PepsiCo Annual Report 2001

Frito-Lay International

Frito-Lay International (FLI) continued to build its brands and expand its presence in more than 40 countries with great results, even amid difficult macroeconomic conditions.

Total volume grew 6%, with salty snack volume up 9%, the highest rate of any PepsiCo division. And despite the negative impact of weaker foreign currencies, revenue was up 7% and operating profit increased 17%.

The volume advance was driven by strong results in Europe, Brazil, Poland and the United Kingdom, as well as the impact of acquisitions in Colombia and Egypt. The greatest contributions to operating profit came from Mexico and the United Kingdom, the division's two largest markets.

The volume growth led to share gains in most major markets in Latin America, Europe and Asia.

In a consumer product category where demand is highly elastic, one of the most effective ways to drive growth is to consistently generate excitement among consumers. As the world's largest international snack company, FLI is able to do that better than any snack competitor.

With the experience and technical resources of the global Frito-Lay system, FLI is a perennial leader in new products. In the United Kingdom, for example, FLI's Walkers snack unit drove growth with new products like Heinz ketchup-flavored potato chips, to Squares, a square-shaped potato snack, to new flavors of Dippas brand tortilla chips.

FLI also creates excitement with creative marketing and promotions. As the only snack company with a broad international presence, FLI has the scale and resources to identify emerging consumer trends and tie in globally with popular movies and other big events with high potential to drive sales.

FLI's promotion with Pokémon is a perfect example. After using tie-ins with Pokémon to drive extraordinary growth in Mexico and other Latin American markets in 2000, FLI brought the Pokémon phenomenon to all its markets in Europe, the Middle East and Africa in 2001 — with exceptional results once again.

FLI also marked an important structural change in 2001. Following the merger of PepsiCo and Quaker, the Quaker international food businesses became part of the FLI portfolio. Integration of those businesses will yield millions of dollars in cost savings.