This summary is based on the first quarter fiscal 2008 earnings call conducted by PepsiCo Inc. (PEP: chart) on April 24, 2008.

Management:

- Chairman & CEO: Indra Nooyi
- CEO of PepsiCo Americas Foods: John Compton
- CEO of PepsiCo Americas Beverages: Massimo D''Amore
- Vice Chairman and CEO of PepsiCo International: Mike White
- CFO: Richard Goodman
- VP of IR: Jane Nielsen

Key Investors Issues

- Revenues rose 13% from $7.35 billion in 2007 to $8.33 billion.
- Earnings were $1.14 billion or 70 cents a share, up 4.7%.
- The firm returned $2.1 billion to shareholders, $610 million in dividends and $1.5 billion in share repurchases.

First Quarter Highlights

- The company delivered strong operating results with 13% net revenue increase from $7.35 billion in the prior year to $8.33 billion due to higher prices.
- Earnings were $1.14 billion or 70 cents a share, up 4.7% from $1.1 billion or 65 cents a share in the prior year on revenue growth.

The firm is on pace to achieve its full year cash flow and CapEx targets, expecting $7.6 billion in cash from operating activities and $2.7 billion in capital spending.

- The firm returned $2.1 billion to shareholders, $610 million in dividends and $1.5 billion in share repurchases.
- The firm reiterated its guidance for the full year, volume of 3-5%, high single digit revenue growth, and EPS growth of at least $3.72 of share which represents 10% growth of the quarter 2007 EPS of $2.38.

Macroeconomic Insights:

- The US economy has slowed and consumer confidence is low, however, categories have done quite well due to the relative affordability of products and consumers economizing and shifting towards at home eating occasions.
- Traffic has declined in two channels, food service and to a certain extent C&G, causing volumes in the highly penetrated beverage business to slow in these two channels.
- Volume across large format channels is good, as consumer shift to food and beverages consumed at home.

In markets outside the United States, the global macros are still good, particularly in the developing economies where robust economic growth, coupled with low per capita consumption levels of the product creates vibrant growth opportunities.

- The currency diversification from the international businesses has provided some kind of balance to the falling dollar’s impact on commodity prices.
- Commodity prices are going up in almost every country in the world particularly in grain, cooking oil and energy.
- The firms commodity inflation estimate for the year is 9% to 10% worldwide versus the 6% indicated previously.
- To adjust to this cost hike, the firm is taking additional pricing and pacing pricing execution in the market place, including both rate hours and visual pricing to minimize the impact on consumers.

Segment Highlights:

- PepsiCo Americas Foods generated 3% volume growth, 13% revenue growth and 8% operating profit growth, solid results in the face of considerable commodity headwinds.
- Frito-Lay North America, generated 2% volume growth, 7% revenue growth and 4% operating profit growth.
- Across the portfolio, the firm saw strength across core products with mid single-digit volume growth in the Lays and Ruffles trademarks and high single-digit growth in Cheetos and dips.

There were declines in the Quaker rice cakes business and a modest decline in trademark Doritos.

- Overall, Frito-Lay continued to drive both volume and value share gains in measured channels.
- On the profit side, the 4% growth was about 3 points below the historical average as the firm planned pricing four to five months ahead of in market timing.
- During March, the firm introduced True North nut brand to key customers and held sampling events in over 1300 target in Sam’s Club.
- It also launched two new baked snacks, Lay’s Cracker Crisp and Cheetos Cracker Trax, both Smart Spot qualified and targeting incremental Cracker occasion.

Responding to the consumer request for lower sodium versions of the core brands is the new Pinch of Salt line, it has 30% to 50% less sodium in the original products.

- The firm completed the formation of the joint venture with the Strauss Group, makers of the fast growing Sabra hummus and dips.
- Under the new JV, Frito-Lay and Strauss will each own 50% of the Sabra dip business. - Sabra expands Frito-Lay’s role in providing healthier snack options and aligns with this fresh trend that is taking place in the market place.

Quaker Foods division reported about flat volume for the first quarter but strong top line growth of 7%.

- Quaker’s top line was driven by volume growth in Quaker Oats and ready-to-eat cereals.
- Net price realization and positive mix resulted in 7% revenue growth and helped offset commodity inflation.