Our Sustainability JourneyOverview 2007

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Overview

In a world that continues to experience unprecedented economic, environmental and social challenges, PepsiCo — one of the world’s largest food and beverage companies — recognizes our responsibilities to help make a difference. In this overview, we share our progress in addressing these challenges, identify where we believe we can have the most impact and acknowledge our opportunities for continuous improvement.

Today, we are striving for a balance of achieving continued financial success while bringing purpose to our performance. We call it “Performance with Purpose” and we have defined three prime areas of influence: human, environmental and talent sustainability.

> Human Sustainability — refers to our efforts to nourish consumers with a range of products, from treats to healthy eats.

> Environmental Sustainability — reinforces our commitment to protect our natural resources and operate in a way that minimizes our environmental footprint. In fact, we have set ourselves the goal of making our environmental impact net-neutral.

> Talent Sustainability — focuses on developing our employees in a diverse and inclusive environment and making sure our company is an attractive destination for the world’s best talent.

During this journey, we’re shifting towards developing and enhancing metrics to more meaningfully reflect PepsiCo’s global performance. While this will take time, we believe this will bring sharper focus to achieving demonstrable progress and to integrating sustainability goals more fully into our business operations. The talents and skills of our global workforce, coupled with our operational capabilities, provide our company with a unique opportunity to have a positive impact on society. Time and again, our people demonstrate they are committed to making a difference and to living PepsiCo’s Sustainability Vision. Our vision is to continually improve all aspects of the world in which we operate — environment, social, economic — creating a better tomorrow than today. We have communicated this vision to our 185,000 employees worldwide in 45 different languages as part of our goal to bring greater good to the world. It’s a responsibility every associate at PepsiCo takes seriously.

This report covers full year 2007 through May 2008.

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Significant Achievements

Expanded our portfolio of healthful products through innovation

Improved significantly our water, fuels, and electricity efficiency

Conserved nearly 5 billion liters of water and nearly 500 million kilowatt hours of energy worldwide

Instituted guidelines for beverages limiting advertising and marketing to children under 12

Committed more than $16 million to bring safe water to developing countries

Launched our global sustainable packaging policy

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What does sustainability mean at PepsiCo?We define sustainability as “Performance with Purpose.” In today’s world, consumers are bringing their principles to their purchasing. We, in return, are bringing a purpose to our performance.

There are three specific components to Performance with Purpose. First, we offer foods and beverages that responsibly provide nourishment to people and societies. Second, we are intent on minimizing our impact on the environment in which we operate. And third, we work hard to create an inclusive environment where the best people want to work.

How does the Performance with Purpose mission tie in with your business?Performance with Purpose is at the foundation of every aspect of our business. Indeed, financial achievement can and must go hand-in-hand with sustainability.

Our approach to creating superior financial performance is straightforward — drive shareholder value. We integrate a commitment to human, environmen-tal and talent sustainability into all of our operations.

Doing so creates a blueprint for PepsiCo to develop, manufacture and sell our products in a sustainable way, and gives us a competitive advantage in markets all over the world, which in turn drives long-term growth.

How is PepsiCo responding to these difficult economic times?There’s no question that these are challenging times. Like many companies, we’re facing headwinds such as rising costs, an uncertain economic outlook and shifting currency rates. While we can’t control the macroeconomic system, we need to adapt to the near-term challenges to deliver our long-term growth plans.

We’re taking measured steps to continue generating long-term shareholder value. First, we’re focusing on consumer value as much as innovation and premium products. Second, we’re calibrating consumer price points and packaging options to keep our products in proportion with the rest of the food basket and to keep pace with changing consumer preferences and wallet constraints. And finally, we’re investing where we believe we have the greatest leverage to maintain and ultimately accelerate our growth.

Sustainability Q & A with Indra Nooyi, PepsiCo Chairman and CEO

Indra K. Nooyi Chairman and Chief Executive Officer

Is PepsiCo doing enough to tackle consumer health concerns like obesity?Obesity impacts quality of life and poses a serious health risk. More than one billion adults are overweight and 300 million are clinically obese — in both developed and developing countries.

We recognize our responsibility to address diet and nutrition concerns around the globe. We’re mindful of the way the world is changing and we’re listening to experts who provide deep insights and enabling solutions.

As a result, we’ve made steady progress transforming our portfolio, for example, by introducing new products that offer improved nutri-tion. We’re reducing portion sizes and reformulating some of our existing products to reduce fat, saturated fat, salt and sugar. We are also adding more whole grains, fiber, fruits and vegetables and vitamins and minerals to our products.

We agree with the World Health Or-ganization, the National Institutes of Health and other leading experts that the ultimate solution to obesity is en-ergy balance — the balance between calories consumed and calories burned through activity. We’re committed to supporting both sides of this energy balance equation.

Water is a key ingredient in many PepsiCo products. How is the company addressing the water scarcity issue?We’re working hard to reduce the amount of water we use to make our products. We’re also promoting ac-cess to clean water around the world through alliances with non-profit groups and working with agricul-tural suppliers to assist them with efficiency improvements.

Our efforts are focused where our assets and expertise can make the big-gest impact. One such area is farming. On average, agriculture accounts for 70 percent of all fresh water use in the world and as much as 95 percent in many developing countries — almost all goes to irrigating crops. Chang-ing the way that farmers use water in some of the fastest growing econo-mies will help address water scarcity.

In India, for example, PepsiCo is work-ing with farmers to save approximately 30 percent of the water they typically use for growing rice. We’ve introduced a unique form of direct seeding and paddy cultivation. In China, PepsiCo developed a low water use way to grow potatoes under desert condi-tions by using a pivot irrigation system. In all markets — but especially those that are growing rapidly — applying innovation and developing new methods for conserving water is vital to our business.

How can the food and beverage industry make the biggest difference in terms of addressing environmental sustainability? PepsiCo has focused on three environmental areas that are critical to the industry: water, energy and packaging.

We’re continually looking for ways to bring to scale the good ideas being implemented across our business and we share this experience with our peers.

Our goal is continuous improvement, driven by the ingenuity of our people, best practices, technology, education, and innovation. We’ve always been an environmentally concerned company.

In recent years, we’ve stepped up our initiatives. Now that we have common environmental metrics across all PepsiCo divisions globally, we can better track, manage and understand our environmental footprint. I’m certain this will lead to continuous progress.

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Human Sustainability Our Goal Our goal is to offer consumers a range of products, from treats to healthy eats. We are proud to give consumers choices across the spectrum. We’re committed to playing a responsible role in health and wellness by encouraging people to adopt healthy, active lifestyles — beginning with the products we offer.

We have world-class scientists who are singularly focused on science-based nutrition standards and guidance as they develop food and beverage products. Our state-of-the-art research and development facilities ensure that we’re leveraging the talent and skills of our employees and operational capabilities.

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We continue to make great strides in transforming our portfolio of products to meet consumers’ needs by:

Introducing new food and beverage »products that offer nutrition benefits;

Reformulating some of our existing »products to reduce nutrients of concern including fat, saturated fat, sodium and added sugars; and,

Adding whole grains, fiber, fruit, vegetables, key »vitamins and minerals.

We believe it is our responsibility to understand the diet and nutrition concerns of populations around the globe. We recognize our role in reducing the risk of chronic diseases associated with poor diets. This includes heart disease, diabetes and obesity. While there’s an ongoing debate about different responses to obesity, a key solution to maintaining a healthy weight is energy balance — the balance between calories consumed and calories burned through activity. We believe the way we can make a difference is by addressing both sides of the energy balance equation.

On the calories consumed side of the equation, we’re striving to make smart choices easier for con-sumers by providing a wide variety of healthful food and beverage products with easy-to-understand nutrition labeling.

On the calories burned side of the equation, we’re actively leading and engaged in key private-public partnerships to increase understanding of nutrition and health, encourage responsible marketing practices and support programs that motivate people to adopt healthier, more active lifestyles.

By addressing both calories consumed and calories burned, we believe we can help consumers make smart choices and live healthier lives.

We’re expanding our global research and development capability under the leadership of a world-leading endocrinologist and other experts in science, nutrition and health policy. This leadership brings a new level of expertise and focus to our efforts to develop products that meet the cultural taste and food preferences of con-sumers while providing nutrition and functional benefits.

With increased research capability and investment, the global R&D team is establishing priorities and standards of practice for longer-term research, nutrition, food safety, regulatory, and health policy.

Today, there are eight regional research centers worldwide focused on leveraging nutrition science, knowledge, and insight to develop convenience foods and beverages that can improve the overall diet and

positively impact health. Three centers are located in the United States in Valhalla, New York; Plano, Texas and Barrington, Illinois. Other centers are in Leicester, United Kingdom; Monterrey and Mexico City, Mexico; Shanghai, China and New Delhi, India.

In addition, we’re broadening our innovation efforts through the formation of a variety of new research partnerships with leading universities and other insti-tutions including Yale University, Newcastle University, Dresden University, Westfalische Wilhelms-Universitat Munster, Monell Chemical Senses Center, University of Texas and The New York Academy of Sciences, among others. There is ongoing collaboration with these orga-nizations to further drive our portfolio transformation.

Expanding PepsiCo’s Global R&D Network

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Transforming Our Portfolio

We’re launching new products that reflect consumer demand and ad-dress public health needs for great taste and greater benefits — foods and beverages that make it more enjoyable to lead healthy lives. Simply put, we’re changing because our consumers are changing and because the health of the world’s growing populations demands it. Healthier eating is good for busi-ness and good for the well-being of our consumers.

Innovating Approaches and New Products

Our pipeline of innovation includes a stream of new products that offer culturally relevant taste and prefer-ence with nutrition benefits that can complement a meal or provide a more healthy snack choice. Here are some examples:

In Mexico, our »Gamesa-Quaker business launched a line of portion controlled, oat-based cookies and snacks.

In Brazil, we expanded our baked »snacks. We introduced low-fat bread snacks in Chile, Puerto Rico, Spain, Turkey, Saudi Arabia and Russia.

In the United Kingdom, our Walk- »ers business developed SunBites, a whole grain snack with 30 per-cent less fat than standard crisps.

In the United States, Frito-Lay »unveiled Flat Earth fruit and vegetable crisps that deliver a one-half serving of fruit or veg-etable per ounce and we created True North, all natural nut snacks.

In India, we launched Quaker »Oats Kesar and Cheetos Whoosh, made from whole grains and vegetables.

PepsiCo and the Whole Earth »Sweetener Company introduced a zero-calorie, all-natural sweet-ener derived from the stevia plant. It’s called PureVia and it was introduced in Peru as a new, nutritionally enhanced PepsiCo beverage called “SoBe Life.”

Innovation in Emerging MarketsIn 2008, Lay’s Andinas potato chips were launched in Peru. Andinas are made of 100 percent native Peruvian potatoes, which have 10 times more antioxidants than a regular potato, contain no added salt and have reduced saturated fat content.

This new product will benefit more than 6,000 potato farmers by involving them in a special program that will provide a 25 percent premium over the market price for supplying top quality potatoes to PepsiCo.

Additionally, growers will be offered training, including farming technical assistance, which will enable them to preserve the legacy of their crops.

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Reformulating Existing Products

Our commitment to improve our portfolio’s nutritional profile is further demonstrated by the reformulation of some of our existing products.

Our product reformulations include removing trans fats, moving to healthier oils, developing and using sugar substitutes, adding whole grains, and reducing added sugars, among others. Some specific examples include:

In India, we’re using rice bran oil »instead of palmoline oil, reducing saturated fats by 40 percent.

In the United States, Tropicana »orange juice varieties include added potassium, omega-3 fatty acids and Vitamin D.

In the United Kingdom and Eu- »rope, we’ve introduced Baked Lay’s and Baked Walkers with 70 percent less total fat than regular crisps.

In the United States and the »United Kingdom, we reduced by between 50 percent and 80 percent the saturated fat in our Frito-Lay potato chip and Walkers crisp brands by converting to

high oleic sunflower oil.

Expanding through Strategic Acquisitions

Key acquisitions have helped us expand our offering of more healthful products. The focus on more nutritious offerings started with the acquisition of Tropicana in 1998 and the 2001 merger with Quaker Oats, including Gatorade. Most recently, PepsiCo has acquired or purchased a major stake in JSC Lebedyansky, Russia’s leading branded juice company and the world’s sixth-largest juice manu-facturer; Sandora, a leading juice company in Ukraine; Naked Juice, a premium juice company in the United States, and V Water, a leading vitamin water, in the United Kingdom.

Promoting Active, Healthy Lifestyles

We support programs that use simple steps to encourage people to get active:

In Latin America, we launched Vive Saludable Escuelas, an initiative to teach children how to add physical activity to their daily lives. A physi-cal education routine, designed by Mexico’s Sports Commission, is being implemented by teachers in partici-pating schools. To date, the program has touched more than one million children in 4,000 schools.

In India, our “Get Active” pilot program reaches 70,000 students in 120 schools and promotes an

active lifestyle through an energy balance curriculum.

In the United States, we are collaborating with the YMCA, the largest provider of fitness programs, to support Activate America, a public health initiative that helps make healthy living a reality for millions of Americans.

Helping Consumers Make Better Choices with Nutrition Labeling

We care about the health of consumers. We want them to enjoy our products and we want to help them make the healthful food choice the easier choice.

A key way we do this is through our own nutrition labeling. In the United States, we were the first in the indus-try to introduce a symbol that makes it easier for consumers to identify which of our products contribute to a healthier lifestyle. Our Smart Spot symbol — the symbol of Smart Choices Made Easy — is a simple labeling system that explains why each product is a smart choice.

PepsiCo Global Nutrition Team Reaches Out to Community The PepsiCo Global Nutrition Team demonstrated its commitment to nutrition education by reaching out to residents of St. Luke’s Lifeworks, a non-profit organization that provides learning opportunities and support services to people overcoming homelessness in Fairfield County, CT.

In partnership with Yale University, and a team of PepsiCo senior executives, the nutrition team presented an interactive lesson on how to make smart food choices on a limited budget.

Our nutritionists explained the benefit of eating a healthy diet, shared a list of a broad range of healthy foods and showed how to read a food label to make smart choices. The residents then created their own grocery lists, visited a local grocery store and purchased a week’s worth of food within their budgets that provided a balanced diet.

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Making Choices Easier

PepsiCo is also a founding member of the Keystone Food and Nutrition Roundtable, a multi-stakeholder group that seeks to drive improve-ments in the American diet. The Keystone Roundtable is a consensus forum of industry, academia, the public health community and gov-ernment, working collaboratively to create an easy-to-understand and uniform front-of-pack nutrition labeling program to help consum-ers make healthier choices among all packaged food and beverages.

In Europe, we introduced front-of-pack nutritional labeling across our brands in partnership with other food and beverage companies. The labels help consumers understand the percentage of their “Guideline Daily Amount” (GDA) of calories, sugars, saturates, fat and salt con-tained in a portion of food or drink.

Addressing Malnutrition in Vulnerable Populations

We are committed to serving a wide range of consumer needs, and in countries where malnutri-tion is a serious issue, that includes offering products directly aimed at addressing chronic hunger. We are working toward developing nutrition-based solutions to reduce hunger and malnutrition in select developing countries, particularly in India, South Africa, and in time, Nigeria. We will leverage our core competencies including R&D, product development, marketing, sales and distribution to launch a product with the necessary public and private partnerships to reach the target population and sustain its use.

Engaging in Responsible Marketing and Advertising

We understand the importance of being a responsible marketer. We believe that industry-wide voluntary

action continues to be the best way to address our responsibilities.

We announced our full support of the International Council of Bever-ages Associations’ guidelines on marketing to children — a landmark initiative supported by industry. The guidelines permit no marketing or advertising of beverages, other than water, fruit juice and dairy-based beverages, to children under 12 years old. These guidelines will be fully implemented on a global basis by January 2009. We were also a found-ing member of a voluntary U.S. food and beverage industry initiative that redefined how the industry markets products to children under 12. Today, 100 percent of our advertising to children is devoted exclusively to products that meet defined nutri-tion criteria or provide a functional benefit. We have committed to similar guidelines in Canada, the Eu-ropean Union of 27 nations, Mexico, Thailand, South Africa, Australia and New Zealand.

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The burden of malnutrition can only be dealt with if the public and private sector including the food industry work together towards this objective. The future of humankind is being shaped by what we do or fail to do today, it is up to those in positions of leadership to show the way forward.Professor Ricardo Uauy President of the IUNS (International Union of Nutrition Sciences)

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Partnering for Change

We proactively lead and engage in private-public partnerships with key external experts and stakehold-ers in the global health policy and science/nutrition communities to help improve diets and deliver substantial improvements in our products. Our leaders actively participate in global health policy initiatives including the World Health Organization, the National Institutes of Health, Wellcome, the Pan American Health Organization and the Alliance for a Healthier Generation, among others.

We are among eight leading food and beverage companies to sign the “Global Commitment to Action on the Global Strategy on Diet, Physical Activity and Health,” a commitment addressed to the World Health Organization. We agreed to five key global commit-ments to action that will take place over the next five years. We will report our progress in delivering these goals at the annual World Health Assembly meeting.

We also partner with the Global Alliance for Improved Nutrition (GAIN), a Swiss foundation that seeks to fight malnutrition by

mobilizing partners to deliver improved nutrition to vulnerable populations.

Leaving a Positive Footprint on Society

The PepsiCo Foundation supports health, nutrition and wellness programs around the globe with an emphasis on underserved communi-ties and seeks to discover real solutions to undernutrition.

Oxford Health Alliance: The Oxford Health Alliance is a global organization that works to reduce the burden of chronic diseases in the United Kingdom, Mexico, China and India. Working with the PepsiCo Founda-tion, the Community Interventions for Health program was imple-mented to reduce chronic disease by targeting three risk factors: diet, physical activity level and tobacco use.

Family Health Self-Empowerment Project: The University of Florida and its Family Health Self-Em-powerment Project is a multi-year research and intervention pro-gram that investigates approaches to reduce the incidence of obesity in low-income and ethnic families.

Healthy Food, Healthy Moves: Chicago Communities in Schools and the Consortium to Lower Obe-sity in Chicago Children (CLOCC) are collaborating on the Healthy Food Healthy Moves: Inform Chicago initiative to test and deliver a health promotion program in six Chicago schools. The three-year pilot project has mobilized a broad network of community organizations, govern-ment officials, educators, public health professionals, and families in a citywide effort to raise awareness of how to achieve healthy lifestyles.

Environmental Sustainability

Our GoalAt PepsiCo, we are committed to minimizing the impact our business has on the environment with methods that are socially responsible, scientifically based and economically sound. Foundationally, we expect compliance with environmental laws and regulations. In places where, in our judgment, the requirements are not stringent enough, we will apply a higher standard to drive environmental protection. We will audit our performance against these expectations to assure we are doing right. After more than a decade of action, we continue our energy efficiency, water conservation and responsible packaging innovation initiatives and take accomplishments that are pioneered in one part of our business to scale throughout our global network.

We continuously improve our environmental programs and explore inventive solutions to the world’s challenges. We operate in a way that minimizes our environmental footprint with the goal of reaching a net-neutral impact. We’ve focused our environmental sustain-ability efforts on water, energy and packaging — areas where we can make the biggest impact. And we’re extending our outreach to our franchised bottlers and our supply chain, including our agricultural partners.

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In 2007, PepsiCo agreed on rigorous, corporation-wide global metrics to help us better track and understand our environmental footprint. Our goal is to reduce water consumption by 20 percent, reduce electricity consumption 20 percent, and reduce fuel consump-tion by 25 percent per unit of production by 2015 as compared to our 2006 consumption.

We continue to make positive impact and have achieved signifi-cant results. In 2007, our beverage businesses reduced water con-sumption by 9 percent, electricity consumption by 8 percent and fu-els consumption by 7 percent. Our foods businesses reduced water consumption by 6 percent, electric-ity consumption by 3 percent and fuels consumption by 3 percent.

We have environmental scientists and technical experts who are knowledgeable of leading edge scientific research and discoveries so we can leverage our operational capabilities to help make a difference.

We have in place a global eco-efficiency strategy for resource conservation (RECON) within our operations that helps us optimize our water, energy and electricity use through improved methods and technologies. We extend this strategy to our bottlers and co-packers through workshops around the world.

We have formed a series of partner-ships with key external stakeholders to provide us with additional insights, expertise and knowledge on multiple aspects of sustainabil-ity. We will continue to actively lead and engage in key private-public partnerships to spur action and solutions to address the urgency of the world’s environmental issues.

PepsiCo established uniform protocols for energy and water measurement and reporting in 2005 and rolled them out for use across all divisions for the first time in 2006. Prior to this, Frito-Lay North America (FLNA) had been collecting data since 1999. Quaker/ Tropicana/ Gatorade began data collection in 2004. PepsiCo International has now collected one full year of data.

This is the first time year-over-year comparisons are avail-able for PepsiCo as a whole. The data collected represents PepsiCo-owned manufacturing sites with 100 percent of usage at FLNA and Quaker/Tropicana/Gatorade and 90 percent at PepsiCo International.

* Liters for beverages; Kilograms for foods.

Beverage

Water Fuel Electricity

Foods PepsiCo

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10%

0%1%2%3%4%5%6%7%8%9%

10%

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10%

Beverage

Water Fuel Electricity

Foods PepsiCo

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10%

0%1%2%3%4%5%6%7%8%9%

10%

0%1%2%3%4%5%6%7%8%9%

10%

Resource Conservation Improvements 2006 vs 2007

Water

Beverage

Water Fuel Electricity

Foods PepsiCo

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10%

0%1%2%3%4%5%6%7%8%9%

10%

0%1%2%3%4%5%6%7%8%9%

10%Electricity

Fuel

PepsiCoFoodsBeverages

Reductions in water, fuel and electricity use 2006 vs 2007. 2006 baseline (per unit of production)*

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Water

Water is essential for all foods — for growing, washing, processing and cooking. It is the primary ingredi-ent in our beverages. Reducing the amount of water we use is imperative and we’re committed to minimizing our water footprint through greater efficiency across our operations. Where we source our water is just as critical since sourcing from stressed areas causes damage to local communities and ecosystems.

Throughout our business, we work to reduce our water footprint and help avoid water conflicts with local communities. At the same time, we are engaged in improving access to clean water around the world through alliances with non-profit groups.

Conserving Water in Our Operations

In 2007, we conserved nearly 5 billion liters of water across our operations as compared to 2006 through technological improvements in our global manufacturing operations and resource conservation programs.

In the United Kingdom, our total water use across all our operations was 1,564 million liters in 2007. Be-tween 2001 and 2007, we reduced the water used to manufacture Walkers Crisps by 42 percent from 13 l/kg of production to 7.6 l/kg. This was achieved through a comprehensive analysis of all water usage and improved measurement systems.

The Walkers team developed engineering solutions to reduce equipment water use and increase opportunities for recycled water use.

In Mexico, all of our Sabritas manu-facturing facilities have secondary process water treatment systems, which will allow us to extend water recycling to more activities while eliminating the impact of waste water on the environment.

Frito-Lay, the U.S. snack division of PepsiCo, continued to improve its water efficiency by conserv-ing more than 300 million gallons (1 billion liters) of water in 2007 as compared to 2006 through its continued water conservation efforts known as the “Gallon per Pound Challenge.” Frito-Lay won recognition from the Environmen-tal Protection Agency as a Water Efficiency Leader in 2007.

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Pepsi-Cola bottlers in North America are also doing their part to conserve water resources. Pepsi Bottling Group has installed water recovery systems on reverse osmosis filters that conserve more than 1 billion liters of water annually as compared to traditional designs.

Water conservation is especially important in water stressed areas. In 2003, our India team embarked on an ambitious journey to achieve positive water balance by 2009

through a comprehensive program to conserve and optimize water usage, both in our own manufac-turing processes and in the communities we serve.

We have carried out a variety of innovative reuse and recycling initiatives. In the last five years in India, we have reduced our water use in manufacturing by more than 55 percent. We have also prevented depletion of ground water aquifers by constructing rainwater harvest-

ing systems in most of our plants. We’ve supplemented this by introducing community water projects in farms and comprehensive watershed management programs in diverse and challenging geo-graphic locations. Similar projects are underway in China, Thailand and Mexico.

Gatorade Employees as Change Agents Many water efficiency solutions implemented across our global operations today were first identified by the conservation team at our Gatorade facility in Atlanta, GA in response to the August 2007 drought, one of the worst in centuries. Those solutions alone helped the Atlanta plant conserve nearly 290 million liters of water in 2007 and have led to system-wide water savings. Since 2004, Gatorade has reduced water usage by 17 percent across its entire manufac-turing system through implementing best practices across facilities. Gatorade employees on the manufacturing line have acted as change agents by helping plants conserve millions of liters of water. Through employee-led “tag and flag” programs, water savings efficiencies such as leaks on production lines are immediately addressed.

Gatorade is continuing to implement innovative technologies throughout its plants, including:

> Using dry lube, a process that replaces soapy water with silicone to lubricate bottle lines

> Reclaiming and recycling steam vapor from heating processes

> Cleaning empty bottles through “air-rinsing,” a process that uses ionized air instead of water

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Reducing Water Use in Agriculture

While using water responsibly throughout our business is a top priority, we also believe in our ability to address the broader problem of water scarcity. In India, for example, where agriculture ac-counts for over 80 percent of total fresh water consumption, PepsiCo is working with farmers to reduce water intensity in paddy cultiva-tion by around 30 percent through direct seeding, a technique that avoids the traditional flood irriga-tion method currently practiced by paddy growers across the country. Paddy is India’s largest grain crop,

and consumes the bulk of fresh water used in Indian agriculture. In 2007, PepsiCo piloted this program on 100 acres, and it was scaled up to cover 1,000 acres in 2008. The significant impact of this change can be gauged from the fact that if only 6,000 acres of paddy cultiva-tion were shifted to direct seeding it would offset the entire water used in PepsiCo India’s beverage plants.

Partnering for Change

PepsiCo Chairman and CEO Indra Nooyi publicly demonstrated PepsiCo’s commitment to helping address the global water crisis by joining other partners as a signato-ry to the United Nations CEO Water Mandate. By signing the CEO Water Mandate, PepsiCo has committed to adhere to a holistic approach to water management in six areas: direct operations, supply chain and watershed management, collective action, public policy, community engagement and transparency.

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Leaving a Positive Footprint on Society

The PepsiCo Foundation’s mission around the environment is to advance knowledge and methods of water resource management that are sustainable and positively impact both quantity and quality of water supply. The Foundation has committed more than $16 million to organizations working to bring safe water to developing countries.

China Women’s Development Foundation: The PepsiCo Foun-dation partnered with the China Women’s Development Foundation (CWDF) to implement a research, development and intervention program designed to expand avail-ability of safe drinking water for the people of Western and Central

China. The grant is designed to provide safe drinking water using a watershed management solu-tions approach to expand CWDF’s repertoire of rainwater harvesting techniques. Ultimately it will help communities obtain water and teach them to improve the safety of their water through treatment.

The Earth Institute: In 2008, The Earth Institute at Columbia Uni-versity, one of the world’s premier institutions dedicated to global sustainable development, and the PepsiCo Foundation, entered into a $6 million three-year partnership. The program includes a series of high-impact, community-based ac-tivities and practical solutions across water, agriculture and climate.

WaterPartners: The PepsiCo Foundation made a $4.1 million grant to WaterPartners to provide safe drinking water and sanitation to communities of the greatest need in India. This grant was the biggest single contribution to Wa-terPartner’s WaterCredit Initiative, an innovative program that uses microfinance to increase access to safe water and improve sanitation for local communities in India.

Safe Water Network: Through a three-year partnership with Safe Water Network, the PepsiCo Founda-tion has pledged $3.5 million to implement safe water initiatives for village water systems in Ghana, India, and Bangladesh, as well as rainwater harvesting systems in India.

The Earth Institute and the PepsiCo Foundation are working together to address water challenges in India, China, Mali and Brazil. By harnessing good business practices with cutting-edge science in climate prediction, remote sensing, hydrology, and agronomy, our project together will help to develop new business models for sustainable water use. Jeffrey Sachs Director, Earth Institute at Columbia University ”

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Energy

Climate change may adversely affect the raw materials and other supplies we use, including water and agricultural products. In 2007, we successfully reduced our use of fuels and electricity and continued work to transform our business model, including identifying op-portunities to reduce energy use in our operations, use renewable energy, construct green buildings and work with suppliers to reduce their energy use.

Reducing Our Energy Use

We have set comprehensive elec-tric and thermal energy reduction goals across our businesses to ensure that the energy intensity of our operations is continuously re-duced. During 2007, our beverage businesses reduced electricity con-sumption by 8 percent and fuels consumption by 7 percent per unit of product. Our foods businesses

reduced electricity consumption by 3 percent and fuels consumption by 3 percent.

In the United Kingdom and Ireland, we reduced the amount of energy used per pack of Walkers Crisps production by 32 percent between 2000 and 2007.

We have also focused on the en-ergy efficiency of our vehicle fleet. For example, Sabritas, our Mexican snack food business, has 13,000 distribution vehicles, about 6,000 of which were converted over the past ten years to burn liquid propane gas. This has reduced carbon and nitrogen emissions and generated fuel savings of between 15 and 22 percent (depending on geographic conditions and fuel costs).

In the U.K. and Ireland, we im-proved our fleet fuel efficiency by 12 percent between 2001 and 2006. In 2007, we reduced our absolute distribution footprint by 4.3 percent despite shipping 10.3 percent more products. This was achieved by investing in vehicle technology, such as putting lower friction tires on our vehicles, streamlining the vehicles to reduce wind resistance, implementing

new journey-planning software, and conducting a comprehensive training program for our drivers. These improvements were com-bined with in-cab systems that tracked fuel efficiency on a weekly basis.

PepsiCo’s commitment to saving energy through green building worldwide continued in 2007. Our new facilities constructed in 2007 were designed to meet the U.S. Green Building Council’s (USGBC) Leadership in Energy and Envi-ronmental Design (LEED) stan-dards — one of the most rigorous standards for “green building” in the world. The USGBC awarded the prestigious LEED Gold certification to two of our facilities: Gatorade’s Wytheville, Virginia manufacturing facility and Gatorade’s Tolleson, Arizona distribution center. At the time, the Wytheville facility was the largest LEED-Gold certified food and beverage manufacturing site in the world.

In May 2008, PepsiCo introduced the Sustainable Engineering Guide-lines based on LEED standards. The guidelines support our environ-mental sustainability commitments throughout our engineering pro-

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cess, and apply to all new construc-tion as well as major remodels of existing buildings globally. The Sustainable Engineering Guidelines can be accessed through a website available to all PepsiCo engineers and key partners worldwide.

Harnessing Renewable Energy

Across PepsiCo, we are evolving to the use of more renewable energy in our operations with several initia-tives at our manufacturing plants.

In India, we launched our first remote wind turbine, harnessing one of the most efficient, clean and renewable sources of energy. This turbine is connected to the public electricity grid with suffi-cient power to meet more than 75 percent of the electricity needs of our Mamandur plant.

Our Tropicana juice manufacturing plant in Ft. Pierce, Florida continued its progress toward greenhouse gas neutrality by using carbon-neutral landfill gas for a portion of its operations. In 2007, approximately 10 percent of the facility’s thermal energy demands were derived from this renewable source.

Our Frito-Lay plant in Modesto,

California unveiled a solar concen-trator field designed to drive the production of truly “solar powered” SunChips multigrain snacks. The 5-acre solar concentrator field in-cludes 54,000 square feet of curved mirrors designed to absorb sun-light. The solar energy captured by the 192 solar collectors produces steam that generates nearly three quarters of the heat used in the SunChips manufacturing process at the Modesto plant.

In 2007, we announced plans for our first-ever “net zero” plant in Casa Grande, Arizona. With plans to run almost entirely on renewable fuels and recycled water, retrofits to this existing Frito-Lay facility are sched-uled to be completed by 2011.

We are also proud of our purchase of over 1.1 billion kilowatt-hours of Green-e© certified Renewable Energy Certificates (RECs) annually

to equal 100 percent of purchased electricity used by all U.S. facilities. The U.S. Environmental Protection Agency estimates the PepsiCo purchase is the same amount of electricity needed to power nearly 90,000 American homes annually.

Partnering for Change

We continue to develop external partnerships focused on strate-gies to reduce greenhouse gas emissions. In 2007, PepsiCo joined the U.S. Environmental Protec-tion Agency’s Climate Leaders, a voluntary partnership program that works to develop compre-hensive climate change strategies, including supporting reduction in greenhouse gases. We are the first consumer products company to join with other concerned com-panies and non-governmental organizations in the U.S. Climate Action Partnership to encourage the federal government to enact climate legislation.

* Per unit of production. Represents 95 percent of company-owned manufacturing facilities. Non-manufacturing facilities not included.

Greenhouse Gas Emissions (GHG)/Kg or L Production*

Snack 0.529

Beverage 0.080

2007 GHG Emissions Intensity

Packaging and Solid Waste

We distribute our products in a variety of packages, each carefully designed to deliver convenience and appeal to our consumers while protecting the integrity of our products. Our team of engineers and packaging suppliers are dedi-cated to finding preferable designs, and are working continuously towards improving our packaging performance while reducing our packaging environmental footprint.

Our goal is to design and develop packaging systems that are environ-mentally responsible throughout their entire lifecycle and partner with leading organizations to promote sustainable packaging and recycling practices. We have launched a global sustainable packaging policy and formed a Sustainable Packaging Council, led by our Procurement and Packaging R&D organization, to develop a roadmap that will guide us toward this goal.

Activating Sustainable Packaging Programs

We follow five principles of sustainable packaging design:

Reduce: using less material in our packaging, to conserve natural resources

Reuse: increasing use of reusable packaging and increasing the amount of recycled material in our packaging

Recycle: designing packaging for recycling and developing biode-gradable and compostable packag-ing solutions

Remove: eliminating environ-mentally sensitive materials and processes from our packaging

Renew: increasing use of renewable material resources

Reducing and Recycling Our Waste

At Frito-Lay, route sales employees return empty cartons from stores to our plants for reuse or recycling and delivery boxes are used an average of six to seven times — this conserves nearly 5 million trees a year and keeps more than 25 million kilograms of cardboard away from landfills. For Frito-Lay’s North American and International

products, Frito-Lay recycles packag-ing film waste from our suppliers’ sites for use in other products such as park benches.

Using Less Material in Our Packaging

Although beverage containers are the most recycled consumer packaging in the United States, and they are designed for recycling, we continue to look for ways to reduce the amount of packaging used for our products. And we are achiev-ing success. PepsiCo scientists and packaging specialists have led the way in reducing packaging materi-als through cost-effective changes in design and production, known in the industry as “light-weighting.” Light-weighting reduces the amount of raw materials and energy used to make our packages and generates less waste after our products are enjoyed.

The average Pepsi bottle contains 10 percent recycled plastic — that’s more than any other soft drink brand in the United States.

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Across all our U.S. divisions, initiatives conducted in 2007 to reduce packaging have resulted in more than 9 million kilograms of material reduction across PET bottles and corrugated materials.

Quaker Standard Oatmeal has eliminated the PVC band on the 18 oz. tube and replaced it with biodegradable material, eliminating more than 87,000 kilograms of PVC a year.

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GREAT AMERICANCLEANUPTM

In 2008, we introduced a new, half-liter bottle for our Aquafina flavored waters, Lipton Iced Teas, and Tropicana juice drinks. The new bottle contains 20 percent less plastic than the previous bottle and its label is 10 percent smaller than before. These innovations are taking nearly 6 million kilograms of packaging out of the system each year and reducing greenhouse gas emissions by 18,000 metric tonnes annually. That’s equivalent to taking 3,350 cars off the road for a year.

We’ve trimmed the amount of plastic used in the bottles, caps and labels of our most popular Aquafina bottle — the half-liter (16.9 oz.) bottle — by 35 percent since 2002. This saves more than 27 million kilograms of plastic a year and reduces greenhouse emissions by 78,000 metric tonnes annually. That’s equivalent to taking 14 thou-sand cars off the road for a year.

We’re also removing environmen-tally sensitive materials from the waste stream. For example, Quaker Standard Oatmeal has eliminated the PVC band on the 18 oz. tube and replaced it with biodegradable material, eliminating more than 87,000 kilograms of PVC a year.

Partnering for Change

Keep America Beautiful, Inc. (KAB) is the largest non-profit community improvement organization in the United States. Pepsi is a longtime, national sponsor of KAB’s annual Great American Cleanup. For the past three years, Pepsi has brought together Sam’s Club, KAB and the Aquafina water brand in a national, school-based recycling program. The program collected more than 70 million plastic bottles for recycling in 2007.

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Supply ChainExtending Resource Conservation

Working with our supplier commu-nity on specific initiatives, PepsiCo is able to grow and extend our effective resource conservation programs. We’re also focused on setting quantifiable goals for energy, greenhouse gases (GHG), water, agriculture and forestry resource conservation within the extended supply chain.

Some examples of our Supplier Out-reach program in action include:

Our U.K. and Ireland business is one of 12 charter members of the Carbon Disclosure Project’s Supply Chain Leadership Collaboration (SCLC). This group aims to dramatically increase to the thousands the number of its member-suppliers reporting on cli-mate change mitigation efforts and adaptation strategies. Our member-ship demonstrates to our suppliers how important we feel climate change is to business decision-making along with our desire to work collaboratively.

We’ve joined other companies and Greenpeace in a global initiative called “Refrigerants, Naturally!” Its goal is to address climate change and ozone layer depletion caused by gases in refrigeration equipment by working with our suppliers to improve the environmental perfor-mance of our coolers and marketing equipment. More than 99 percent of our new purchases of refriger-ated point-of-sale equipment in the United States use HFC-free insulation.

Engaging Suppliers: Environmental SustainabilityCitrosuco is a leading supplier of not-from-concentrate orange juice to Tropicana. It is a family-owned company with a Brazilian orange business founded more than 40 years ago. More than 20 percent of its plantation area is set aside as nature reserves. Another equivalent area is populated with palm trees and other vegetation — retaining rain water and providing natural wildlife habitats.

The reserve areas exceed the Brazilian environment agencies’ required legal limit. Citrosuco is roll-ing out new environmental systems on its orange farms, leading to higher efficiencies in pesticide and fertilizer use by, for example, analyzing the optimum time of day and weather conditions for applying, which allows them to use less. The company’s juicing facilities are powered by biomass (sugar cane fiber) and use no fossil fuels. Nutrients such as nitrogen are extracted, composted, and reused to naturally fertilize nearby farms.

Citrosuco’s truck fleet is currently being upgraded with larger trucks fitted to existing trailers, which can carry 30 percent more juice with the same number of trips, reducing fuel use. The efficiency of Citrosuco’s ships has been improved by utilizing deck space to transport specialty goods, such as large wind-turbine blades and generators.

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Instituting Our Global Sustainable Agriculture Policy

We’re currently formalizing our Global Sustainable Agriculture Policy, which demonstrates our thoughtful approach to work-ing across the agricultural supply chain. We continuously bench-mark against our industry peers to understand best practices and ap-proaches to sustainable agriculture, including water saving techniques, waste reuse, soil protection and chemical use.

PepsiCo has initiated a Sustainable Water and Nutrition Management program. This program enables sus-tainable, environmentally respon-sible water management of our potato crops by monitoring irriga-tion methods. Countries involved in the project include the United Kingdom, United States, Mexico, Australia, Egypt, China, Portugal, Republic of South Africa, Pakistan and Turkey.

At Frito-Lay North America, we have developed methods to wash potatoes at the farm to reduce or eliminate the residual soil shipped to our manufacturing facilities. This allows the soil to be redistributed at the farm rather than disposed of through plant waste water dis-charge and also reduces diesel fuel requirements.

Quaker North America has been a leader for decades in the oat indus-try, developing new oat varieties that deliver increased field yields and improved disease resistance. Improving field performance through new oat varieties reduces fertilizers, fungicide and herbicide use. Improved oat varieties gener-ate more oats per acre — reducing the time, energy and resources required per crop.

In Mexico, our Sabritas Agro Team has activated “Campo Limpio,” an outreach initiative to educate farmers about sustainable agricul-tural practices in production fields. The goal is to help farmers reduce chemical and microbiological agents in fields and in raw materi-als. We aim to further increase the commitment of our growers to the safe handling of our raw materials, in particular corn and potatoes, through a training and certificate program that focuses on good agricultural practices.

Talent Sustainability

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Our GoalOur people are our greatest strength. Without a broad base of talented people, we can’t continue to deliver exceptional results. Our goals are to attract, hire, develop and retain the most talented people. By valuing our employees, supporting their ability to work effectively together and providing them with the tools they need to succeed, we are ensuring that PepsiCo is the kind of company where talented people of all backgrounds want to work.

We will continue to foster an inclusive environment, by increasing female and minority representation in management ranks, engaging employees in health and wellness programs and creating rewarding job opportunities for people with disabilities.

We will leverage the reach of our employee base and continue to encourage our employees around the world to participate in community service and inclusion activities, which are designed not only to positively impact the communities we serve, but to drive our employees to be leaders in social responsibility.

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Gamesa-Quaker: Embracing Employees with DisabilitiesOur Gamesa-Quaker facility in Monterrey, Mexico was one of the first in the country to introduce a program for integrating people with disabilities into the workforce. The program was designed to provide meaningful opportunities and better quality of life for these employees, and to attract an alternative source of highly committed talent.

This program’s success is the result of an ongoing commitment to changing culture, attitude and education throughout Gamesa-Quaker’s facilities.

To date, 3 percent of Gamesa-Quaker’s manufacturing operation is made up of employees with different abilities. These employees are also being integrated into other areas of the business such as sales.

This initiative has been extended across Latin America, where PepsiCo is the largest employer of people with different abilities; nearly 800 associates currently. The program has also been implemented at our Sabritas business in the Caribbean and Brazil. The high level of commitment demonstrated by these employees has boosted productivity and created a differentiated and inclusive work environment.

Expanding Opportunities through Diversity and Inclusion

PepsiCo approaches diversity and inclusion as a fundamental business priority. Our continued innovation and growth requires employees who can understand the needs of international and diverse markets. We intend to continually evolve our culture so that our associates are recognized for their contributions and valued for the unique differ-ences they bring to the workplace.

In the United States, our Diversity and Inclusion Networks promote a culture where everyone feels they have an equal opportunity to contribute and succeed. The groups include African Americans, Latinos/Hispanics, Asians, Native Americans,

Women, Gay/Lesbian/Bisexual/Transgender and EnAble, for indi-viduals with disabilities. In addition to our core employee resource groups, we have the Women of Color Multicultural Alliance and the White Male Inclusion Group.

PepsiCo has a Global Diversity and Inclusion Governance Council that is composed of internal and external thought leaders and is co-chaired by our Chairman and Chief Diversity Officer. The Council is focused on raising the bar on diversity and inclusion capabilities and creating a sustainable and differentiated com-petitive advantage for PepsiCo. Diversity and Inclusion Councils have been successfully established in all four continents of our PepsiCo International business — focusing

on locally relevant diversity and inclusion strategies and plans, with a particular focus on women.

Increasing support for women in the workforce is crucial, especially in developing countries. Our long-term progress depends on recruit-ing and retaining women in these geographies. PepsiCo International increased the percentage of female executives from 13 in 2003 to 21 in 2007. Representation of women in many Muslim countries in PepsiCo’s Middle East/Africa region improved from 5 percent in 2004 to 18 percent in 2007. The Female Tal-ent Development program was launched to focus on work environ-ment changes and recruitment of women in 2008.

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Providing a Safe and Healthy Work Environment

The safety, health and well-being of our employees around the world are of utmost importance.

PepsiCo is proud to live by our Sustainability Vision and we believe that protecting the health and safety of our people is a core value. Occupational injuries and illnesses are preventable and we aspire to an incident-free environment. We implement our health and safety policy through the worldwide PepsiCo Environment Health and Safety framework.

PepsiCo serves as chief partner in the global program of the World Health Organization/World Eco-nomic Forum “Workplace Wellness Unit” and is working with both

organizations to develop better workplace wellness solutions.

We also have internal programs such as HealthRoads, PepsiCo’s employee wellness benefit. HealthRoads promotes healthier lifestyles through a combination of personalized coaching, fitness and nutrition programs, online tools, resources, and worksite wellness initiatives.

In 2007, HealthRoads was launched in Asia and in the United Kingdom, we initiated “Fit for Life,” a program designed to encourage healthier lifestyles as well as better work/life balance for all employees. Vive Saludable (Live Healthy) is a similar program in Mexico that promotes healthy lifestyles among employees and consumers.

PepsiCo’s Human Rights Workplace Policy ensures a work environ-ment that is free from all forms of discrimination where people feel comfortable and respected. In 2008, we translated this policy into 30 languages and broadly com-municated it as part of our Code of Conduct Training, a leading edge process that ensures our businesses are operating in the most ethical way possible.

Partnering for ChangeFighting HIV/AIDS

Across PepsiCo, we recognize HIV/AIDS as a uniquely challenging global health issue that poses a significant threat to not only our employees, but to the sustainability of our business operations world-wide. Since 2002, PepsiCo has been a member of the Global Business Coalition on HIV/AIDS, Tuberculosis and Malaria (GBC), a not-for-profit group dedicated to fighting HIV/AIDS and related diseases. PepsiCo has separate HIV/AIDS workplace programs in countries where there is high or rising prevalence and where we have major operations, including South Africa, China, India, Russia, and the United States.

Developing Future Leaders

PepsiCo provides support to pro-grams that offer opportunities for individuals to gain thought leader-ship skills and experience.

In 2007, PepsiCo made a $1 million commitment to help United Negro College Fund (UNCF) advance its mission and its work with historically black colleges and universities. This gift symbolized PepsiCo’s continued commitment to UNCF, to close the

Engaging Suppliers: Supplier DiversityPepsiCo extends its commitment to diversity and inclusion by providing opportunities for our business partners and the communities in which we operate. PepsiCo and its bottler community achieved 2007 spending of approximately $1.13 billion with U.S. minority-owned and women-owned suppliers, marking the fifth consecutive year of double-digit growth in supplier diversity spending.

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gap in providing equal education and in promoting diversity and inclusion in the workplace.

PepsiCo also participated in Fair and Independent Courts: A Confer-ence on the State of the Judiciary, at the request of Supreme Court Justice Sandra Day O’Connor. The conference goal was to advance the independence and fairness of the judiciary, which is important to the business environment.

Separately, the PepsiCo Founda-tion made a $100,000 grant to the Georgetown University Law Center. Our contribution will help to implement the projects like the production of an online tool for high school students to learn about the independent courts.

Supplier CSR Assurance Program

We communicate, educate and work with our suppliers to improve corporate social responsibility per-formance across the supply chain.

In 2007, PepsiCo developed a Sup-plier Code of Conduct to clarify our global expectations in the areas of labor practices, employee health and safety, environmental manage-ment and business integrity.

It has been translated into 18 additional languages, has been proactively communicated and is mandatory in all procurement contracts. Our Supplier Code is based on the ILO, UNGC and other benchmark standards.

To further demonstrate our commitment to sustainability within our supply chain, PepsiCo joined the Supplier Ethical Data Exchange (Sedex).

Sedex is a web-based system that allows companies to maintain and share data on labor and environ-mental standards at their produc-tion sites. Sedex members are com-mitted to continuous improvement of the ethical performance of their supply chains.

We have also joined in an industry-wide initiative called AIM-PROGRESS along with other manufacturers to work towards improving working conditions within our supply chain communities.

PepsiCo’s involvement with Sedex enables its supply chain partners to share in its vision of Performance with Purpose. By actively encouraging the sharing of information, PepsiCo will gain transparency within its supply chain and improve performance. Tara Norton General Manager, Sedex

“”

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Leaving a Positive Imprint on Society

The PepsiCo Foundation has a long history of funding diversity pro-grams in education and workforce development with community-based organizations in the United States. The Foundation’s objective is to foster economic achievement and mobility for the underserved and minority populations. Cur-rently, the strategic areas of focus include access to education and training, and women’s empower-ment programs.

National Council of La Raza: Together with the National Council of La Raza (NCLR) in 2001, the PepsiCo Foundation created the NCLR Escalera project “Taking Steps to Success” to close the gap of Latino high school dropouts. The program encourages at-risk Latino high school students to graduate from high school, prepare for

college, and explore career oppor-tunities through internships. The Foundation’s intent is to co-devel-op a best practice education program model that can be expanded to include all of the organization’s 300 affiliates. This program continues to be expanded and replicated across the nation.

Ascent: Since 2006, The PepsiCo Foundation has been working in partnership with Ascent to prepare and train multicultural women to build careers in corporate America. Ascent collaborates with corporate partners to identify, attract, and advance women of color. The partnership is designed to assist Ascent in firming its business strategy, training, portfolio and governance structure, and to enable Ascent to launch and develop program curricula.

Community Engagement

PepsiCo encourages and supports its employees in their efforts to volunteer for community organi-zations and projects. We sponsor and participate in a wide variety of local and national activities through employee involvement. During PepsiCo’s 2008 Global Week of Community Service, more than 1,800 employees around the world spent time serving their local com-munities and service organizations.

Whether it’s promoting healthier lifestyles or helping to close the education achievement gap, PepsiCo has set the standard for other companies to follow.Janet Murguia CEO, National Council of La Raza ”“

PepsiCo is one of the world’s largest food and beverage companies with 2007 annual revenues of more than $39 billion. The Company employs approximately 185,000 people worldwide, and its products are sold in approximately 200 countries. Its principal businesses include: Frito-Lay snacks, Pepsi-Cola beverages, Gatorade sports drinks, Tropicana juices and Quaker foods. The PepsiCo portfolio includes 18 brands that generate $1 billion or more each in annual retail sales. Outside the U.S., our portfolio also includes a variety of well-known local brands including Sabritas, Gamesa, Walkers, Matutano, Smith’s, Simba, Chipsy, Mirinda and 7-Up among others.

> PepsiCo was named to the DJSI World and North America Indexes.

> Business Ethics magazine named PepsiCo to the 100 Best Corporate Citizens list.

> The U.S. Environmental Protection Agency (EPA) recognized PepsiCo as Green Power Partner of the Year and Energy Star Partner of the Year.

> The Human Rights Campaign named PepsiCo as one of the Best Places to Work for Gay/Lesbian/Bisexual/Transgender (GLBT) Equality.

> Working Mother magazine named PepsiCo to its Best Green Companies for America’s Children list.

> The AIDS Responsibility Project (ARP) presented PepsiCo with the International Corporate Courage Award.

> CRO magazine recognized PepsiCo among the 2007 100 Best Corporate Citizens in the United States.

> Seven PepsiCo China bottling plants were recognized as Best Water-Saving Companies in China’s beverage industry by the China Beverage Industry Association.

> China Rights Forum and China Business News Group named PepsiCo 2007 Outstanding Employer of China in the Shanghai Region.

> Catalyst honored PepsiCo with the 2007 Catalyst Award for its Woman of Color Multicultural Alliance.

> Black Enterprise magazine named PepsiCo as one of the 40 Best Companies for Diversity.

> The Cause Marketing Forum awarded Sam’s Club/Aquafina’s “Return the Warmth” program with the top environmental honor, the Halo Award.

2007 Select Recognitions

At PepsiCo, we’re committed to Performance with Purpose — achieving business and financial success while leaving a positive imprint on society. We want to grow our business by being — and by being recognized as — a sustainability leader.

Our approach to superior financial performance is straightforward — drive shareholder value. By address-ing sustainability issues, we deliver on our purpose agenda. Our performance and our purpose are not separate — it’s a merger of financial achievement in each of the three elements that together form our purpose agenda: human, environmental and talent sustainability.

Human Sustainability — Offering our consumers a broad range of products, from treats to healthy eats — and making it easier for them to make healthful choices.

Environmental Sustainability — Protecting our natural resources and operating in a way that minimizes our environmental footprint, with the goal of reaching a net-neutral impact.

Talent Sustainability — Developing our employees by creating a diverse and inclusive culture and making certain our company is an attractive destination for the world’s best people.

This approach encompasses the many challenges that PepsiCo faces: rising obesity rates and the need for more physical activity, nutritional deficiencies in vulnerable populations in developed and developing countries, water scarcity and quality, climate change, and the need for responsible packaging. We recognize the importance of managing risk while overcoming our challenges.

The people behind PepsiCo’s brands are working hard to address these economic, environmental and social challenges. The talents and skills of our global workforce matched with our operational capabilities of developing, moving and selling the world’s favorite foods and beverages can effect real world change. While we have made significant strides on this journey, there is still a lot to learn and do. It is our intent to lead the way.

Our Commitment

PepsiCo Website: www.pepsico.com© 2008 PepsiCo, Inc.

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