Opinion on effectiveness of Letter to Shareholders of the annual report

Chairman Nooyi’s Letter to Shareholders meets the majority of criteria on the purpose of a letter to shareholders. Overall, the letter provides a strong summary of previous year highlights, future goals, and objectives. Exact core numbers and percent of revenue Pepsi incurred are reported and this allows the audience to make decisions based on the reporting; however, these numbers are non-GAAP. It sets a positive tone and reports on sales and earnings, financial health of the company, achievements to date, continual changes and innovation, plus closing remarks of where Pepsi is headed. Emphasis is placed on positioning for long term growth while addressing impactful issues on changing markets and how the company will remain competitive in challenging environments within many different aspects.

It is detailed in how Pepsi will continue to build the brand both domestically and on a global perspective while touching on productivity, people, operations, and performance. Most importantly it addresses the future plans for this upcoming year and specifically how Pepsi will execute on these plans. The letter is effective in its communication and provides a good summary of visions and strategies with both prospective and current shareholders. The content allows existing shareholders to have a better understanding on all decisions, goals, and operations that Pepsi is currently engaging in both now and later allowing enough insight for the audience to take the information and evaluate Pepsi’s overall performance goals.

A couple details that could have been addressed more clearly are on how the corporation will minimize risk and the actual plan for how it will allocate the increase in marketing dollars. The message lacks a bit of overall strategic vision; however, still provides shareholders a solid groundwork to have a comprehensive understanding of Pepsi so as to make better decisions for the continual growth of the company.

Major Issues of Management’s Discussion and Analysis

The Management’s Discussion and Analysis section lists several major issues that Pepsi must face in the upcoming year and in the future. Issues identified included everything from consumer changes, market changes on a global perspective, and overall business operations from finance, accounting, intelligence, all encompassing. Some of the most crucial issues affecting Pepsi’s success have a lot to do with changes in consumer mindsets, global economics, political changes, and increases in price for commodities due to global fluctuations on many variables that are uncontrollable. Since many of the outstanding and developing issues addressed in this section are indeed uncontrollable variables- this requires Pepsi to adjust business operations accordingly to accommodate these issues that are outside of its natural control.

Change in Consumer Preferences: Demand for Pepsi products as stated may be adversely affected by changes in consumer preferences and tastes. This is an uncontrollable factor as consumer values change as society begins to evolve into a different mindset in regards to food consumption. This includes changes in the perception of sugar and other artificial ingredients or attributes in addition to an increasing negative image of “junk foods”.

International Market Expansion/limitations in political changes: Pepsi has no control over changes in policy or government both domestically and internationally. Civil unrest or other developments and risks in markets where products are sold may heavily affect overall business operations. However, again- this is an uncontrollable variable. Pepsi can only continually engage in international market research and adjust plans accordingly to accommodate such volatility which may prove to be difficult. Since international markets are a large percentage of Pepsi’s business model, failure to successfully implement global