and $ 3.5 billion in 2022.

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

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Consumer research is excluded from research and development costs and included in other marketing costs.

Research and development costs were $ 804 million, $ 771 million and $ 752 million in 2023, 2022 and 2021, respectively, and are reported within selling, general and administrative expenses.

Research and development costs were $ 813 million, $ 804 million and

$ 771 million in 2024, 2023 and 2022, respectively, and are reported within selling, general and administrative expenses.

Goodwill and Other Intangible Assets

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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.

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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with our internal forecasts and operating plans.

A deterioration in these assumptions could adversely impact our results.

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• Financial Instruments – Note 9.

• Leases – Note 12.

• Supply Chain Financing Arrangements – Note 14 .

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

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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.

In November 2023, the Financial Accounting Standards Board (FASB) issued guidance to enhance disclosure of expenses of a public entity’s reportable segments.

The new guidance requires a public entity to disclose on an annual and interim basis:

(1) significant segment expenses that are regularly provided to the CODM and included within each reported measure of segment profit or loss, (2) 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, and (3) information about a reportable segment’s:

(a) profit or loss, and (b) assets, if provided to CODM, and on an annual basis, 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 the guidance and all existing segment disclosures.

We adopted the guidance in our 2024 annual reporting, on a retrospective basis.

See Note 1 for further information.

In September 2022, the 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.

The new guidance requires disclosure of key terms of the program, including a description of the payment terms, payment timing and assets pledged as security or other forms of guarantees provided to the finance provider or intermediary.

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.

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.

We adopted the guidance in the first quarter of 2023, except for the rollforward, which we adopted in our 2024 annual reporting, on a prospective basis.

See Note 14 for further information.

Not Yet Adopted

In November 2024, the FASB issued guidance to improve the disclosure of expenses in commonly presented expense captions.

The new guidance requires a public entity to provide tabular disclosure, on an annual and interim basis, of amounts for the following expense categories:

(1) purchases of inventory, (2) employee compensation, (3) depreciation and (4) intangible asset amortization, as included in each relevant expense caption.

A relevant expense caption is an expense caption presented on the face of the income statement that contains any of the expense categories noted.

Additionally, on an annual and interim basis, a qualitative description is required for amounts remaining in relevant expense captions that are not separately disaggregated quantitatively.

The guidance also requires certain amounts that are

currently required to be disclosed to be included in the same tabular disclosure as these disaggregation requirements.

Furthermore, on an annual and interim basis, a public entity is required to separately disclose selling expenses and annually, disclose a description of the selling expenses.

The guidance is effective for 2027 annual reporting, and in the first quarter of 2028 for interim 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 2027 annual reporting and each quarter thereafter, on a prospective basis.

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

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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 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 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.

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

These pre-tax charges are expected to consist of approximately 55 % of severance and other employee-related costs, 10 % for asset impairments (all non-cash) resulting from plant closures and related actions and 35 % for other co sts associated with the implementation of our initiatives.

The 2019 Productivity Plan leverages new technology and business models to further simplify, harmonize and automate processes;

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

and simplifies our organization and optimizes our manufacturing and supply chain footprint.

As a result, we expect to incur pre-tax charges of approximately $ 6.15 billion, including cash expenditures of approximately $ 5.1 billion, as compared to our previous estimate of pre-tax charges of approximately $ 3.65 billion, including cash expenditures of approximately $ 2.9 billion.

These pre-tax charges are expected to consist of approximately 55 % of severance and other employee-related costs, 10 % for asset impairments (all non-cash) resulting from plant closures and related actions and 35 % for other costs associated with the implementation of our initiatives.

The total plan pre-tax charges are expected to be incurred by division approximately as follows:

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Selling, general and administrative expenses 551 433 347

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

Impairment of intangible assets 14 — —

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

Total restructuring and impairment charges $ 727 $ 445 $ 411

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698 446 380 2,501

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

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

29 ( 1 ) 31 126

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$ 338 $ — $ 26 $ 364

(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.

(a) Excludes cash expenditures of $ 7 million in 2024 , and $ 1 million each in 2023 and 2022, reported in the cash flow statement in pension and retiree medical plan contributions.

The majority of the restructuring accrual at December 28, 2024 is expected to be paid by the end of 2025.

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The annual impairment assessment on indefinite-lived intangible assets performed in the third quarter of 2024, based on best available market information and our internal forecasts and operating plans at the time, did not result in any material impairment charges.

As of December 28, 2024, the estimated fair value of the SodaStream reporting unit narrowly exceeded its carrying value.

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

We did not recognize any impairment charges for goodwill in the year ended December 28, 2024 .

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).

We determined that the carrying value exceeded the fair value for certain of our intangible assets, 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.

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

As a result, we recognized pre-tax impairment charges (included in brand portfolio impairment charges) of $ 241 million ($ 193 million after-tax or $ 0.14 per share) in impairment of intangible assets, primarily related to indefinite-lived intangible assets in the year ended December 31, 2022.

As a result, we recognized pre-tax impairment charges of $ 241 million ($ 193 million after-tax or $ 0.14 per share) in impairment of intangible assets, primarily related to indefinite-lived intangible assets in the year ended December 31, 2022.

See Note 1 for further information.

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.

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).

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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.

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.

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See Note 1 for further information.

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.

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.

We did not recognize any impairment charges for goodwill in the year ended December 31, 2022.

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:

2022 Acquisitions Impairment Translation

and Other Balance,

2022 Acquisitions Impairment Translation

and Other Balance,

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

340 — ( 88 ) ( 1 ) 251 — — — 251

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

Goodwill 189 — — — 189 — — — 189

Total 189 — — — 189 — — — 189

Goodwill 11,974 — — ( 27 ) 11,947 4 — 10 11,961

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

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

The components of indefinite-lived intangible assets are as follows:

Goodwill $ 17,534 $ 17,728

100 — ( 29 ) 4 75 — — 7 82

Total 533 — ( 29 ) 7 511 — — 31 542

Goodwill (d)(e)

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

Other indefinite-lived intangible assets

Reacquired franchise rights 7,437 7,533

Acquired franchise rights 1,858 1,891

Total indefinite-lived intangible assets $ 31,233 $ 31,458

(a) Increase is related to the acquisition of remaining ownership in Sabra.

See Note 13 for further information.

The change in the book value of goodwill is as follows:

FLNA QFNA PBNA LatAm Europe (a)

AMESA APAC Total

Balance as of December 31, 2022

$ 451 $ 189 $ 11,947 $ 436 $ 3,646 $ 1,015 $ 518 $ 18,202

Acquisitions — — 4 — — 34 — 38

Impairment — — — — ( 290 ) — — ( 290 )

Translation and other 2 — 10 24 ( 190 ) ( 58 ) ( 10 ) ( 222 )

Balance as of December 30, 2023

453 189 11,961 460 3,166 991 508 17,728

Total 8,553 — ( 2,685 ) 11 5,879 — ( 862 ) ( 154 ) 4,863

Goodwill 1,063 14 — ( 62 ) 1,015 34 — ( 58 ) 991

Acquisitions (b)

159 — — — — — 3 162

Total 1,268 14 ( 36 ) ( 75 ) 1,171 34 ( 6 ) ( 71 ) 1,128

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

Translation and other ( 10 ) — ( 36 ) ( 47 ) ( 220 ) ( 21 ) ( 22 ) ( 356 )

Balance as of December 28, 2024

$ 602 $ 189 $ 11,925 $ 413 $ 2,946 $ 970 $ 489 $ 17,534

Total 1,040 — ( 172 ) ( 83 ) 785 — ( 59 ) ( 14 ) 712

Total goodwill 18,381 14 — ( 193 ) 18,202 38 ( 290 ) ( 222 ) 17,728

Total reacquired franchise rights 7,548 — — ( 66 ) 7,482 36 — 15 7,533

Total acquired franchise rights 1,696 230 ( 1 ) ( 19 ) 1,906 14 — ( 29 ) 1,891

Total brands 7,883 — ( 3,009 ) 47 4,921 — ( 637 ) 22 4,306

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

(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.

(a) Impairment in 2023 is related to SodaStream.

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

Translation and other in 2024 primarily reflects the depreciation of the Russian ruble and euro.

(b) Primarily related to the acquisition of remaining ownership in Sabra.

See Note 13 for further information.

(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 2022, we recorded $ 86 million ($ 0.06 per share) of net tax expense related to the TCJ Act as a result of correlating adjustments related to a partial audit settlement with the IRS for tax years 2014 through 2019 .

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.

As of December 28, 2024, our mandatory transition tax liability was $ 1.7 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 each of 2023, 2022 and 2021.

We reduced our liability through cash payments and application of tax overpayments by $ 579 million in 2024 , and $ 309 million in each of 2023 and 2022.

We currently expect to pay approximately $ 772 million of this liability in 2025.

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Other Tax Matters

In 2021, we received a final assessment from the IRS audit for the tax years 2014 through 2016.

The assessment included both agreed and unagreed issues.

On October 29, 2021, we filed a formal written protest of the assessment and requested an appeals conference.

As a result of the analysis of the 2014 through 2016 final assessment, we remeasured all applicable reserves for uncertain tax positions for all years open under the statute of limitations, including any correlating adjustments impacting the mandatory transition tax liability under the TCJ Act, resulting in a net non-cash tax expense of $ 112 million ($ 0.08 per share) in 2021.

On October 29, 2021, we filed a formal written protest of a final assessment from the IRS audit for the tax years 2014 through 2016 and requested an appeals conference.

In 2022, we came to an agreement with the IRS to settle one of the issues assessed in the 2014 through 2016 tax audit.

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

In 2024 and 2023, tax benefits of $ 54 million ($ 0.04 per share) and $ 68 million ($ 0.05 per share), respectively, were recorded related to the impairment of certain consolidated investments.

Deferred tax liabilities and assets are comprised of the following:

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Balance, beginning of year $ 6,478 $ 5,013 $ 4,628

Provision 1,419 492 ( 9 )

(Benefit)/provision ( 198 ) 1,419 492

Other (deductions)/additions ( 95 ) 46 ( 107 )

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The gross amount of interest accrued, reported in other liabilities, was $ 469 million as of December 28, 2024, of which $ 103 million of tax expense was recognized in 2024.

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.

A reconciliation of unrecognized tax benefits is as follows:

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PSUs are awards pursuant to which a number of shares are delivered to the holder upon vesting at the end of the service period based on PepsiCo’s performance against specified financial performance metrics.

The number of shares may be increased to the maximum or reduced to the minimum threshold based on the results of these performance metrics in accordance with the terms established at the time of the award.

The number of shares may be increased to the maximum or reduced to the minimum threshold based on the results of these performance metrics in accordance with

the terms established at the time of the award.

During the vesting period, RSUs and PSUs accrue dividend equivalents that pay out in cash (without interest) if and when the applicable RSU or PSU vests and becomes payable.

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Expected to vest as of December 28, 2024

$ 49,546 $ 32,681 1.24

(a) In thousands, disclosed at target.

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Note 7 — Pension, Retiree Medical and Savings Plans

In 2024, we recognized a pre-tax settlement charge of $ 213 million ($ 165 million after-tax or $ 0.12 per share) in a U.S.

qualified defined benefit pension plan due to lump sum distributions to retired or terminated employees and the purchase of a group annuity contract whereby a third-party insurance company assumed the obligation to pay and administer future benefit payments for certain retirees.

The settlement charge was triggered when the aggregate of the cumulative lump sum distributions and the annuity contract premium exceeded the total annual service and interest cost.

Effective December 31, 2022, we merged two U.S.

qualified defined benefit pension plans, PepsiCo Employees Retirement Plan I (Plan I), mostly inactive participants, and PepsiCo Employees Retirement Plan A (Plan A), mostly active participants, with Plan I remaining.

qualified defined benefit pension plans, PepsiCo Employees Retirement Plan I (Plan I), mostly inactive participants, and PepsiCo Employees Retirement Plan A, mostly active participants, with Plan I remaining.

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

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See Note 13 for further information.

In 2021, we adopted a change to the Canadian defined benefit plans to freeze pension accruals for salaried participants, effective January 1, 2024, and to close the hourly plan to new non-union employees hired on or after January 1, 2022.

After the effective date, all salaried participants receive an employer contribution to the defined contribution 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.

We also adopted a change to the U.K.

defined benefit plan to freeze pension accruals for all participants effective March 31, 2022.

After the effective date, participants have the opportunity to receive employer contributions to match employee contributions up to defined limits.

Pre-tax pension benefits expense will decrease after the effective dates, partially offset by contributions to defined contribution plans.

In 2021, we adopted a change to the U.S.

qualified defined benefit plans to transfer certain participants from Plan A to Plan I, effective January 1, 2022.

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

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

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

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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 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.

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 PepsiCo Employees Retirement Hourly Plan (Plan H) (approximately 11 years) and retiree medical (approximately 11 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 (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 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 loss/(gain) 603 ( 3,989 ) 194 ( 1,284 ) ( 22 ) ( 198 )

Experience (gain)/loss ( 563 ) 603 ( 55 ) 194 ( 44 ) ( 22 )

Benefit payments ( 617 ) ( 1,006 ) ( 108 ) ( 116 ) ( 78 ) ( 80 )

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Total $ 3,672 $ 3,614 $ 628 $ 699 $ ( 347 ) $ ( 342 )

Changes recognized in net (gain)/loss included in other comprehensive loss

Changes recognized in net loss/(gain) included in other comprehensive loss

Net loss/(gain) arising in current year $ 320 $ 333 $ 8 $ 119 $ ( 36 ) $ ( 30 )

Amortization and settlement recognition ( 298 ) ( 74 ) ( 43 ) ( 23 ) 25 27

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

Foreign currency translation (gain)/loss — — ( 39 ) 40 1 —

Total $ 22 $ 259 $ ( 74 ) $ 136 $ ( 10 ) $ ( 3 )

Accumulated benefit obligation at end of year $ 11,069 $ 11,653 $ 2,638 $ 2,835

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 net loss arising in the current year is primarily attributable to lower actual asset return as compared to expected return on plan assets and actual experience differing from demographic assumptions, partially offset by experience gain primarily due to 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.

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Service cost $ 347 $ 327 $ 487 $ 46 $ 43 $ 64 $ 31 $ 29 $ 37

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

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

Interest cost $ 585 $ 593 $ 434 $ 144 $ 141 $ 90 $ 32 $ 36 $ 19

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Special termination benefits 31 ( 1 ) 37 — — — 1 — —

Total other pension and retiree medical benefits (income)/expense $ ( 211 ) $ 2 $ ( 404 ) $ ( 29 ) $ ( 99 ) $ ( 93 ) $ ( 10 ) $ ( 35 ) $ ( 25 )

Total other pension and retiree medical benefits expense/(income) $ 52 $ ( 211 ) $ 2 $ ( 20 ) $ ( 29 ) $ ( 99 ) $ ( 10 ) $ ( 10 ) $ ( 35 )

Total $ 399 $ 116 $ 489 $ 26 $ 14 $ ( 35 ) $ 21 $ 19 $ 2

(a) In 2024, U.S.

includes a settlement charge of $ 213 million ($ 165 million after-tax or $ 0.12 per share) related to the aggregate of lump sum distributions and the purchase of a group annuity contract exceeding the total of annual service and interest cost.

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.

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(a) Expected future benefit payments for our retiree medical plans do not reflect any estimated subsidies expected to be received under the 2003 Medicare Act.

Subsidies are expected to be approximately $ 1 million for each of the years from 2024 through 2028 and approximately $ 2 million in total for 2029 through 2033.

Subsidies are expected to be less than $ 1 million for each of the years from 2025 through 2029 and approximately $ 2 million in total for 2030 through 2034.

These future benefit payments to beneficiaries include payments from both funded and unfunded plans.

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Forward contracts consist of currency forwards.

We also participate in securities lending programs to generate additional income by loaning plan assets to borrowers on a fully collateralized basis, including both cash and non-cash collaterals.

For 2025 and 2024, our expected long-term rate of return on U.S.

plan assets is 7.4 %.

plan assets is 7.5 % and 7.4 %, respectively.

Our target investment allocations for U.S.

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We also review current levels of interest rates and inflation to assess the reasonableness of the long-term rates.

We evaluate our expected return assumptions annually to ensure that they are reasonable.

We evaluate our expected return assumptions annually to ensure

that they are reasonable.

To calculate the expected return on plan assets, our market-related value of assets for fixed income is the actual fair value.

For all other asset categories, such as equity securities, we use a

method that recognizes investment gains or losses (the difference between the expected and actual return based on the market-related value of assets) over a five -year period.

For all other asset categories, such as equity securities, we use a method that recognizes investment gains or losses (the difference between the expected and actual return based on the market-related value of assets) over a five-year period.

This has the effect of reducing year-to-year volatility.

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Fair Value Hierarchy Level 2024 2023

plan assets (a)

Equity securities, including preferred stock (b)

plan assets (a)(b)

Equity securities, including preferred stock (c)

1 $ 4,270 $ 4,698

Government securities (c)

Government securities (d)

2 1,538 1,812

Corporate bonds (c)

Corporate bonds (d)

2 3,903 4,233

Mortgage-backed securities (c)

Contracts with insurance companies (d)

Cash and cash equivalents (e)

Mortgage-backed securities (d)

Contracts with insurance companies (e)

Cash and cash equivalents (f) (g)

Sub-total U.S.

plan assets 10,569 11,226

Real estate commingled funds measured at net asset value (f)

Dividends and interest receivable, net of payables

Real estate and other commingled funds measured at net asset value (h)

Securities lending payables, net of dividends and interest receivable (g)

plan assets $ 10,772 $ 11,724

International plan assets

Equity securities (b)

Equity securities (c)

1 $ 1,172 $ 1,175

Government securities (c)

Corporate bonds (c)

Fixed income commingled funds (g)

Contracts with insurance companies (d)

Government securities (d)

Corporate bonds (d)

Fixed income commingled funds (i)

Contracts with insurance companies (e)

Cash and cash equivalents 1 128 143

Sub-total international plan assets 3,287 3,348

Real estate commingled funds measured at net asset value (f)

Real estate commingled funds measured at net asset value (h)

Dividends and interest receivable 31 18

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retirees and their beneficiaries.

(b) Invested in U.S.

(b) Includes securities loaned to borrowers under the securities lending program with fair value of $ 630 million in 2024.

and international common stock and commingled funds, and the preferred stock portfolio was invested in domestic and international corporate preferred stock investments.

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plan assets for 2024 and 2023, respectively.

(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 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.

(d) 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 represent 31 % of total U.S.

plan assets for both 2024 and 2023.

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

The changes in Level 3 amounts were not significant in the years ended December 28, 2024 and December 30, 2023.

(e) Includes Level 1 assets of $ 3 million for 2023 and Level 2 assets of $ 346 million and $ 157 million for 2023 and 2022, respectively.

(f) The real estate commingled funds include investments in limited partnerships.

These funds are based on the net asset value of the appraised value of investments owned by these funds as determined by independent third parties using inputs that are not observable.

(f) Includes Level 1 assets of $ 456 million and $ 3 million, and Level 2 assets of $ 276 million and $ 346 million for 2024 and 2023, respectively.

(g) Includes $ 447 million of cash collateral under the securities lending program offset by corresponding securities lending payable of the same amount.

The net impact on the fair value of U.S.

plan assets is zero .

(h) Includes investments in limited partnerships and private credit funds.

These funds are based on the net asset value of the investments owned by these funds as determined by independent third parties using inputs that are not observable.

The majority of the funds are redeemable quarterly subject to availability of cash and have notice periods ranging from 30 to 90 days.

(g) Based on the published price of the fund.

(i) Based on the published price of the fund.

Retiree Medical Cost Trend Rates

The assumed health care cost trend rates are as follows:

The assumed health care cost trend rates for both 2025 and 2024 are as follows:

Average increase assumed 5 %

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Current maturities of long-term debt $ 4,004 $ 3,924

Commercial paper ( 5.5 %)

Commercial paper ( 4.5 % and 5.5 %)

Other borrowings ( 8.6 % and 7.8 %)

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(b) The interest rates presented reflect weighted-average effective interest rates at year-end.

See Note 9 for further information regarding our interest rate derivative instruments.

Certain of our fixed rate indebtedness have been swapped to floating rates through the use of interest rate derivative instruments.

See Note 9 for further information regarding our interest rate swap contracts.

As of December 28, 2024 and December 30, 2023, our international debt of $ 325 million and $ 279 million, respectively, was related to borrowings from external parties, including various lines of credit.

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Interest Rate Maturity Date Principal Amount (a)

Floating Rate February 2026 $ 350

4.550 % February 2026 $ 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

Floating rate February 2027 $ 300 (b)

4.650 % February 2027 $ 550 (b)

4.550 % February 2029 $ 450 (b)

4.700 % February 2034 $ 450 (b)

4.500 % July 2029 $ 850

4.800 % July 2034 $ 650

5.250 % July 2054 $ 750

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

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

(b) Issued through our wholly-owned consolidated finance subsidiary, PepsiCo Singapore Financing I Pte.

Ltd., which has no assets, operations, revenues or cash flows other than those related to the issuance, administration and repayment of the notes and any other notes that may be issued in the future.

The notes are fully and unconditionally guaranteed by PepsiCo, Inc.

on a senior unsecured basis and may be assumed at any time by PepsiCo, Inc.

as the primary and sole obligor.

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

In 2024, we entered into a new five-year unsecured revolving credit agreement (Five-Year Credit Agreement), which expires on May 24, 2029.

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We may request that commitments under this agreement be increased up to $ 5.75 billion (or the equivalent amount in euros).

Additionally, we may, once a year, request renewal of the agreement for an additional one-year period.

Additionally, we may, up to two times during the term of the 2024 Five-Year Credit Agreement, request renewal of the agreement for an additional one-year period.

The Five-Year Credit Agreement replaced our $ 4.2 billion five-year credit agreement, dated as of May 26, 2023.

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

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.

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.

As a result of the cash tender offers, we recorded a pre-tax charge of $ 842 million ($ 677 million after-tax or $ 0.49 per share) to net interest expense and other, 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.

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.

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.

Note 9 — Financial Instruments

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Our global purchasing programs include fixed-price contracts and purchase orders and pricing agreements.

Our hedging strategies include the use of derivatives and, in the case of our net investment hedges, debt instruments.

Certain derivatives are designated as either cash flow or fair value hedges and qualify for hedge accounting treatment, while others do not qualify and are marked to market through earnings.

Our hedging strategies include the use of derivatives and non-derivative debt instruments.

Certain derivatives are designated as either cash flow, fair value or net investment hedges and qualify for hedge accounting treatment, while others do not qualify and are marked to market through earnings.

The accounting for qualifying hedges allows changes in a hedging instrument’s fair value to offset corresponding changes in the hedged item in the same reporting period that the hedged item impacts earnings.

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.

Gains or losses on derivatives designated as cash flow and net investment hedges are recorded in accumulated other comprehensive loss within common shareholders’ equity and reclassified to our income statement when the hedged transaction affects earnings for cash flow hedges and when the hedged foreign operation is either sold or substantially liquidated for net investment hedges.

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

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We classify both the earnings and cash flow impact from these derivatives consistent with the underlying hedged item.

Cash flows associated with the settlement of derivative instruments designated as net investment hedges of foreign operations are classified within investing activities.

We perform assessments of our counterparty credit risk regularly, including reviewing netting agreements, if any, and a review of credit ratings, credit default swap rates and potential nonperformance of the counterparty.

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In addition, risk to our supply of certain raw materials is mitigated through purchases from multiple geographies and suppliers.

We use derivatives, with terms of no more than three years , to hedge price fluctuations related to a portion of our anticipated commodity purchases, primarily for agricultural products, energy and metals.

We use derivatives, with terms of no more than two years , to hedge price fluctuations related to a portion of our anticipated commodity purchases, primarily for agricultural products, metals, and energy.

Derivatives used to hedge commodity price risk that do not qualify for hedge accounting treatment are marked to market each period with the resulting gains and losses recorded in corporate unallocated expenses as either cost of sales or selling, general and administrative expenses, depending on the underlying commodity.

These gains and losses are subsequently reflected in division results when the divisions recognize the cost of the underlying commodity in operating profit.

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.

Interest Rates

We centrally manage our debt and investment portfolios considering investment opportunities and risks, tax consequences and overall financing strategies.

We use various interest rate derivative instruments including, but not limited to, interest rate swaps, cross-currency interest rate swaps, Treasury locks and swap locks to manage our overall interest expense.

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

Certain of our fixed rate indebtedness have been swapped to floating rates.

The notional amount, interest payment and maturity date of our interest rate swap contracts match the principal, interest payment and maturity date of the related debt, and they have terms of no more than six years .

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

As of December 28, 2024, approximately 13 % of total debt was subject to variable rates, after the impact of the related interest rate swap contracts, compared to approximately 9 % as of December 30, 2023.

Foreign Exchange

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 and foreign currency assets and liabilities created in the normal course of business.

We manage this risk through sourcing purchases from local suppliers, negotiating contracts in local currencies with foreign suppliers and through the use of derivatives, primarily forward contracts with terms of no more than two years .

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

We manage this risk through sourcing purchases from local suppliers, negotiating contracts in local currencies with foreign suppliers and through the use of derivatives including, but not limited to, forward contracts and cross-currency interest rate swap contracts.

Exchange rate gains or losses related to foreign currency transactions are recognized as transaction gains or losses on our income statement as incurred.

We also use net investment hedges to partially offset the effects of foreign currency on our investments in certain of our foreign subsidiaries.

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 $ 3.0 billion as of December 30, 2023 and $ 2.9 billion as of December 31, 2022.

The forward contracts and cross-currency interest rate swap contracts have terms of no more than two years and twelve years , respectively.

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

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.

Interest Rates

We centrally manage our debt and investment portfolios considering investment opportunities and risks, tax consequences and overall financing strategies.

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

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 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.

Net Investment Hedges

We are exposed to foreign exchange risk from net investments in our foreign operations.

We manage this risk for certain of our foreign operations by utilizing derivative and non-derivative instruments, including cross-currency interest rate swaps and foreign currency denominated debt designated as net investment hedges.

In 2024, we entered into cross-currency interest rate swaps with a total notional amount of $ 500 million for Chinese renminbi and maturity dates ranging from November 2025 to November 2029 .

The cross-currency interest rate swaps are designated as net investment hedges to hedge the net assets of certain foreign operations with Chinese renminbi functional currency.

We use the spot method to assess hedge effectiveness for our net investment hedges.

Excluded components in the form of interest accruals on cross-currency interest rate swaps are recorded in net interest expense and other.

The notional amounts of our financial instruments used to hedge the above risks as of December 28, 2024 and December 30, 2023 are as follows:

Notional Amounts (a)

Commodity contracts $ 1.4 $ 1.7

Interest rate swap contracts $ 2.0 $ —

Foreign exchange contracts $ 3.1 $ 3.8

Cross-currency contracts $ 1.2 $ 1.3

Non-derivative debt instruments $ 2.9 $ 3.0

(a) In billions.

Debt Securities

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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.

As of December 28, 2024, we have no investments in held-to-maturity debt securities.

As of December 30, 2023, we had $ 309 million investments in commercial paper recorded in cash and cash equivalents.

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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Our assessment of whether a debt security has a credit loss or is impaired could change in the future due to new developments or changes in assumptions related to any particular debt security.

In 2022, we entered into an agreement with Celsius to distribute Celsius energy drinks in the United States (see Note 4 for further information) and invested $ 550 million in Series A convertible preferred shares issued by Celsius, which included certain conversion and redemption features.

In 2022, we entered into an agreement with Celsius Holdings, Inc.

(Celsius) to distribute Celsius energy drinks in the United States and invested $ 550 million in Series A convertible preferred shares issued by Celsius, which included certain conversion and redemption features.

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.

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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.

In the year ended December 28, 2024 , we recorded an unrealized loss of $ 350 million in other comprehensive income and a decrease in the investment of $ 21 million due to cash dividends received.

In addition, during the year ended December 28, 2024, we transferred $ 184 million of other available-for-sale debt securities from Level 2 to Level 3, as unobservable inputs to the fair value became more significant, and subsequently recorded an unrealized gain of $ 72 million in other comprehensive income.

There were no impairment charges related to our investments in available-for-sale debt securities in the years ended December 28, 2024, December 30, 2023 and December 31, 2022.

There were net unrealized gains of $ 334 million and $ 612 million as of December 28, 2024 and December 30, 2023, respectively, associated with our available-for-sale debt securities.

TBG Investment

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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.

In 2023, we recorded our proportionate share of TBG’s earnings, which included 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.

In 2024, after identifying several indicators of impairment such as worsening operating losses and liquidity position, we quantitatively assessed our investment in TBG for impairment and, consequently, recorded an other-than-temporary impairment of our remaining investment, resulting in pre-tax impairment charges of $ 498 million ($ 416 million after-tax or $ 0.30 per share), with $ 409 million in our PBNA division and $ 89 million in our Europe division, recorded in selling, general and administrative expenses.

We estimated the fair value of our ownership in TBG using discounted cash flows.

We also recorded an allowance for expected credit losses in selling, general and administrative expenses in 2024, primarily related to outstanding receivables associated with the Juice Transaction;

see Note 1 for further information.

Recurring Fair Value Measurements

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2 $ — $ 503 $ — $ 477

Derivatives designated as fair value hedging instruments:

Interest rate swap contracts (f)

2 $ — $ 46 $ — $ —

Derivatives designated as cash flow hedging instruments:

Foreign exchange (f)

Foreign exchange contracts (g)

2 $ 55 $ 3 $ 3 $ 31

Interest rate (f)

Cross-currency contracts (g)

2 — 165 5 135

Commodity (g)

Commodity contracts (h)

$ 82 $ 174 $ 18 $ 190

Derivatives designated as net investment hedging instruments:

Cross-currency contracts (g)

2 $ 1 $ 4 $ — $ —

Derivatives not designated as hedging instruments:

Foreign exchange (f)

Foreign exchange contracts (g)

2 $ 28 $ 12 $ 33 $ 38

Commodity (g)

Commodity contracts (h)

$ 31 $ 22 $ 38 $ 51

Total derivatives at fair value (h)

Total derivatives at fair value (i)

$ 114 $ 246 $ 56 $ 241

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Financial liabilities are classified on our balance sheet within accounts payable and other current liabilities and other liabilities.

(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.

(b) Classified as other assets.

Includes Level 3 assets of $ 1,041 million as of December 28, 2024, and Level 2 assets of $ 178 million and Level 3 assets of $ 1,156 million as of December 30, 2023.

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 7.3 % and 8.1 % as of December 28, 2024 and December 30, 2023, respectively, based on Celsius’ estimated synthetic credit rating.

The fair value of the other Level 3 investment is estimated using a lattice model primarily based on the underlying stock price, volatility and certain significant unobservable inputs, such as a discount rate of 8.3 % as of December 28, 2024, based upon an 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.

The fair value of our Level 2 investment as of December 30, 2023 approximates the transaction price and any accrued returns, as well as the amortized cost.

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(e) Based on the fair value of investments corresponding to employees’ investment elections.

(f) Based on recently reported market transactions of spot and forward rates.

(g) Primarily based on recently reported market transactions of swap arrangements.

(h) Derivative assets and liabilities are presented on a gross basis on our balance sheet.

(f) Based on Secured Overnight Financing Rate forward rates.

As of December 28, 2024, the carrying amount of hedged fixed-rate debt was $ 1.9 billion, which was classified on the balance sheet within long-term debt obligations.

(g) Based on recently reported market transactions of spot and forward rates.

(h) Primarily based on recently reported market transactions of swap arrangements.

(i) Derivative assets and liabilities are presented on a gross basis on our balance sheet.

Amounts subject to enforceable master netting arrangements or similar agreements which are not offset on our balance sheet as of December 28, 2024 and December 30, 2023 were not material .

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The fair value of our debt obligations as of December 28, 2024 and December 30, 2023 was $ 40 billion and $ 41 billion, respectively, based upon prices of identical or similar instruments in the marketplace, which are considered Level 2 inputs.

Losses/(gains) on our cash flow and net investment hedges are categorized as follows:

Losses/(gains) on our fair value hedges are categorized as follows:

Losses/(Gains) Recognized in

Income Statement (a)

Interest rate swap contracts $ 46 $ —

(a) Interest rate derivative losses/(gains) are included in net interest expense and other.

These losses/(gains) are substantially offset by decreases/increases in the value of the underlying debt, which are also included in net interest expense and other.

Losses/(gains) on our cash flow hedges are categorized as follows:

Losses/(Gains)

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2024 2023 2024 2023

Foreign exchange $ 93 $ ( 3 ) $ 61 $ ( 21 )

Interest ( 34 ) 138 ( 31 ) 159

Commodity 149 ( 57 ) 125 ( 267 )

Net investment 122 ( 120 ) — —

Foreign exchange contracts $ ( 101 ) $ 93 $ ( 6 ) $ 61

Cross-currency contracts 46 ( 34 ) 48 ( 31 )

Commodity contracts 57 149 123 125

Total $ 2 $ 208 $ 165 $ 155

(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.

Cross-currency interest rate swap derivative losses/(gains) are included in selling, general and administrative expenses.

Commodity derivative losses/(gains) are included in either cost of sales or selling, general and administrative expenses, depending on the underlying commodity.

See Note 11 for further information.

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) on our net investment hedges are categorized as follows:

Losses/(Gains)

Recognized in

Accumulated Other

Comprehensive Loss Losses/(Gains)

Recognized in Income Statement (a)

2024 2023 2024 2023

Non-derivative debt instruments $ ( 133 ) $ 122 $ — $ —

Cross-currency contracts 3 — ( 5 ) —

Total $ ( 130 ) $ 122 $ ( 5 ) $ —

(a) Amount excluded from the assessment of effectiveness recognized in earnings associated with cross-currency interest rate swaps.

Based on current market conditions, we expect to reclassify net gains of $ 45 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 )

Foreign exchange contracts $ 1 $ 2 $ 3 $ ( 1 ) $ 41 $ 40

Commodity contracts 2 8 10 39 33 72

Total $ 3 $ 10 $ 13 $ 38 $ 74 $ 112

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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 3 million for the year ended December 30, 2023 and immaterial for the years ended December 31, 2022 and December 25, 2021.

The weighted-average amount of antidilutive securities excluded from the calculation of diluted earnings per common share was 4 million, 3 million and immaterial for the years ended December 28, 2024, December 30, 2023 and December 31, 2022, respectively.

Note 11 — Accumulated Other Comprehensive Loss Attributable to PepsiCo

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( 13,255 ) ( 31 ) ( 2,719 ) 471 ( 15,534 )

Other comprehensive (loss)/income before reclassifications (e)

Other comprehensive loss before reclassifications (e)

( 1,965 ) ( 6 ) ( 280 ) ( 306 ) ( 2,557 )

Amounts reclassified from accumulated other comprehensive loss — 158 285 — 443

Net other comprehensive (loss)/income ( 334 ) Ye ( 42 ) ( 456 ) 608 ( 224 )

Net other comprehensive (loss)/income ( 1,965 ) 152 5 ( 306 ) ( 2,114 )

Tax amounts 3 ( 39 ) — 72 36

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$ ( 15,217 ) $ 82 $ ( 2,714 ) $ 237 $ ( 17,612 )

(a) The changes primarily represent fair value increases in available-for-sale debt securities, including our investment in Celsius convertible preferred stock in 2023.

(a) The movements primarily represent fair value changes in available-for-sale debt securities, including our investment in Celsius convertible preferred stock.

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 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.

(b) Pension and retiree medical amounts are net of taxes of $ 1,283 million as of December 25, 2021, $ 1,184 million as of December 31, 2022 and $ 1,282 million as of both December 30, 2023 and December 28, 2024.

(d) Currency translation adjustment primarily reflects depreciation of the Russian ruble and South African rand, partially offset by appreciation of the Mexican peso.

(e) Currency translation adjustment primarily reflects depreciation of the Mexican peso and Russian ruble.

The following table summarizes the reclassifications from accumulated other comprehensive loss to the income statement:

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Foreign exchange contracts ( 5 ) 64 ( 10 ) Cost of sales

Interest rate derivatives ( 40 ) 159 64 Selling, general and administrative expenses

Cross-currency contracts 48 ( 31 ) 159 Selling, general and administrative expenses

Interest rate swap contracts ( 7 ) ( 9 ) — Selling, general and administrative expenses

Commodity contracts 122 126 ( 252 ) Cost of sales

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Pension and retiree medical items:

Amortization of net prior service credit $ ( 33 ) $ ( 37 ) $ ( 44 ) Other pension and retiree medical benefits income

Amortization of net losses 56 164 289 Other pension and retiree medical benefits income

Settlement/curtailment losses 14 313 54 Other pension and retiree medical benefits income

Amortization of net prior service credit $ ( 31 ) $ ( 33 ) $ ( 37 ) Other pension and retiree medical benefits (expense)/income

Amortization of net losses 73 56 164 Other pension and retiree medical benefits (expense)/income

Settlement/curtailment losses 243 14 313 Other pension and retiree medical benefits (expense)/income

Net losses before tax 285 37 440

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In 2023, 2022 and 2021, we recognized gains of $ 52 million, $ 175 million and $ 42 million, respectively, on sale-leaseback transactions with terms under five years.

In 2024 , 2023 and 2022, we recognized gains of $ 118 million, $ 52 million and $ 175 million, respectively, on sale-leaseback transactions with terms generally under five years.

Supplemental cash flow information and non-cash activity related to our operating leases are as follows:

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Note 13 — Acquisitions and Divestitures

Acquisition of remaining ownership in Sabra

On December 3, 2024, we acquired the Strauss Group’s 50 % ownership in Sabra for total consideration of $ 241 million in cash, resulting in Sabra becoming a wholly-owned subsidiary.

Upon consolidation, we recognized a pre-tax gain of $ 122 million ($ 92 million after-tax or $ 0.07 per share) in our FLNA division, recorded in selling, general and administrative expenses, related to the remeasurement of our previously held 50 % equity ownership in Sabra at fair value using a combination of the transaction price, net of a control premium, and discounted cash flows.

We accounted for the acquisition as a business combination in the fourth quarter of 2024.

We recognized and measured the identifiable assets acquired and liabilities assumed at their estimated fair values on the date of acquisition, in our FLNA division.

The preliminary estimates of the fair value of the identifiable assets acquired and liabilities assumed in this transaction as of the acquisition date primarily include goodwill and other intangible assets of $ 0.3 billion and property, plant and equipment of $ 0.1 billion.

The preliminary estimates of the fair value of identifiable assets acquired and liabilities assumed are subject to revision, which may result in adjustments to the preliminary values discussed above as valuations are finalized.

We expect to finalize these amounts as soon as possible, but no later than the fourth quarter of 2025.

Acquisition of Siete

On January 17, 2025, we acquired all of the outstanding equity interest in Siete, a Mexican-American foods business, in a transaction valued at approximately $ 1.2 billion.

The total consideration transferred was approximately $ 1.2 billion in cash.

The purchase price will be adjusted for net working capital and net debt amounts as of the acquisition date.

We will account for the transaction as a business combination in the first quarter of 2025.

We will recognize and measure the identifiable assets acquired and liabilities assumed at their estimated fair values on the date of acquisition.

The identifiable assets acquired and liabilities assumed in Siete as of the acquisition date, which primarily include goodwill and other intangible assets, will be based on preliminary estimates that are subject to revisions and may result in adjustments to the preliminary values as valuations are finalized.

We expect to finalize these amounts as soon as possible, but no later than the first quarter of 2026.

Juice Transaction

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As a result of this transaction, in the year ended December 31, 2022, we recorded a gain in our PBNA and Europe divisions (see detailed income statement activity below), including $ 520 million related to the remeasurement of our 39 % ownership in TBG at fair value using a combination of the transaction price, discounted cash flo ws and an option pricing model related to our liquidation preference in TBG .

In the fourth quarter of 2022, we reached an agreement on final purchase price adjustments for net working capital and net debt amounts as of the transaction close date compared to targeted amounts set forth in the purchase agreement.

In the fourth quarter of 2022, we reached an agreement on final purchase price adjustments for net working

capital and net debt amounts as of the transaction close date compared to targeted amounts set forth in the purchase agreement.

A summary of income statement activity related to the Juice Transaction for the year ended December 31, 2022 is as follows:

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The Juice Transaction did not meet the criteria to be classified as discontinued operations.

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.

In the years ended December 28, 2024 and December 30, 2023, we recognized i mpairment and other 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.

Divestiture-related charges reflect transaction expenses, including consulting, advisory and other professional fees.

Acquisition and divestiture-related charges primarily include transaction expenses, such as consulting, advisory and other professional fees, and merger and integration charges.

Merger and integration charges include employee-related costs, contract termination costs, closing costs and other integration costs.

A summary of our acquisition and divestiture-related charges is as follows:

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FLNA $ 9 $ — $ —

PBNA 16 51 11

Corporate (b)

Corporate — 25 6

Other pension and retiree medical benefits expense — — 6

Total acquisition and divestiture-related charges $ 22 $ 41 $ 80

After-tax amount (d)

After-tax amount

$ 18 $ 23 $ 66

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(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.

(b) Recorded in selling, general and administrative expenses.

Note 14 — Supply Chain Financing Arrangements

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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.

As of both December 30, 2023 and December 31, 2022, $ 1.7 billion of our accounts payable are to suppliers participating in these financing arrangements.

A summary of our outstanding obligations confirmed as valid under the supplier finance program for the year ended December 28, 2024 is as follows:

Confirmed obligations outstanding at beginning of year $ 1,655

Invoices confirmed 6,552

Confirmed invoices paid ( 6,636 )

Translation and other ( 93 )

Confirmed obligations outstanding at end of year $ 1,478

Note 15 — Supplemental Financial Information

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2024 2023 2022

Accounts and notes receivable (a)

Accounts and notes receivable

Trade receivables $ 8,487 $ 8,675

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Allowance, beginning of year 175 150 $ 147

Net amounts charged to expense (b)

Deductions (c)

( 26 ) ( 12 ) ( 25 )

Net amounts charged to expense (a)

( 36 ) ( 26 ) ( 12 )

Translation and other ( 11 ) ( 4 ) ( 6 )

Allowance, end of year 356 175 $ 150

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Accumulated depreciation ( 27,997 ) ( 27,400 )

Property, plant and equipment, net (e)

$ 27,039 $ 24,291

Property, plant and equipment, net $ 28,008 $ 27,039

Depreciation expense $ 2,945 $ 2,714 $ 2,523

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Deferred marketplace spending 100 103

Pension plans (f)

Right-of-use assets (g)

Other investments (h)

Pension plans (b)

Right-of-use assets (c)

Other investments (d)

Other 821 780

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Accounts payable and other current liabilities

Accounts payable (i)

Accounts payable (e)

$ 10,997 $ 11,635

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Dividends payable 1,885 1,767

Current lease liabilities (g)

Other current liabilities (j)

Current lease liabilities 642 556

Other current liabilities

Total $ 24,454 $ 25,137

(a) Increase primarily reflects strong revenue performance across much of our portfolio in 2023.

(b) 2021 includes reductions in allowance for expected credit losses related to COVID-19 pandemic recorded in 2020.

(d) Includes adjustments related primarily to currency translation and other adjustments.

(e) Change is driven by increase in capital spending, partially offset by depreciation.

(f) See Note 7 for further information.

(g) See Note 12 for further information.

(h) Increase in 2023 primarily reflects unrealized pre-tax gains on our investment in Celsius convertible preferred stock.

(a) Increase primarily reflects an allowance for expected credit losses related to outstanding receivables from TBG associated with the Juice Transaction;

see Note 1 for further information.

(i) Increase reflects higher capital expenditures and commodity costs in 2023.

(j) Increase primarily reflects change in income tax provision.

(b) See Note 7 for further information.

(d) Includes our investment in Celsius convertible preferred stock.

See Note 9 for further information.

(e) Primarily reflects a decrease in capital expenditure payables, currency translation adjustments, as well as timing of payments.

Statement of Cash Flows

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$ 3,064 $ 2,532 $ 2,766

(a) 2022 excludes the premiums paid in accordance with the debt transactions.

2021 excludes the charge related to cash tender offers.

(a) 2022 excludes the premiums paid in accordance with certain debt transactions.

See Note 8 for further information.

(b) In each of 2023, 2022 and 2021, includes tax payments of $ 309 million related to the TCJ Act.

(b) Includes tax payments of $ 579 million in 2024 , and $ 309 million in each of 2023 and 2022, related to the TCJ Act.

Supplemental Non-Cash Activity

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(a) Primarily relates to collateral posted against certain of our derivative positions.

Note 16 — Legal Contingencies

The Company is party to a variety of litigation, claims, legal or regulatory proceedings, inquiries and investigations.

While the results of such litigation, claims, legal or regulatory proceedings, inquiries and investigations cannot be predicted with certainty, management believes that the final outcome of the foregoing will not have a material adverse effect on our financial condition, results of operations or cash flows.

Report of Independent Registered Public Accounting Firm

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Also, projections of any evaluation of effectiveness to future periods are subject to the risk that controls may become inadequate because of changes in conditions, or that the degree of compliance with the policies or procedures may deteriorate.

Critical Audit Matters

The critical audit matters communicated below are matters arising from the current period audit of the consolidated financial statements that were communicated or required to be communicated to the audit committee and that:

(1) relate to accounts or disclosures that are material to the consolidated financial statements and (2) involved our especially challenging, subjective, or complex judgments.

The communication of critical audit matters does not alter in any way our opinion on the consolidated financial statements, taken as a whole, and we are not, by communicating the critical audit matters below, providing separate opinions on the critical audit matters or on the accounts or disclosures to which they relate.

Sales incentive accruals

As discussed in Note 2 to the consolidated financial statements, the Company offers sales incentives and discounts through various programs to customers and consumers.

A number of the sales incentives are based on annual targets, resulting in the need to accrue for the expected liability.

These incentives are accrued for in the “Accounts payable and other current liabilities” line on the balance sheet.

These accruals are based on sales incentive agreements, expectations regarding customer and consumer participation and performance levels, and historical experience and trends.

We identified the evaluation of certain of the Company’s sales incentive accruals as a critical audit matter.

Subjective and complex auditor judgment is required in evaluating these sales incentive accruals as a result of the timing difference between when the product is delivered and when the incentive is settled.

This specifically related to (1) forecasted customer and consumer participation and performance level assumptions underlying the accrual, and (2) the impact of historical experience and trends.

The following are the primary procedures we performed to address this critical audit matter.

We evaluated the design and tested the operating effectiveness of certain internal controls related to the sales incentive process, including controls related to (1) the accrual methodology, (2) assumptions around forecasted customer and consumer participation, (3) performance levels, and (4) monitoring of actual sales incentives incurred compared to estimated sales incentives in respect of historical periods.

To evaluate the timing and amount of certain accrued sales incentives we (1) analyzed the accrual by sales incentive type as compared to historical trends to identify specific sales incentives that may require additional testing, (2) recalculated expenses and closing accruals on a sample basis,

based on volumes sold and terms of the sales incentives, (3) assessed the Company’s ability to accurately estimate its sales incentive accrual by comparing previously established accruals to actual settlements, and (4) tested a sample of settlements or claims that occurred after period end, and compared them to the recorded sales incentive accrual.

Carrying value of certain reacquired and acquired franchise rights and SodaStream goodwill

As discussed in Notes 2 and 4 to the consolidated financial statements, the Company performs impairment testing of its goodwill and other indefinite-lived intangible assets on an annual basis during the third quarter of each fiscal year or more frequently if events or changes in circumstances indicate that it is more likely than not that an impairment exists.

The carrying value of other indefinite-lived intangible assets as of December 30, 2023 was $13.7 billion, which represents 13.7% of total assets, and includes certain PepsiCo Beverages North America’s (PBNA) reacquired and acquired franchise rights, which had a carrying value of $8.7 billion as of December 30, 2023.

The carrying value of goodwill as of December 30, 2023 was $17.7 billion, which represents 17.6% of total assets, and includes goodwill related to the SodaStream reporting unit in Europe.

We identified the assessment of the carrying value of PBNA’s reacquired and acquired franchise rights and SodaStream goodwill in Europe as a critical audit matter.

The impairment analysis of these indefinite-lived intangible assets required significant auditor judgment to evaluate the Company’s forecasted revenue and profitability levels, including the expected long-term growth rates and the selection of the discount rates to be applied to the projected cash flows.

Significant auditor judgment was necessary to assess the subjective and uncertain impact of competitive operating and macroeconomic factors on future levels of revenue, operating profit and cash flows.

The following are the primary procedures we performed to address this critical audit matter.

We evaluated the design and tested the operating effectiveness of certain internal controls related to the goodwill and other indefinite-lived intangible assets impairment process, including controls related to the development of forecasted revenue, profitability levels, expected long-term growth rates, and selection of the discount rates to be applied to the projected cash flows used to estimate the fair value of the goodwill and other indefinite-lived intangible assets.

We also evaluated the sensitivity of the Company’s conclusion related to changes in assumptions, including the assessment of changes in assumptions from prior periods.

To assess the Company’s ability to accurately forecast, we compared the Company’s historical forecasted results to actual results.

We compared forecasted revenue and profitability levels in the cash flow projections used in the impairment tests with available external industry data and other internal information.

We involved valuation professionals with specialized skills and knowledge, who assisted in evaluating (1) the long-term growth rates used in the impairment tests by comparing against economic data and information specific to the respective assets, including projected long-term nominal Gross Domestic Product growth in the respective local countries, and (2) the discount rates used in the impairment tests by comparing them against discount rates that were independently developed using publicly available market data, including that of comparable companies.

Critical Audit Matter

The critical audit matter communicated below is a matter arising from the current period audit of the consolidated financial statements that was communicated or required to be communicated to the audit committee and that:

(1) relates to accounts or disclosures that are material to the consolidated financial statements and (2) involved our especially challenging, subjective, or complex judgments.

The communication of a critical audit matter does not alter in any way our opinion on the consolidated financial statements, taken as a whole, and we are not, by communicating the critical audit matter below, providing a separate opinion on the critical audit matter or on the accounts or disclosures to which it relates.

Unrecognized tax benefits

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The Company establishes reserves if it believes that certain positions taken in its tax returns are subject to challenge and the Company likely will not succeed, even though the Company believes the tax return position is supportable under the tax law.

The Company adjusts

these reserves, as well as the related interest, in light of new information, such as the progress of a tax examination, new tax law, relevant court rulings or tax authority settlements.

The Company adjusts these reserves, as well as the related interest, in light of new information, such as the progress of a tax examination, new tax law, relevant court rulings or tax authority settlements.

We identified the evaluation of certain of the Company’s unrecognized tax benefits as a critical audit matter because the application of tax law and interpretation of a tax authority’s settlement history is complex and involves subjective judgment.

1 unchanged sentence

The following are the primary procedures we performed to address this critical audit matter.

We evaluated the design and tested the operating effectiveness of certain internal controls related to the unrecognized tax benefits process, including controls to (1) identify uncertain income tax positions, (2) evaluate the tax law and tax authority’s settlement history used to estimate the unrecognized tax benefits, and (3) monitor for new information that may give rise to changes to the existing unrecognized tax benefits, such as progress of a tax examination, new tax law or tax authority settlements.

We involved tax and valuation professionals with specialized skills and knowledge, who assisted in assessing the unrecognized tax benefits by (1) evaluating the Company’s tax structure and transactions, including transfer pricing arrangements, and (2) assessing the Company’s interpretation of existing tax law as well as new and amended tax laws, tax positions taken, associated external counsel opinions, information from tax examinations, relevant court rulings and tax authority settlements.

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financial incentives we give to our independent bottlers to assist in the distribution and promotion of our beverage products.

Chief Operating Decision Maker (CODM) :

our Chairman and Chief Executive Officer.

Concentrate Shipments and Equivalents (CSE) :

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Compared sentence by sentence after normalising whitespace, quotation marks, case and digits, so re-formatting and restated figures do not read as changed language. Wording changes appear as one removal and one addition. The current filing and the prior one are authoritative.

What changed 10-K

Item 7. Management’s Discussion and Analysis