PepsiCo, Inc.

July 2013

2013 Trian Fund Management, L.P. All rights reserved

Disclosure Statement and Disclaimers

General Considerations

This presentation is for general informational purposes only, is not complete and does not constitute an agreement, offer, a solicitation of an offer, or
any advice or recommendation to enter into or conclude any transaction or confirmation thereof (whether on the terms shown herein or otherwise).
This presentation should not be construed as legal, tax, investment, financial or other advice. The views expressed in this presentation represent the
opinions of Trian Fund Management, L.P. (Trian) and the funds and accounts it manages (collectively Trian, and such funds and accounts, Trian
Partners), and are based on publicly available information with respect to PepsiCo, Inc. (the "Issuer or PepsiCo) and the other companies
referred to herein. Trian Partners recognizes that there may be confidential information in the possession of the companies discussed in this
presentation that could lead such companies to disagree with Trian Partners conclusions. Certain financial information and data used herein have
been derived or obtained from filings made with the Securities and Exchange Commission ("SEC") or other regulatory authorities and from other
third party reports. Funds managed by Trian currently beneficially own and/or have an economic interest in shares of the Issuer and Mondelz
International, Inc. (Mondelez).
Trian Partners has not sought or obtained consent from any third party to use any statements or information indicated herein as having been
obtained or derived from statements made or published by third parties. Any such statements or information should not be viewed as indicating the
support of such third party for the views expressed herein. Trian Partners does not endorse third-party estimates or research which are used in this
presentation solely for illustrative purposes. No warranty is made that data or information, whether derived or obtained from filings made with the
SEC or any other regulatory agency or from any third party, are accurate. Past performance is not an indication of future results.
Neither Trian Partners nor any of its affiliates shall be responsible or have any liability for any misinformation contained in any third party, SEC or
other regulatory filing or third party report. Unless otherwise indicated, the figures presented in this presentation, including internal rates of return
(IRRs), return on invested capital (ROIC) and investment values have not been calculated using generally accepted accounting principles
(GAAP) and have not been audited by independent accountants. Such figures may vary from GAAP accounting in material respects and there can
be no assurance that the unrealized values reflected in this presentation will be realized. There is no assurance or guarantee with respect to the
prices at which any securities of the Issuer will trade, and such securities may not trade at prices that may be implied herein. The estimates,
projections, pro forma information and potential impact of the opportunities identified by Trian Partners herein are based on assumptions that Trian
Partners believes to be reasonable as of the date of this presentation, but there can be no assurance or guarantee that actual results or
performance of the Issuer will not differ, and such differences may be material. This presentation does not recommend the purchase or sale of any
security.
Trian Partners reserves the right to change any of its opinions expressed herein at any time as it deems appropriate. Trian Partners disclaims any
obligation to update the data, information or opinions contained in this presentation.

Note: Disclosure Statement and Disclaimers are continued on the next page
2

Disclosure Statement and Disclaimers (contd)

Forward-Looking Statements
This presentation contains forward-looking statements. All statements contained in this presentation that are not clearly historical in nature or that
necessarily depend on future events are forward-looking, and the words anticipate, believe, expect, potential, opportunity, estimate, plan,
and similar expressions are generally intended to identify forward-looking statements. The projected results and statements contained in this
presentation that are not historical facts are based on current expectations, speak only as of the date of this presentation and involve risks,
uncertainties and other factors that may cause actual results, performance or achievements to be materially different from any future results,
performance or achievements expressed or implied by such projected results and statements. Assumptions relating to the foregoing involve
judgments with respect to, among other things, future economic, competitive and market conditions and future business decisions, all of which are
difficult or impossible to predict accurately and many of which are beyond the control of Trian Partners. Although Trian Partners believes that the
assumptions underlying the projected results or forward-looking statements are reasonable as of the date of this presentation, any of the
assumptions could be inaccurate and, therefore, there can be no assurance that the projected results or forward-looking statements included in this
presentation will prove to be accurate. In light of the significant uncertainties inherent in the projected results and forward-looking statements
included in this presentation, the inclusion of such information should not be regarded as a representation as to future results or that the objectives
and plans expressed or implied by such projected results and forward-looking statements will be achieved. Trian Partners will not undertake and
specifically declines any obligation to disclose the results of any revisions that may be made to any projected results or forward-looking statements
in this presentation to reflect events or circumstances after the date of such projected results or statements or to reflect the occurrence of
anticipated or unanticipated events.
Not An Offer to Sell or a Solicitation of an Offer to Buy
Under no circumstances is this presentation intended to be, nor should it be construed as, an offer to sell or a solicitation of an offer to buy any
security. Funds managed by Trian are in the business of trading -- buying and selling -- securities. It is possible that there will be developments in
the future that cause one or more of such funds from time to time to sell all or a portion of their holdings of the Issuer and/or Mondelez in open
market transactions or otherwise (including via short sales), buy additional shares (in open market or privately negotiated transactions or
otherwise), or trade in options, puts, calls or other derivative instruments relating to such shares. Consequently, Trian Partners beneficial
ownership of shares of, and/or economic interest in, the Issuer or Mondelez common stock may vary over time depending on various factors, with
or without regard to Trian Partners views of the Issuers or Mondelezs business, prospects or valuation (including the market price of the Issuers
or Mondelezs common stock), including without limitation, other investment opportunities available to Trian Partners, concentration of positions in
the portfolios managed by Trian, conditions in the securities markets and general economic and industry conditions. Trian Partners also reserves
the right to change its intentions with respect to its investments in the Issuer and take any actions with respect to investments in the Issuer as it
may deem appropriate.
Concerning Intellectual Property
All registered or unregistered service marks, trademarks and trade names referred to in this presentation are the property of their respective
owners, and Trians use herein does not imply an affiliation with, or endorsement by, the owners of these service marks, trademarks and trade
names.

Executive
Summary

Executive Summary

Trian beneficially owns in excess of $1.3bn of PepsiCo shares, making it one of the largest
positions in our portfolio

We believe the status quo is unsustainable. PepsiCo has significantly underperformed

over a prolonged period of time

Total Shareholder Return (TSR) at the low end of the peer group since 2006

Earnings per share (EPS) growth has compounded at approximately half the rate of the consumer staples
index since 2006

We believe PepsiCo is at a strategic crossroads as secular forces ranging from changing

consumer tastes to the increased importance of emerging markets have changed the
outlook of PepsiCos key businesses. Managements plans (increased advertising and
marketing spend, the hope of disruptive carbonated soft drinks (CSD) innovation, and
productivity initiatives that have not hit the bottom-line) are unlikely to be game-changers
long-term

Trian believes the problem is structural as management and shareholders grapple with the
dichotomy between the companys fast growth and slow growth businesses

Conflict in allocating resources: do you starve Americas Beverage to feed growth markets or do you borrow
from growth markets to prop up Americas Beverage?

Lowest common denominator effect to valuation as PepsiCo is neither a GrowthCo nor a CashCo:
PepsiCos growth businesses are overshadowed by beverages, while beverages should be positioned as a
CashCo (more efficient capital structure, high dividend)

Ceiling on valuation: PepsiCo is destined to be viewed as #2 to Coke despite snacks comprising 2/3rds of
PepsiCos value

Both snacks and beverages are limited in their strategic options because of PepsiCos holding company
structure

Note: The estimates, projections, pro forma information and potential impact of the ideas set forth herein are based on assumptions that Trian believes to be reasonable, but there can be no
assurance that actual results or performance of the Issuer will not differ, and such differences may be material. This presentation does not recommend the purchase or sale of any security.

Executive Summary (contd)

To unlock shareholder value, we have recommended to PepsiCo that it pursue one of two
strategic alternatives:
Alternative A: Merge with Mondelez, creating a global snacks powerhouse. Use acquisition as catalyst to
separate beverage ~$175 implied value per share by the end of 2015 (only way for
shareholders to capture up to $33bn in cost synergies)

Alternative B: Separate global snacks and global beverage into two standalone companies approximately
$136 $144 implied value per share by the end of 2015 depending on whether PepsiCo spins all
of beverages, Americas beverages or N. American beverages

PepsiCo has indicated that it is not inclined to pursue a Mondelez transaction though we
disagree with their rationale and hope they will reconsider their position

If PepsiCo does not pursue a Mondelez transaction, we believe it must separate snacks /
beverages. We believe a separation will create a focused snacks leader positioned to
deliver attractive growth and productivity initiatives that hit the bottom-line. We believe it
will also create a beverages leader that can combine an efficient capital structure, high
dividend and operational improvements to unlock value. Separating beverages from
snacks preserves the possibility of a strategic transaction in the future, which can create
additional value

Note: The estimates, projections, pro forma information and potential impact of the ideas set forth herein are based on assumptions that Trian believes to be reasonable, but there can be no
assurance that actual results or performance of the Issuer will not differ, and such differences may be material. This presentation does not recommend the purchase or sale of any security.

PepsiCo: A Leader In Snacks & Beverages

Scale

$65 billion in 2012 revenue

Largest food and beverage business in North America and second largest in the world

Global

Sales in over 200 countries

35% of revenue from developing and emerging markets

Brand Power

Well Positioned

22 billion-dollar brands
More than 40 brands between $250m and $1bn in sales(1)
Strong category leadership; brands are typically #1 or #2 in their categories
Attractive categories (snacks and beverages) projected to grow revenue globally at 5%
or higher
Competes in categories with a small number of key players
Snacks business, if standalone, would be one of the most attractive consumer
companies in the world (leading market shares, strong margins and growth)

2012 Sales

Source: SEC filings, annual reports and investor presentations.

(1) As of 2/21/2013

2012 Core Operating Profit

Leading Portfolio Of 22 Billion-Dollar Brands

Mega Brands: Estimated Worldwide Retail Sales ($bn)
Walkers
Starbucks Ready to Drink Beverages (PepsiCo/Starbucks partnership)

Diet Mountain Dew

Fritos
Sierra Mist

Brisk (PepsiCo/Unilever partnership)

Pepsi MAX
Aquafina
Tostitos
Ruffles
Lipton Ready-To-Drink Teas (PepsiCo/Unilever partnership)
Mirinda

Cheetos
Quaker Foods and Snacks
Doritos
7-Up (Outside US)
Diet Pepsi
Tropicana Beverages
Gatorade (G Series, FIT, Propel)
Mountain Dew
Lays
Pepsi
$20

$15

$10

$5

$0

Source: PepsiCo 2011 Annual Report and Investor Presentations

Track Record of
Underperformance

Shareholder Returns Have Disappointed

Total shareholder returns have significantly underperformed large-cap snacks and beverages
peers (along with the consumer staples index) over an extended period of time
Total Shareholder Returns:
Since 2006 (1)

Total Shareholder Returns:

5-Years

187%

260%
214%
123%
106%

95%

145%
75%

109%

56%

90%

77%
52%

CCE

Cons.
Staples
Index

CCE

Total Shareholder Returns:

3-Years

Cons.
Staples
Index

Total Shareholder Returns:

1-Year

105%
95%

90%

33%
71%

30%

70%

12-month period begins shortly

after major earnings re-set in
early Feb. 2012

27%

24%

22%

46%
14%

36%

8%

CCE

Cons.
Staples
Index

CCE

Cons.
Staples
Index

Source: Capital IQ through July 11, 2013. Total returns include dividends. Consumer staples index represents the Consumer Staples Select Sector Index (IXR), estimated by
using Consumer Staples Select Sector SPDR Fund (XLP).
(1) As of October 2006 when current leadership team took over. Dr Pepper Snapple was not public throughout the entire timeframe.

10

It All Comes Down To Earnings:

EPS Growth Has Trailed Peers: 2006-2012
PepsiCo EPS growth has materially trailed peers since 2006
EPS has compounded at approximately half the rate of the consumer staples index and key competitors like Coca-Cola
EPS has only grown 11% in total over the past four years

PepsiCo Adjusted EPS Has Stalled

And EPS Growth(1) Has Trailed Peers

Consumer Staples
Avg: 71%

$4.13

$3.68

154%

$4.40
$4.10

$3.71

$3.38
$3.00
71%

70%
58%
37%

36%
19%

2006

2007

2008

2009

2010

2011

2012

CCE

Consumer
Staples
Index

EPS
CAGR(2) 11%(3)

Source: Company SEC Filings and Bloomberg

(1) Represents 2006 2012 total EPS growth
(2) Compounded annual growth rate
(3) Dr Pepper Snapple EPS since first annual public data (12/31/2008). CCE 2006 EPS adjusted to reflect impact of special dividend.

9%

CocaCola

9%

Dr
Pepper
Snapple

12%(3)

Hershey

5%

PepsiCo

Kraft/
Mondelez

5%

3%

11

Despite 2012 EPS Reset, 2013 EPS Growth

Is Forecast to be Below Peers
PepsiCo reset EPS in 2012 to $4.10, well-below prior consensus expectations of ~$5.00
Driven in part by $500-$600m in additional brand support

Despite the reset and significant brand investment, 2013 EPS is forecast to grow only 7%,
below the peer average and at the low-end of PepsiCos long-term guidance (high single
digit EPS growth)
As a result, 2013 EPS is forecast to be only 6% above the level achieved in 2010

PepsiCo 2012 Consensus EPS Estimate Over Time

2013E Consensus EPS Growth Below Peers(1) and

Long-Term Guidance
(Despite 2012 Reset)

$5.25

9.3%
High SingleDigit

$5.00
$4.75

Actual $4.10

$4.50

7.3%

$4.25
$4.00
$3.75
Nov-10 Mar-11

Jul-11

Nov-11 Mar-12

Jul-12

Nov-12

Peer Average

Source: Capital IQ and SEC Filings.

(1) Peers include Coca-Cola, Dr Pepper Snapple, Mondelez, Hershey and Coca-Cola Enterprises

Long-Term
Guidance

PepsiCo

12

The Current Structure

Is Unsustainable

PepsiCo Has Struggled Managing

Two Fundamentally Different Businesses
PepsiCo Snacks

PepsiCo Beverage

$35bn Revenue / $6.3bn EBIT(1)

$33bn Revenue / $3.9bn EBIT(1)

2/3rds of PepsiCo value

1/3rd of PepsiCos value but

Leader in growing categories

#2 globally (meaningfully trails

Coca-Cola)

#1 in salty snacks (10x relative

global market share)(2)

Main competitor has advantaged

position and 100% focus

Organic volume growth across

virtually all businesses

N. American CSDs (+25% of

revenue): 5+ yrs of negative
volume growth and 10+ yrs of per
capita volume declines
structural challenge(3)

Extremely profitable (18% EBIT

margin in top quartile of food
group)
Very different business /
management requirements vs.
beverages:
Less innovation-intensive
Category dominance supports
push vs. pull model
Company-owned supply chain a
unique economic model and
competitive advantage

Consistent organic growth a

primary driver of shareholder
returns

Structural Challenges
PepsiCo underinvested in
beverages to support snacks
Then, snacks were pushed to overearn to support reinvestment in
beverages
Meanwhile, advertising spend as a
% of sales has declined and trails
peers

Meaningful consumer of capital

post bottling acquisition

Beverage JVs in key growth

markets offset earnings pressure
but were questionable long-term
decisions

12% EBIT margin lags peers and

PepsiCos snacks business

Productivity / synergies have not hit

the bottom-line

Fundamentally different culture /

strategic priorities vs. snacks:

EPS growth trails peers

Fast-moving culture
Consumer-led innovation
Optimization of distribution is key
(franchise vs. company-owned)

Challenges retaining managerial

talent (particularly beverages)
Snacks valuation obfuscated by
beverages weakness

Cash returns and cost management

are primary components of
shareholder returns

Note: The estimates, projections, pro forma information and potential impact of the ideas set forth herein are based on assumptions that Trian believes to be reasonable, but there can be no assurance
that actual results or performance of the Issuer will not differ, and such differences may be material. This presentation does not recommend the purchase or sale of any security.
(1) Represents 2013 Trian estimates. Beverage revenue and EBIT in Europe and AMEA segments allocated per Trian estimates and Wall St. research. Corporate costs are allocated as a percentage of
revenue. EBIT is defined as earnings before interest and taxes.
(2) Q4 2012 PepsiCo earnings call.
(3) Bernstein 2/6/13.

14

Power of One Between Beverages / Snacks

Has Driven Cultural And Operational Challenges
Ten years into Power of One has yielded a dominance of snack minded management
in charge of execution. The merchandising benefits of [Power of One] will not offset the
cultural handicaps that it seems to be imposing on the beverage unit
A turnaround of the North American beverage business is never going to happen if soft
drinks and snacks are not properly managed for their increasingly different strategic and
cultural needs. How is Power of One counterproductive? Just a few days ago PepsiCo
announced a new Power of One Americas Council The council includes 6 legacy snack
executives and only 2 native beverage executives. According to PepsiCo, this council is
necessary because, snack and beverage occasions are typically planned together and the
products are both purchased and consumed together. We do not entirely agree with this view
and respectfully question how this perspective will help to decommoditize Pepsis core
beverage brands and reactivate the categorys growth. A great many of the occasions for
snacks and soft drinks do not easily match.This continued emphasis on Power of One and
recent decisions by the corporate leadership could be making it tougher to form the next
generation of beverage leaders. There is a risk that bright beverage executives at PepsiCo may
be concerned by what we externally see as a subjugation of the beverage units culture and
needs to Frito Lay. The unintended message that may be getting sent by the recent
management moves and by the snack heavy senior leadership is that any talented individual who
wants to rise through the beverage ranks must flow through the food business at some point.
There seems to be little room and hope for native and career beverage executives at PepsiCo.
Credit Suisse research 10/4/2011
15

Is Americas Beverage Weakness Also Impacting Frito-Lay?

We suspect Fritos volume weakness in recent years is linked to Americas Beverage
Specifically, we question whether Frito has been pushed to over-earn (or under-invest) to offset declining beverage profits
Volume deceleration at Frito has coincided with hundreds of basis points of Frito margin expansion in recent years

If so, we believe this dynamic is unsustainable or Frito can expect accelerated market share losses ahead
US CSDs: A Declining Category
Significant investments in marketing in 2012 did not result in share
gains in the US, but only served to stabilize share

5.0%

Volume growth was still negative, declining low-single-digits

0.0%

Am. Beverage Organic Volume Growth(1)

3%

3%

4%

3%

4%
0%

What happens when incremental beverage investment subsides?

The plight of North American CSDs is well documented: more than
half a decade of negative volume growth and more than a full decade
of per capita volume declines(2)

0%

-1%

-1%

-5.0%

-3%
-6%

-10.0%
'02

'03

'04

'05

'06

'07

'08

'09

'10

'11

'12

Snacks: A Growing Category but Frito-Lay North America is Losing Share

Frito-Lay North Americas growth has been slowing for several
years
Slowing overall sales growth
2002-2009: Average of 6% organic growth
2009-2012: Average of 3% organic growth
Frito-Lay North America significantly lagged broader snack growth
in 2012(3)
Salty Snacks: Nielsen channels grew 4.5-5.5% vs PEPs +2-2.5%

Decelerating Organic Volume Growth Over Time(1)

5.0%
4.0%
3.0%
2.0%
1.0%
0.0%
-1.0%
-2.0%

4%
3%

3%

4%
3%

1%

1%

3%

1%

1%
-1%

'02 '03 '04 '05 '06 '07 '08 '09 '10 '11 '12

Snacks: Nielsen channels grew +6% vs PEPs +1.5-2%

Excludes impact of 53rd weeks. Excludes volume from incremental brands related to PBG operations in Mexico as well as volume related to DPSG manufacturing and
distribution agreement, entered in connection with acquisitions of PBG/PAS (applies to 2010 & 2011 beverage). Prior to 2008, this refers to just North America as Pepsi
changed its segment structure.
(2)
Bernstein 2/6/13.
(3)
Goldman Sachs 1/23/13.
Note: The estimates, projections, pro forma information and potential impact of the ideas set forth herein are based on assumptions that Trian believes to be reasonable, but there
can be no assurance that actual results or performance of the Issuer will not differ, and such differences may be material. This presentation does not recommend the
16
purchase or sale of any security.
(1)

Under-Investment In Brands
PepsiCos advertising spend as a % of net sales has declined considerably in recent years
and is well below peers, even with the significant brand reinvestment in 2012
We believe the lack of consistent advertising investment is another indication of the
challenges and conflicts in resource allocation that arise when managing businesses with
inherent structural differences
Advertising Spend as a % of Sales: 2006 2012
12%

10%

8%

6%

4%

2%
2006

Source: Company SEC Filings.

2007

2008

2009

2010

2011

2012

17

Minimal Return on Invested Capital

Cash Flow From Operations (09-12)
($bns)

($ billions)

Total: $32.7bn (~25% of Market Cap)

$12.0
$8.9

$8.4
$8.0

Capital Expenditures, Net Acquisitions &

Research and Development

$8.5

$6.8

$0.0
2009

2010

2011

11,434

8.7%

Acquisitions, Net of Divestitures(1)

21,441

16.2%

1,008

0.8%

Total Capital Investment

33,883

25.6%

% of Cumulative Operating Cash Flow

103.7%

2012

While Adjusted EPS Has Barely Grown

$6.00

$4.13
$4.00

$3.68

$4.40

% of
Market Cap

Capital Expenditures

Restructuring Expense
$4.0

Cumulative
'09-'12

$4.10

$3.71

Despite spending an aggregate of $33bn from 2009 to

2012 which was over 100% of operating cash flow
on capex, net acquisitions and restructuring, EPS has
grown at just 5%. Moreover, the Company has
generated just a 5% return on capital (change in EBIT
2008 to 2012 divided by total capital investment)(2)

2.7% CAGR

$2.00

$0.00
2008

2009

2010

2011

2012

Source: PepsiCo SEC filings. Market Capitalization as of 7/11/2013

(1) Used equity acquired (percentage not owned) plus assumed debt for acquisitions.
(2) EBIT increased $1.9bn from 2008-2012. This increased was just 5% of total capital invested.

18

Limited Value Creation From Recent Acquisitions

Company

Purchase
Price(1)

EV(3)/LTM
EBITDA(4)

Trian Commentary
We believe PepsiCo significantly overpaid for exposure to
perhaps the riskiest emerging market

Lebedyansky JSC,
Juice Business

~$5.0bn

17.5x

~$11.6bn

8.3x

~$4.3bn

8.6x

800-900m
reais
>$450m
(Rumor)

NA

$2.0bn(2)

Midteens(5)

Rich valuation: Danone sold its minority stake a few months

earlier at a significantly lower valuation

Multiple paid, which was well below PepsiCos multiple,

should have led to EPS accretion and / or freed up funds
for investment in growth
But, acquisition failed to drive EPS higher and PepsiCo was
still forced to re-invest in brand support / rebase earnings in
2012

We believe PepsiCo may have overpaid by 30% more than

the cover bid

We believe this is a high multiple for a Russian juice

business, in pursuit of health and wellness / international
exposure

Source: Company SEC Filings, Press Releases and Bloomberg PepsiCo Buys Mabel for as Much as 900 Million Reais, Estado Says.
(1) Market cap they acquired (excludes percentage already owned) plus the debt they consolidated
(2) Implied total enterprise value of Lebedyansky Juice business from PepsiCos 3/20/2008 press release.
(3) Enterprise Value
(4) Earnings before interest, taxes, depreciation and amortization
(5) Based on Trian estimates and PepsiCo press release (3/20/08).

19

Limited Value Creation From Push Into Health And Wellness

At its 2010 investor day, PepsiCo unveiled a new corporate objective: building a
$30bn nutrition business (NutritionCo) by 2020

Called for faster organic growth through integration of health strategies across segments (e.g.,
Power of One) as well as acquisitions of nutrition-related companies

While Trian believes PepsiCo is well served to prudently adapt its product-line
to changing health trends, we believe the emphasis placed on building out
NutritionCo was a distraction from the core portfolio

Led to several high-priced acquisitions (e.g., Wimm-Bill-Dann), a common risk when an M&A
department is tasked with achieving aggressive growth targets in a specific area

Distractions may have been a contributor to loss of market share in key snacks and beverages
categories

The focus on NutritionCo also led to a perception that management had

disavowed its fun for you portfolio the heart of PepsiCos business

20

China and Mexico Bottling Transactions:

Sacrificing Long-Term Value For Short-Term Accretion?
In mid-2011, PepsiCo announced an agreement to contribute its companyowned Mexican bottling operations to a new joint venture with GEUPEC and
Empresas Polar, where GEUPEC was given a majority stake

In late-2011, PepsiCo announced an agreement to contribute its Chinese

company-owned and JV bottling operations to Tingyis beverage subsidiary
Tingyi-Asahi Beverages (TAB) in return for a 5% equity interest in TAB with an
option to increase its holding to 20% by 2015
While these transactions had several near-term benefits
PepsiCo was reportedly losing ~$180m annually in China (in part, we believe, because of a high-cost
infrastructure)
Claimed co-branding opportunities and distribution synergies

We believe PepsiCo may have mortgaged its long-term future in key growth
markets
Gave up control of route to market in two of the most important countries outside the U.S.
Will rely on third parties to build PepsiCos presence

Trian is uncertain a 100% focused beverage company would have entered into
these transactions
Source: PepsiCo SEC filings and Wall Street research including Bank of America 4/23/12.

21

Claims Of Productivity Savings

And Synergies Have Not Hit The Bottom-Line
Several productivity initiatives announced since 2008:
Productivity for Growth: $1.2bn in total cost savings (Q4 2008-2011)
2012-2014 Productivity Plan: $3bn from 2012-2014, delivered in excess of $1 billion in 2012(1)

Also significant announced cost synergies from acquisitions:

Pepsi Bottling Group / PepsiAmericas: $550m per year (2010-2012)
Wimm-Bill-Dann (WBD): $100m per year (2011-2014)

Limited Impact on the Bottom-Line

From 2009-2012 Productivity/Synergies
09-12 Productivity: $2.2bn
09-12 Synergies: $0.6bn
Total Savings: $2.8bn ($1.31 per share)
$3.68

2008

$4.10

2012

Claimed savings of $1.31, yet only $0.42

of total EPS growth
Source: Company SEC Filings, Transcripts
Note: Productivity and synergies are annualized based on Trian estimates.
(1) Q4 2012 transcript 2/14/13.

No Impact on the Bottom-Line

From 2012-2013 Productivity/Synergies
11-13 Productivity: $2.0bn
11-13 Synergies: $0.3bn
Total Savings: $2.3bn ($1.05 per share)

$4.40

2011

0.0% EPS
CAGR

$4.40

2013E
(Consensus)

Claimed savings of $1.05, yet no change

in EPS

22

EBIT Margin Before Advertising At Low End Of Peers

PepsiCos EBIT(1) margin (before advertising expense) is well below the peer
group

Why arent lower margin bottling assets being offset by higher margin
businesses like beverage concentrates, Quaker NA and Frito-Lay NA?
2012 EBIT Before Advertising: % of Net Sales

30%
26%

Coca-Cola

Dr Pepper
Snapple(2)

Peer Average: 25%

26%

Hershey

18%

17%

PepsiCo

Mondelez

Source: Company SEC Filings

(1) EBIT defined as earning before interest and taxes
(2) All companies add back only advertising expense except Dr Pepper Snapple. Dr Pepper Snapple only discloses Advertising and Marketing Production Costs Related to
TV, Print, Radio and Other Marketing Investments, so this figure is added back to operating income.

23

Beverage Margin Also Estimated at Low End of Peers

Though PepsiCo does not disclose its international beverage margin (1/3 of sales),
we estimate its global beverage business has a 12% EBIT margin well below
beverage peers

Even Coca-Cola Enterprises (CCE) has a higher margin despite lack of concentrate
revenue (albeit European bottling is more profitable than U.S. bottling)
PepsiCo Estimated 2012 Beverages Margin vs Beverages Peers

23%
Peer Average: 18%

18%
13%

Coca-Cola

Dr Pepper
Snapple

CCE

12%

PepsiCo Global Beverages

(Trian Estimate)

Source: SEC filings and Wall Street research.

Note: The estimates, projections, pro-forma information and potential impact of Trians ideas set forth herein are based on assumptions that Trian believes to be reasonable, but there can be
no assurance or guarantee that actual results or performance of the Issuer will not differ, and such differences may be material. This presentation does not recommend the purchase or sale
of any security.
(1) Represents 2012 Trian estimates. Beverage revenue and EBIT in Europe and AMEA segments allocated per Trian estimates and Wall St. research. Corporate costs are allocated as a
percentage of revenue.

24

Trians Path to
Value Creation

The Time Is Right: Separate Snacks / Beverages

Trian believes the challenges facing PepsiCo are structural in nature, rendering the company increasingly
unmanageable as evidenced by the long record of underperformance

Fundamentally different businesses with different drivers to shareholder value: growth vs. cash return

Conflict in allocating resources between businesses

Ceiling on valuation

Margins that lag peers

Productivity and synergies that fail to impact the bottom line

Structural problems require structural solutions: we believe superior shareholder value can be attained at PepsiCo
by separating into standalone snacks and beverages companies

Separation is a means to an end:

o Increases probability of profitable growth
o Increases probability of trading multiple re-rating

Trian has recommended to PepsiCo that it pursue one of two strategic alternatives, each of which entails a
separation of beverages:
Alternative A: Merge with Mondelez, use acquisition as a catalyst to separate beverages. A bold, transformative
transaction that creates the global snacks leader with potential for up to $6 billion in cost and revenue synergies
Alternative B: Separation of snacks and beverages into two new standalone companies. Trian favors a spin of all of
beverages (as opposed to a spin of North America beverages or Americas beverages only):
o Creates two pure play companies

o Preserves global brands

o Maximizes probability of value add strategic moves in the future
Note: The estimates, projections, pro-forma information and potential impact of Trians ideas set forth herein are based on assumptions that Trian believes to be reasonable, but there can be no
assurance or guarantee that actual results or performance of the Issuer will not differ, and such differences may be material. This presentation does not recommend the purchase or sale of any security.

26

The Separation Is A Means To An End

Increases Probability Of Profitable Growth
Improves focus and eliminates complexity

Increases Probability Of Multiple Re-Rating

Frito-led snacks an attractive standalone company

One-time opportunity to optimize corporate

structures; start with blank sheets of paper to
create leaner businesses

Growth company that generates significant cash / pays an

attractive dividend

More likely that productivity hits the bottom-line

Opens door to strategic options (consolidator, M&A target,

Mondelez merger)

Can reduce substantial holding company costs

($1bn corporate unallocated)

Focused food peers trade at much better valuations

Dis-synergies can be fully offset (though we

assume only ~50% are offset in our modeling):
$0.8-1.0bn of claimed synergy between beverage /
snacks per management
Management believes synergies would be lost upon
separation
We believe dis-synergies can be mitigated through joint
purchasing co-ops, cost-sharing agreements, etc.
Moreover, based on Trians experience with corporate
spin-offs, dis-synergies are often more than 100% offset
by cost savings found as part of the blank sheet of
paper process

No longer subsidizing beverages / competing for resources

Fast moving global beverage pure-play is better

positioned to compete with 100% focused peers
Iconic portfolio with significant untapped potential (margin
expansion, latent brand value)

Company to benefit from highly efficient capital / dividend

structure and CashCo positioning
Entrepreneurial spirit / quick decisions are critical
components to beverages success
Numerous strategic options as consolidator, merger partner
or acquisition candidate

Manufacturing / distribution structure can be optimized

down the road

Source: SEC Filings and transcripts.

Note: The estimates, projections, pro forma information and potential impact of the ideas set forth herein are based on assumptions that Trian believes to be reasonable, but there can be no assurance
that actual results or performance will not differ, and such differences may be material. This presentation does not recommend the purchase or sale of any security. The above example is merely
illustrative. Market conditions at the time of the events reflected above may differ materially from current and future market conditions. The performance of this example should therefore not be construed
as an indication of PepsiCos performance. Past performance is not an indication of future results.

27

PepsiCo Snacks Value Obfuscated By Beverages

Rolling 3-Yr LTM P/E(1) Multiple:

45.0x

PepsiCo
Coca-Cola
Hershey

Avg Rolling LTM PE

'95 '02
'03 '09
'10 '13
30.3x
22.1x
17.7x
38.2x
23.6x
19.7x
24.7x
26.7x
24.0x

40.0x

35.0x

30.0x

25.0x

Key Takeaways:
Companies selected based on scale in branded beverage (CocaCola / PepsiCo) and snacks / confectionary (Hershey)
Key takeaways include:
1. Beverage valuations have been declining in absolute terms
and relative to snacks since the early 2000s (when the lines
crossed and snacks began trading at a premium)
2. PepsiCo has almost exclusively traded at a valuation
discount to Coca-Cola, despite more than half the value of
PepsiCo coming from snacks
3. Hershey, 100% focused on snacks and confectionary,
trades at one of the best multiples in consumer staples.
And rightly so, given it participates in a fast growth
category, has strong margins and has leading brands
4. While not perfect, Hershey is perhaps the most comparable
company for PepsiCo Snacks or a combined PepsiCo /
Mondelez given its snacks / confectionary focus. That said,
Hershey has significantly less international / emerging
markets exposure

20.0x

15.0x

Source: Capital IQ.

(1) Defined as last twelve months price-to-earnings.

28

PepsiCo Snacks Should Trade At Attractive Valuation

Highly focused food companies trade at premium multiples vs. peers with diverse portfolios
Reasons likely include: (i) easier to manage; (ii) respond faster to market challenges / opportunities; and
(iii) more attractive M&A partners
2013 P/E
Large Cap Average: 24.0x

Smaller Cap Average: 29.9x

24.9x

??

POST
(Post)

WWAV
(WhiteWave
Foods)

LNCE
(Snyder's
Lance)

PepsiCo
Snacks

30%

0%(4)

16%

0%(5)

51%

9%

8%

-4%

14%

4%

6%+(6)

23.3%

18.6%

16.1%

7.5%

6.7%

18.0%(7)

22.8x

22.9x

25.1x

HSY
(Hershey)

MKC
(McCormick)

MJN
(Mead
Johnson)

WWY(1)
(Wrigley)

Intl Sales %
(ex NA)

11%

36%(2)

70%+(3)

3-Yr Average
Organic
Growth

7%

5%

CY2012 EBIT
Margin

18.5%

14.4%

40.1x
24.6x

25.2x

Indra Nooyi: I'd say it if it were a stand-alone company, Frito-Lay North America might well be the best
consumer products company Q2 2011 Earnings Call, 7/21/2011

Source: Capital IQ, SEC Filings, Hershey 2013 CAGNY.

Note: The estimates, projections, pro forma information and potential impact of the ideas set forth herein are based on assumptions that Trian believes to be reasonable, but there can be no assurance that actual results
or performance will not differ, and such differences may be material. This presentation does not recommend the purchase or sale of any security. The above examples are merely illustrative. Market conditions at the time
of the events reflected above may differ materially from current and future market conditions. The performance of these examples should therefore not be construed as an indication of PepsiCos performance. Past
performance is not an indication of future results.
(1) Wrigley data is prior to its acquisition by Mars. 2013 P/E is P/E as of 4/27/2008, the day before the Mars acquisition was announced and is for the forward Calendar Year. International Sales percentage is from
2007 sales. Organic growth average is from 2005-2007.
(2) At Sanford Bernstein conference in May 2013, company disclosed 2 data points: 41% of sales outside the US and 31% of sales outside the Americas. Takes mid-point of these two data points
(3) Mead Johnson includes North America and Europe in the same segment. International sales excludes Europe.
(4) Implied by annual report, in which it states it is a manufacturer, marketer and distributor of branded ready-to-eat cereals in the United States and Canada
(5) Implied by annual report, in which it only refers to selling to North America.
(6) Organic growth for PepsiCo per companys SEC filings and Trian estimates.
(7) EBIT estimate for PepsiCo per companys SEC filings and Trian estimates.

29

Tax Free Spin-Offs: A Strong Record of Value Creation

Recent consumer spin-offs have generated significant total returns relative to the S&P 500. Many of these
companies were struggling prior to the separations
Kraft vs. S&P 500

Ralcorp vs. S&P 500

Separated North American Grocery

Business (KRFT) to create a CashCo /
GrowthCo

Sara Lee vs. S&P 500

Separated into cereal (Post) and private

label
After the spin, Ralcorp was acquired by
ConAgra for a 28% premium

Sold HPC business to Unilever (ann. 9/09)

Separated coffee (D.E. Master Blenders) to
create meat-centric food business
DE sold at ~17x CY2013 EBITDA (4/2013)(1)
205%

51%
22%

39%

61%

9%
Kraft

8/3/11-7/11/13

S&P

Ralcorp

7/13/11-11/27/12

Cadbury vs. S&P 500

Separated beverage business (DPS) to create

pure-play snack / confectionary company
Cadbury acquired for 13x LTM EBTDA by Kraft
36%

Sara Lee

S&P

S&P

9/24/09-3/28/13

Fortune Brands vs. S&P 500

Sold golf business (Acushnet) (7/2011)

Separated home & security business (FBHS)
from spirits business (BEAM)
80%

45%
-24%

Cadbury

S&P

Fortune

12/7/10-7/11/13

S&P

3/12/2007-9/7/2009

Spin-Offs (tracked through the Bloomberg US Spin-Off Index) have generated a 64% price return vs. 20% for
the S&P 500 over the last five years (+26% vs. +17%, year-to-date) Goldman Sachs, SOTP Handbook, 5/23/2013
Source: Capital IQ and Trian calculations.
Note: End date is not 7/11/13 when either the spin or remaining company has agreed to be acquired (e.g. Cadbury, D.E. Master (Sara Lee) and Ralcorp), but instead the date that the agreement
to be acquired or talks were announced.
Note: The estimates, projections, pro forma information and potential impact of the ideas set forth herein are based on assumptions that Trian believes to be reasonable, but there can be no
assurance that actual results or performance will not differ, and such differences may be material. This presentation does not recommend the purchase or sale of any security. The above
examples are merely illustrative. Market conditions at the time of the events reflected above may differ materially from current and future market conditions. The performance of these examples
should therefore not be construed as an indication of PepsiCos performance. Past performance is not an indication of future results.
(1) D.E. Master Blenders was known to be in talks with Benckiser as of 3/28/13. 2 weeks later the acquisition was announced.

30

s ("E")

1,007

1,282
903

1,139
808

1,007

903
Cadbury
Confectionary
Margin
638
633Progression:
592
558
527
497
633 Benefits Of Focus On Operations
592Powerful

Same management team

since 2003!
2007A

2008E/A

NA
2009E/A

Underlying Operating
Profit
(mm)

NA
NA
NA
2010E

2010E
2011E
2012E ("E")
Pre-Trian Wall St.
Research Estimates

2011E

2012E

2013E
Post-Trian Actuals ("A") / Jan. 2010
KFTGuidance
acquisition ("E")
closes

CBRY separates confectionary

and beverage in 2008

1,282

in early 2010

Post-Trian Actuals ("A") / Jan. 2010 Guidance ("E")

497

2013E

903

808
638
527

1,007
633

592

558

1,139

NA
2007A

2008E/A

2009E/A

Pre-Trian Wall St. Research Estimates ("E")

Pre-Trian Wall St. Research Estimates -- Other Key Metrics:
Net Revenue
5,093
5,132
5,353
Underlying Operating
Profit Margin

9.8%

10.3%

Post-Trian Actuals / Jan. 2010 Guidance -- Other Key Metrics:

Net Revenue
5,093
5,384
Underlying Operating
Profit Margin

9.8%

11.8%

10.4%

5,975
13.5%

2010E

2011E

NA

2012E

2013E

Post-Trian Actuals ("A") / Jan. 2010 Guidance ("E")

5,585
10.6%

6,334
14.3%

5,828
10.9%

6,714
15.0%

NA

NA

NA

NA

7,116

7,543

16.0%

17.0%

Following the spin-off of beverages and creation of a pure-play confectionary business in 2007, Cadbury increased
its 2010 operating profit margin to a level 400 bps above what Wall Street analysts had forecast prior to the separation.
Source: Cadbury reported results and guidance based on the companys detailed press releases for the fiscal years ended December 2007, 2008 and 2009 and from its January 2010 investor
presentation. The Wall Street research report was from 3/14/2007, prior to Trians involvement and the Companys Vision Into Action Plan announced in June 2007.
Note: The above example is merely illustrative. Market conditions at the time of the events reflected above may differ materially from current and future market conditions. The performance of this
example should therefore not be construed as an indication of PepsiCos performance. Past performance is not an indication of future results.

31

Precedent For PepsiCo Spin-Off Success:

Yum! Brands

In 1997, PepsiCo spun-off its quick service restaurant (QSR) business (Yum) to focus exclusively on snacks /
beverages

At the time, Yum was clearly disadvantaged vs. McDonalds in terms of global brands and financial firepower

But 15 years later, Yum has significantly outperformed McDonalds across virtually every key metric due to
savvy management and aggressive capital deployment, particularly in emerging markets

Would Yum have been as successful (and would it have built a Chinese business worth >$20bn) had it been
part of PepsiCo these past 15 years? We think not

Investors today view PepsiCo Beverages as disadvantaged vs. Coke

They may be right but PepsiCo Beverages has a collection of phenomenal brands with significant untapped
potential. Five years from now (or fifteen) will PepsiCo Beverages be better off still playing second fiddle to
Frito-Lay or having operated as a standalone company under a 100% dedicated management team?
Yum vs. McDonalds (1997 Spin-Off Through Today)

($bn, except per share values)

Enterprise Value
1997
Today

1997

EPS
Today

International Sales
% of Total Sales
1997
Today

Restaurant Profit/
Avg. Company Unit
1997
Today

# of China
Restaurants
Today

$5,047 $35,797
+609%

$0.34
$3.25
+871%

25%
+50%

75%

$85
+212%

$264

5,726

$39,351 $111,517
+183%

$1.16
$5.36
+360%

60%
+8%

68%

$318
+63%

$518

1,700

Source: SEC filings.

Note: The estimates, projections, pro forma information and potential impact of the ideas set forth herein are based on assumptions that Trian believes to be reasonable, but there can be no assurance that actual
results or performance will not differ, and such differences may be material. This presentation does not recommend the purchase or sale of any security. The above examples are merely illustrative. Market
conditions at the time of the events reflected above may differ materially from current and future market conditions. The performance of these examples should therefore not be construed as an indication of
PepsiCos performance. Past performance is not an indication of future results.
32

Kraft Foods Group:

A Case Study For PepsiCos CashCo (PepsiCo Beverages)
Despite a slow growth collection of businesses, Kraft Foods Group (the
N. American grocery division spun-off to shareholders by Kraft in October) trades at a
slight premium to global food peers
20x 2013e P/E multiple vs. ~18x for an average food company(1)

Prior to the spin-off, this same N. American grocery portfolio was viewed as the weaker
portion of Krafts portfolio (meats, cheese, coffee, packaged meals, etc.) similar to how
PepsiCo Beverage is viewed today
Nevertheless, Kraft Foods Groups premium valuation is supported by a safe U.S.-centric
sales mix, an efficient capital structure (~3x Debt/EBITDA), a high dividend payout ratio
(70%) and an attractive dividend yield (3.5%)
Based on an aggressive mindset to reduce unnecessary costs, there is an expectation
management will deliver +300 bps of margin improvement(2) in the coming years as the
company emerges from its legacy culture
We believe Kraft also has the ability to make future accretive acquisitions that, prior to the
spin-off from the parent company, were too small to move the needle and/or focused in
areas that were not strategic priorities
We believe PepsiCo Beverages (PepsiCos CashCo) has a stronger brand portfolio than
Kraft Foods Group in addition to strong, stable free cash flow. If spun-off as a separate
company with a dedicated management team and an intelligent capital allocation strategy,
we believe PepsiCo Beverages would achieve a very attractive valuation multiple
Note: The above example is merely illustrative. Market conditions at the time of the events reflected above may differ materially from current and future market conditions. The performance of
this example should therefore not be construed as an indication of PepsiCos performance. Past performance is not an indication of future results.
(1) Source: Capital IQ. Peer group includes Campbell, Danone, General Mills, Kellogg, Mondelez, Nestle, Smucker and Unilever.
(2) (2012-2015) consensus EBIT margins from Capital IQ

33

Ideal Time To Separate PepsiCo Beverages:

Could Be Modeled After The New Kraft Foods Group
Despite a slower growth collection of businesses, the new Kraft Foods Group trades at a
premium to many global food and beverage peers (including Coca-Cola and PepsiCo) based on:

Perception of latent value in iconic brands

(unrealized by former parent)
Efficient capital structure, strong dividend

Management team committed to reducing costs and

maximizing shareholder value
Expectation of +300 bps of margin improvement

We believe PepsiCo Beverages has many similar traits and can be modeled after Kraft

One of a handful of pure-play global

beverage businesses
14 billion-dollar brands
$33bn in total revenue

We estimate ~12% operating margin today (significant

room for improvement)
Strong, stable free cash flow generation can be optimized
through efficient capital structure and attractive dividend
payout ratio

2013E Price / Earnings Ratio

25.2x

22.8x
19.9x

HSY

MKC

KRAFT

19.4x

MDLZ

19.3x

KO

19.2x

PEP

18.7x

SJM

18.4x

GIS

17.3x

17.1x

16.3x

15.4x

CPB

CAG

DPS

Source: Capital IQ.

Note: The estimates, projections, pro forma information and potential impact of the ideas set forth herein are based on assumptions that Trian believes to be reasonable, but there can be no assurance that actual
results or performance will not differ, and such differences may be material. This presentation does not recommend the purchase or sale of any security. The above examples are merely illustrative. Market
conditions at the time of the events reflected above may differ materially from current and future market conditions. The performance of these examples should therefore not be construed as an indication of
PepsiCos performance. Past performance is not an indication of future results.
34

It Is Time To Redefine The Competition With Coke

Though snacks are ~51% of revenue and ~2/3rds of value, PepsiCo has forever been viewed by investors
through a beverage lens comparing it to Coke, a pure play beverage business
Majority of analysts covering PepsiCo follow beverage, not food
Analysts are fixated on challenges in North American CSDs, despite mid-single digit (MSD)+ organic growth potential across other
businesses (vs. typical food company growth of 2-3%)

Competitive pressure in beverage, in our view, has forced PepsiCo to make questionable capital allocation and
strategic decisions:
Multi-decade arms-war between Coke and Pepsi, driving promotional activity but not volume increases
Recently invested incremental ~$16bn in low margin / capital intensive bottlers to squeeze synergies and help hit profit targets
Purchased Wimm-Bill-Dann (dairy & juice, 100% exposed to single high-risk market) for 17.5x enterprise value (EV) / LTM EBITDA
Pushed snacks margins to the point of over-earning to offset beverage weakness

Managements plan to compete in beverages is unlikely to be game-changing

Disruptive innovation even when successful, generally drives transient growth

Coke will likely continue growing faster than PepsiCo in beverages because of an advantaged global position
We believe this places a ceiling on valuation; PepsiCo destined to continue trading at parity / discount to Coke despite snacks value
Time is of the essence: Coke has upped its game in recent years, leveraging its strategic advantages to make life difficult for Pepsi

Note: The estimates, projections, pro forma information and potential impact of the ideas set forth herein are based on assumptions that Trian believes to be reasonable, but
there can be no assurance that actual results or performance of the Issuer will not differ, and such differences may be material. This presentation does not recommend the
purchase or sale of any security.

35

Trian Does Not Believe Status Quo Is A Viable Long-Term Option:

Recommended Alternatives To Unlock Value
Trian
Preferred
Options
Alternative A.

Alternative B. Separate Snacks / Beverages

Merge PepsiCo &

Mondelez; Separate
Snacks / All of
Beverages

B-1:
Separate All
of Beverages

B-2:
Separate
Americas
Beverages

B-3:
Separate
N. American
Beverages
(1)
(2)

2015E Implied
Value Per
Existing Share(1)

Capital
Return

Future
Strategic
Flexibility at
New Companies

Synergies

Other
Cost
Saving

DisSynergy

$175 per PEP share Strongest capital

return (20% of
$72 per MDLZ share
combined
PEP/MDLZ market
caps to
shareholders)

Significant
flexibility

$144 per PEP share Modest capital

return (~6% of PEP
market cap returned
to shareholders
upon separation)

Significant
flexibility for both
businesses

$138 per PEP share Modest capital

return (~5% of PEP
market cap returned
to shareholders
upon separation)

Limited flexibility
None
(beverage brands
split; SnacksCo still
has non-Americas
beverage)
2 companies with
poison pills (2)

PepsiCo
Somewhat
productivity
mitigates disopportunity (must
synergies by
hit bottom-line)
preserving snacks /
beverages outside
Americas
Separates brands

$136 per PEP share Modest capital

return (~4% of PEP
market cap returned
to shareholders
upon separation)

Limited flexibility
(beverage brands
split; SnacksCo
still has global
beverage)
2 companies with
poison pills (2)

PepsiCo
Somewhat
productivity
mitigates disopportunity (must
synergies by
hit bottom-line)
preserving snacks /
beverage outside
N. America
Separates brands

Potential to
separate MDLZ
Coffee / Grocery
down the road

Brings up to $3bn
of cost savings
Up to $33bn
capitalized value)

MDLZ opportunity Dis-synergies

negated by MDLZ
PepsiCo
synergies and
productivity
standalone margin
opportunity (must
opportunities
Revenue synergies
hit bottom-line)

None

None

PepsiCo
Dis-synergies
productivity
must be offset by
opportunity (must
management cost
hit bottom-line)
actions
Preserves
synergy of global
beverage platform

Trian calculations based on assumptions detailed on pages 48, 56,and 59

Creates two less attractive acquisition candidates / merger partners, one that is no longer a focused food company (beverage may hinder the attractiveness of it to
potential buyer/partner) and the other a beverage company without full control of its brands and restrictions on expansion.

36

A.

Merge With Mondelez;

Separate Beverages / Snacks
Drive Synergies
Realize Standalone Margin
Improvement / Productivity
Opportunities At Both Companies
Opportunity For Efficient Capital
Structure And Significant Capital Return

Trian Sees A Mondelez Merger / Beverage Separation

As The Best Strategy For PepsiCo
Trian believes a merger with Mondelez and a separation of all of PepsiCos
beverages business is the right strategy
~$3bn in potential cost synergies and Mondelez
margin improvement (up to $33bn value)
~$3bn in potential revenue synergies (up to $8bn value)
Standalone Mondelez margin improvement opportunity
Complementary portfolios, customers, channels,
distribution, geographies
Opportunistic given Mondelez is still trading
below what we believe is its intrinsic value
Catalyst to improve capital structure efficiency in
one of the best rate environments in history

Can separate beverage from position of strength

(Mondelez mitigates dis-synergies)
Creates fast growth, emerging markets-centric
snacks powerhouse (37% of sales in EMs); one of
the most valuable portfolios in the world
Creates fast moving beverages pure-play
empowered to compete better versus focused peers
(Coca-Cola and others). #1 U.S. liquid refreshment
company; iconic brand portfolio. Likely significant
margin opportunity
Benefit from focus / white sheet of paper approach
Beverages no longer competing for resources

Transactions can create significant shareholder value

32% EPS accretion / 27% increase(1) in annual dividend by year three based on model assumptions
Upside is so significant that even if select assumptions are not met (though we believe assumptions are
reasonable), the transactions can still drive far more value than the status quo

Most importantly, Trian believes the transactions result in two standalone

companies that are far better positioned for long-term success than either is
today
Note: The estimates, projections, pro forma information and potential impact of the ideas set forth herein are based on assumptions that Trian believes to be reasonable, but there can be no
assurance that actual results or performance of the Issuer will not differ, and such differences may be material. This presentation does not recommend the purchase or sale of any security.
(1) See page 52. Dividend measured against Trian projection of PepsiCo standalone dividend in 2016.

38

Synergies: An Opportunity Worth Up to $33bn

(61% of Mondelez Market Cap)
Announced synergies have averaged 8.3%
of target sales across precedent consumer
staples acquisitions

Some acquirers have far exceeded targeted

synergies (e.g., InBev targeted 9% of sales
in the acquisition of Anheuser-Busch but
achieved 13%, helping to improve
consolidated margins by ~830 bps from
29.9% to 38.2% in 3 years)

Precedent Large-Cap
Consumer Acquisitions: Announced
Synergies as % of Target Sales
Major
Food
& Home
Personal
(HPC)($m)
Major
Food
& HPC
M&A And
Deals:
ExpectedCare
Synergies
M&A Deals: Expected Synergies ($m)
Acquirer

Acquired

Acq.

PY

Est.

% of

Date

Sales

Savings

Sales

Unilever

Bestfoods

2000

8,400

800

9.5%

Kraft

Nabisco

2000

8,300

600

7.2%

PepsiCo

Quaker

2001

5,000

400

8.0%

Nestle

Ralston

2001

2,900

270

9.3%

Kellogg

Keebler

2001

2,700

175

6.5%

Gen. Mills Pillsbury

2001

4,200

350

8.3%

P&G

Clairol

2001

1,600

200

12.5%

Cadbury

Adams

2003

1,900

125

6.6%

8% of Mondelezs sales implies up to $3bn

of synergies, or up to $33bn of capitalized
value

P&G

Wella

2003

4,200

360

8.6%

P&G

Gillette

2005

10,500

1,100

10.5%

RB

BHI

2006

950

140

14.7%

Nestle

Gerber

2007

1,900

95

5.0%

While some research analysts do not give

full credit for synergies, Trian believes
synergies must drop to the bottom line or
drive incremental top-line growth

Kraft

Danone Biscuits

2007

2,800

200

7.1%

Danone

Numico

2007

3,570

82

2.3%

InBev

Anheuser

2008

16,500

1,500

9.1%

Kraft

Cadbury

2009

8,800

625

7.1%

There is potential for significant synergy in a

PEP/MDLZ merger in addition to
previously highlighted standalone margin
improvement opportunities

Average

8.3%

Note: The estimates, projections, pro forma information and potential impact of the ideas set forth herein are based on assumptions that Trian believes to be reasonable, but there can be no assurance
that actual results or performance will not differ, and such differences may be material. This presentation does not recommend the purchase or sale of any security. The above examples are merely
illustrative. Market conditions at the time of the events reflected above may differ materially from current and future market conditions. The performance of these examples should therefore not be
construed as an indication of PepsiCos performance. Past performance is not an indication of future results.

39

PepsiCo Should Be Able To Drive Standalone Margin Improvement at Mondelez:

An Opportunity Worth Up To $16bn (29% of Mondelez Market Cap)
MDLZ EBIT margin was only ~12.2% in 2012, ~380 bps below the peer average
Snacks-focused portfolios, such as Hershey and PepsiCos disclosed food businesses, deliver
margins that are over 610 bps higher than MDLZ
Prior to its sale to Kraft / Mondelez in early 2010, Cadbury itself had committed to high-teens margins by 2013

~400 bps of improvement in MDLZ margins, bringing them in-line with diversified food peers (but
well below snacks peers), would yield ~$1.4bn in incremental EBITDA (potentially worth ~$16bn
to shareholders)

Adjusted CY12 EBIT(1) Margins of Food Peers

18.6%

18.5%

18.0%

17.5%

16.8%

16.2%

Peer Avg: 16.0%

Snacks Avg(4): 18.3%
15.6%

15.2%

14.6%

14.4%

14.4%

14.2%

13.8%
12.2%

Note: The estimates, projections, pro forma information and potential impact of the ideas set forth herein are based on assumptions that Trian believes to be reasonable, but there can be no assurance that
actual results or performance will not differ, and such differences may be material. This presentation does not recommend the purchase or sale of any security. The above examples are merely illustrative.
Market conditions at the time of the events reflected above may differ materially from current and future market conditions. The performance of these examples should therefore not be construed as an
indication of PepsiCos performance. Past performance is not an indication of future results.
(1) Adjusted for one-time items such as restructuring and impairment costs
(2) Represents 2012 numbers. EBIT estimate for PepsiCo per companys SEC filings and Trian estimates..
(3) Represent LTM EBIT as of last publicly reported filings, 6/30/08
(4) Represents the average of PepsiCo (Food), Wrigley, and Hershey

40

Opportunity To Merge With Mondelez At An Attractive Price

Relative To Precedent Consumer M&A Transactions

We assume PEP merges with MDLZ at $35 per share, representing a ~16% premium, in all-stock deal where 20% of the
combined market capitalizations are returned to shareholders through a moderate increase in leverage
Ensures all shareholders maintain significant ownership and upside potential
Resulting financial impact to PepsiCo equivalent to if the deal were structured with 67% cash and 33% stock

Implied EV / Closing LTM EBITDA of 14.4x (13.3x NTM(1)) represents discount to historical food average of ~16x
Equates to ~8.6x EV / 13e EBITDA pro forma for $3.7bn cost synergies and Mondelez margin improvement
Also a low multiple of sales: 2.2x represents a 31% discount to precedent transactions
Note Krafts acquisition of Cadbury was well-timed in Sept. 2009 when the S&P had fallen to ~1,000 (trough valuations). Despite the S&P
500 recovering ~65% over the past four years, Mondelez would still be purchased for a multiple in-line with Cadburys

MDLZ valuation compelling given 40% of revenue from emerging markets (double-digit revenue growth since 09)
Mondelez has a portfolio of proven brands that travel across continents/cultures and have stood the test of time
Standalone consumer products companies with scale brands in emerging markets trade for large multiples (Hindustan Unilever: 27x EV/Fwd
EBITDA; Unilever Indonesia: 30x; Mead Johnson 15x)
PepsiCo paid 17.5x EV / LTM EBITDA for Wimm-Bill-Dann, a dairy and juice company, despite limited synergies (~4% of sales), a portfolio
of regional (rather than global) brands and outsized exposure to a single high-risk market

Precedent Large-Cap Food M&A Transactions

Price / LTM
Sales
2.9x

Acquired
Bestfoods

Year
2000

Kraft

Nabisco

2000

$18.9

14.0x

2.3x

PepsiCo

Quaker Oats

2001

$14.0

15.9x

2.7x

Nestle

Ralston Purina

2001

$11.2

13.5x

3.9x

Cadbury

Adams

2003

$4.2

14.3x

2.2x

Nestle

Gerber

2007

$5.5

15.7x

2.8x

Danone

Numico

2007

$18.4

23.1x

5.1x

Mars

Wrigley

2008

$23.0

19.3x

4.3x

Kraft

Cadbury

2009

$21.1

13.0x

2.2x

Average

$15.6

15.9x

3.2x

14.4x

2.2x

Assumed PEP / MDLZ

Price ($bn)
$24.2

EV / LTM
EBITDA
14.3x

Acquiror
Unilever

$78.0

Note: The estimates, projections, pro forma information and potential impact of the ideas set forth herein are based on assumptions that Trian believes to be reasonable, but there can be no
assurance that actual results or performance will not differ, and such differences may be material. This presentation does not recommend the purchase or sale of any security. The above examples
are merely illustrative. Market conditions at the time of the events reflected above may differ materially from current and future market conditions. The performance of these examples should therefore
not be construed as an indication of PepsiCos performance. Past performance is not an indication of future results.
(1) Defined as next twelve months

41

Wall St. Research Analysts Have Generally Reacted Favorably

To A Potential PepsiCo / Mondelez Combination
Creates a Snacking Giant: Strategically, the combination of PEPs SnackCo and MDLZ would create a global snack giant with
leading market share positions across several sub-snack categories, with limited portfolio overlap. PEP has #1 market share in
chips/crisps, extruded snacks and corn chips while MDLZ has #1 market share in savory biscuits, chocolate, sugar confectionary and
sweet biscuits.
Judy Hong, Goldman Sachs 3.25.13

Strong Accretion: Assuming ~$3+ billion in 2016 synergies, a 25% deal premium, a relatively equal split of debt and equity
financing, and favorable (but we believe realistic) interest rates on new/refinanced debt, we determine that a PEP acquisition of
MDLZ could be accretive by ~15%-20% in the first full year. Note, of course, that this assumes no reinvestment of realized synergies,
which is unlikely.
Alexia Howard, Ali Dibadj, Steve Powers Bernstein 4.22.13

Potential Revenue Synergies:

The potential for revenue synergies could reach ~$3 billion, based on the benchmark set by Mondelez / Cadbury.
Kevin Grundy, Dara Mohsenian and Matthew Grainger, Morgan Stanley 3.25.13

In recent years, both PEP and MDLZ have been focused on expanding their Snacks' footprint into Emerging Markets.
However, in both cases, those Emerging Market businesses remain below-scale (and, in PEP's case at least, meaningfully
margin-dilutive). As a result, to the extent that a combination could lead to accelerated growth and/or enhanced scale, it could
be highly beneficial to both entities. Ali Dibadj, Steve Powers, Alexia Howard, Bernstein 5.17.13
Significant Realizable Cost Synergies:
The cost synergy opportunity is real. In our work published a few weeks ago, we embedded 9% of Mondelez revenues as
synergies (or $3.4B). While there is limited segment/country overlap, the combined entity does have some meaningful overlaps
in the largest countries. The transaction would create 5 markets with sales in excess of $5B at retail (vs MDLZ having 3 and
Frito having 1 of that size today), 6 markets with retails sales between $2-6B, 7 markets with retail sales between $1-2B and 12
markets with sales between $500M-$1B. Bill Pecoriello, Consumer Edge 3.17.13
A Merger Could Yield Significant Cost Savings: MDLZs overall margins are well below those of its scaled global Food peers
(such as PepsiCo, Nestle, and Unilever), particularly in Europe and North America leaving significant runway for cost
savings, in our view. To us, the potential synergies realized through a PEP/MDLZ tie-up could be substantial, not only as the
combined company looks to address these inefficiencies but also due to the likely significant overlap in each companys
infrastructure.
Andrew Lazar, Barclays 3.22.13
42

The Market Itself Reacted Positively

To A Potential PepsiCo / Mondelez Combination
Despite being the assumed acquirer, PepsiCos stock price increased 4%
over the one week period in March when rumors surfaced that Trian was
looking to push for a Mondelez merger

Mondelezs stock price increased 7% over the same one week period
PepsiCo Share Price: 3/21 3/28

Mondelez Share Price: 3/21 3/28

Price Change: +4%

Price Change: +7%

$80.00

$79.11

$29.73

$30.00

$77.83

$78.00

$29.88 $30.29

$78.92

$78.64

$79.00

$30.62

$31.00

$78.29

$30.35

$29.00

$77.00
$28.00

$76.00

$28.56

$76.15
$75.00

$27.00

Source: Capital IQ.

43

Shareholder Overlap Can Facilitate Transaction

37 of PepsiCos top 40 shareholders also own Mondelez
Trian is a major holder of both companies; PepsiCo and Mondelez are two of Trians largest
positions. We are highly vested in both companies success
PepsiCo Top Shareholders (Including Overlap with Mondelez)
# Pepsi Holder:
1. Vanguard
2. Blackrock
3. State Street
4. Capital Research
5. BONY Mellon
6. Wellington Management
7. Bank of America
8. Northern Trust
9. Yacktman
10. T Rowe Price
11. Aberdeen
(2)
12. Trian Fund Management
13. Fidelity
14. JP Morgan
15. Morgan Stanley
16. Franklin Resources
17. Grantham Mayo
18. Wells Fargo
19. Norges Bank
20. TIAA Cref

Note:
(1)
(2)

Overlap With
MDLZ (1)
X
X
X
X
X
X
X
X
X
X
X
X
X
X
X
X
X
X

# Pepsi Holder:
21. Goldman Sachs
22. Geode
23. UBS
24. Invesco
25. Fisher Investments
26. Eagle Capital
27. Deutsche Bank
28. Brown Brothers Harriman
29. Legal & General
30. Credit Suisse
31. General Electric
32. State Farm Mutual
33. American Century
34. NY Common
35. Ameriprise
36. PNC Financial Services
37. Sumitomo
38. Charles Schwab
39. Fayez Sarofim
40. Sun Life Financial

Source: Bloomberg as of 7/11/13.

Shaded institutions represent those that are currently shareholders of Mondelez.
Trian beneficial ownership in each company.

Overlap With
MDLZ (1)
X
X
X
X
X
X
X
X
X
X
X
X
X
X
X
X
X
X
X

44

Proposed Deal Structure Creates A Win-Win For Both Sides

Trian has assumed an all-stock transaction where both companies shareholders have full (prorata) participation in the upside of the combined company. The structure is similar to P&G /
Gillette (though at a much lower multiple of EBITDA)
This is a structure we would like used more often: neither side is burdened by an uneconomic
cash premium; both sides share in the synergies, both sides benefit from a more efficient capital
structure / capital return

Unfortunately social issues too often get in the way of shareholders best interests (only one
CEO, one Board, one corporate headquarters survive)
Lastly, a note specific to Mondelez Of all companies, Mondelez has no moral right to just
say no to a value-creating offer from PepsiCo. After all, Kraft itself made a successful
unsolicited (and culturally unpopular) offer for Cadbury in 2009

Benefits to PepsiCo Shareholders

Not forced to overpay

Shares in synergies

Shares in Mondelez margin upside

Creates catalyst to separate beverages from a

position of strength

More efficient capital structure and capital

return (20% of market cap)

Benefits to Mondelez Shareholders

Compensated through 16% premium for

change-of-control

Shares in synergies

Sharing best practice with PepsiCo increases

probability of margin improvement

More efficient capital structure and capital

return (20% of market cap)

Note: The estimates, projections, pro forma information and potential impact of the ideas set forth herein are based on assumptions that Trian believes to be reasonable, but there can be no
assurance that actual results or performance will not differ, and such differences may be material. This presentation does not recommend the purchase or sale of any security.

45

Recent Blueprint For Successful Consumer M&A:

InBev Acquisition Of Anheuser-Busch
Jun. 08: InBev (ABI) proposed and subsequently completed an acquisition of Anheuser-Busch
Strategic rationale included:
Combination of powerful global brands
Cost reduction / margin improvement (Achieved synergies: 13% of sales. Consolidated margin improvement:
~830 bps)
Capital structure efficiency (pro forma leverage: ~5x Debt / EBITDA)
Total shareholder return since announcement: ABI +147%; S&P 500 +39%
Raised Cost Synergy Target From
$1.5Bn to $2.25Bn; Achieved >50% of
Goal in Just Over a Year(1)

$2.5

$2.25

$2.25

Combined EBITDA Margin

Improved by ~900bp in 3 Years(2)

$16
$12.1

$2.0

$12

$12.1

$13.0

$13.9

$10.8

Volume Growth of Focus

Brands Outpaced Industry Peers

60%

6%

52%

5%

$1.50

$1.5

44%
$8

$1.0
$1.36

$0.5
$0.25

$0.0
July-08
Original
Plan

Synergies Achieved

Dec-08

35.8%

35.5%
29.9%

38.2%

$4

28%

Synergies Expected

20%
2007
Dec-08
Dec-09
Combined Pro Forma
Pre-Acq
LTM EBITDA

Dec-09
Adjusted

Margin

Dec-10

2.7%

3%
2%

$0
Dec-09

4%

36%

30.8%

4.8%

1.9%

1%

1.9%

1.6%

0.4%

0%
2008 InBev
Global Beer Industry

2009 AB InBev

2010 AB InBev

AB InBev Focused Brands

After Several
Divestitures

Source: Bloomberg, company filings, annual reports, and investor presentations. Synergy numbers above do not reflect revenue synergies.
Note: The estimates, projections, pro forma information and potential impact of the ideas set forth herein are based on assumptions that Trian believes to be reasonable, but there can be no
assurance that actual results or performance will not differ, and such differences may be material. This presentation does not recommend the purchase or sale of any security.
Note: The above example is merely illustrative. Market conditions at the time of the events reflected above may differ materially from current and future market conditions. The performance of this
example should therefore not be construed as an indication of PepsiCos performance. Past performance is not an indication of future results.
(1) Updated target to $2.25bn in March 2009 at FY earnings call, and announced it had achieved $250m in 2008. Updated synergy level in 2009 Annual Report
(2) For 2007, uses InBevs estimated figures from their 2008 Analyst Meeting (October 2008), and converts using the stated exchange rate of 1.3676 $/

46

Recent Transaction(s) Demonstrate The Power Of Combing Prodigious

Cash Flow Of Food/Beverage Companies With Prudent Leverage
Potential Returns For PepsiCos Shareholders
With Varying Degrees of Leverage

Gross
Leverage

Each half a turn of leverage adds 3%+ of

accretion
Accretion/Dilution
Exit Year
CY2014e CY2015e CY2016e
4.0x
9%
19%
29%
4.5x
11%
22%
32%
5.0x
14%
25%
36%
5.5x
18%
30%
42%

Precedent Transactions:
Ability to Implement Highly Efficient Capital Structures

Company

Acquiror
LTM
Leverage

Acquiror
Credit
Rating

Post-Acq
LTM
Leverage

Post-Acq
Credit
Rating

2.5x

Baa2/
BBB+

6.7x/
10.4(1)

B2/BB-

1.9x

Baa2/
BBB

4.0x

Baa2/
BBB-

1.8x(1)

NA
(AB was
A2, 1.9x
EBITDA)

5.2x

Baa2

The June 2013 acquisition of Heinz by Berkshire Hathaway and 3G Capital demonstrates
that, more than ever, smart investors are leveraging the strong / stable free cash flow generated by
leading food companies to implement efficient capital structures at record low interest rates.
Source: Trian model and estimates, company SEC filings and press releases
Note: The estimates, projections, pro forma information and potential impact of the ideas set forth herein are based on assumptions that Trian believes to be reasonable, but there
can be no assurance that actual results or performance will not differ, and such differences may be material. This presentation does not recommend the purchase or sale of any
security. The above examples are merely illustrative. Market conditions at the time of the events reflected above may differ materially from current and future market conditions.
The performance of these examples should therefore not be construed as an indication of PepsiCos performance. Past performance is not an indication of future results.
(1) According to Moodys note issued 6/19/2013; 6.7x excludes preferred stock and 10.4x incorporating preferred stock
(2) Uses Net Debt balance from Q2 2008 and Cash from FY2007 to approximate debt before merger.

47

Alternative A: Key Assumptions

PepsiCo would merge with Mondelez in an all-stock transaction valued at $35.00 per
Mondelez share, representing a 16% premium
-

4.5x Debt / Pro Forma EBITDA (Pro forma company repurchases 20% of combined shares
outstanding; implied ownership of 68% PEP / 32% MDLZ)

$3.7bn of combined cost synergies and Mondelez margin improvements achieved over 3
years (8.7% of year 3 revenue); $4.5bn cash restructuring costs

$3bn revenue synergies (3.5% of total snacks sales) achieved over 3 years; 25% flow through

Transaction
Overview

Simultaneously would announce beverages (BeveragesCo) spin-off. PepsiCo snacks and

Mondelez become premier consumer growth company (SnacksCo)

SnacksCo has 6.1% revenue growth, 13.7% EBIT growth

Operating
Assumptions

(12-16e)

Returns

Debt reduced from 4.5x to ~2.8x from 2013 2016

50% dividend payout ratio (2.0% dividend yield)

BeveragesCo has 2.9% revenue growth, 7.2% EBIT growth

-

Debt maintained at 4.0x EBITDA; 70% dividend payout (3.75% dividend yield)

$750mm productivity savings fall to bottom line by FY 2016

Assumes $800m of initial dis-synergies identified, 50% offset by management actions

Valuation
-

SnacksCo trades to 23x forward earnings (modest discount to Hershey)

BeveragesCo trades to a 3.75% dividend yield (18.5x forward EPS) (discount to Kraft Foods)

PepsiCo shareholder returns

-

~35% total IRR over first 2.5 years through value creation at SnacksCo and BeveragesCo

Combined companies generate 32% EPS accretion by 2016 vs. PepsiCo standalone

27% increase in combined dividends by 2016 vs. PepsiCo standalone

Note: The estimates, projections, pro forma information and potential impact of the opportunities identified by Trian Partners herein are based on assumptions that Trian Partners believes to be
reasonable as of the date of this presentation, but there can be no assurance or guarantee that actual results or performance will not differ, and such differences may be material. Unless otherwise
indicated, the figures set forth in this presentation, including internal rates of return (IRR), have not been calculated using generally accepted accounting principles (GAAP) and have not been
audited by independent accountants. Such figures may vary from GAAP accounting in material respects and there can be no assurance that the unrealized values reflected in this presentation will
be realized. This presentation does not recommend the purchase or sale of any security.

48

Alternative A: Preliminary Transaction Overview

Offer Price // Mondelez Valuation(1)
Offer Price
Offer price
x Shares outstanding
Market capitalization
(+) Debt
(-) Cash
(+) Minority interest
Enterprise value

Sources & Uses Schedule

$35.0
1,783
$62,404
18,180
(2,759)
144
$77,970

Valuation
2013 LTM EBITDA // EV/EBITDA
2014 EBITDA // EV/EBITDA
2013 EPS // Price/EPS
2014 EPS // Price/EPS
% - Premium
Current share price / %-Premium

$5,398
$5,882

14.4x
13.3x

$1.53
1.65

22.8x
21.2x

$30.2

16.0%

Sources of funds:
Cash on balance sheet
New debt
Equity
Total sources of funds:
Uses of funds:
Refinancing of debt
Fees and expenses
Minimum cash
Share repurchase / dividend(2)
Consideration to common
Total uses of funds

$
$10,771
84,833
62,404
$158,008

7%
54%
39%
100%

$47,580
1,200
5,000

30%
1%
3%

41,823
62,404
$158,008

26%
39%
100%

$
Debt consideration
Equity consideration
Total consideration
$ Equity consideration per Share
PepsiCo share price
Exchange ratio
Share repurchase
PepsiCo share price at a 10.0% premium
Total shares repurchased
% - Total pro forma shares

$0
62,404
$62,404

$/SHO
$0.0
35.0
$35.0
$35.0
$84.6
0.41x
$41,823
$93.0
449.7
19.8%

Note: The estimates, projections, pro forma information and potential impact of the opportunities identified by Trian Partners herein are based on assumptions that Trian Partners
believes to be reasonable as of the date of this presentation, but there can be no assurance or guarantee that actual results or performance will not differ, and such
differences may be material. Unless otherwise indicated, the figures set forth in this presentation have not been calculated using generally accepted accounting principles
(GAAP) and have not been audited by independent accountants. Such figures may vary from GAAP accounting in material respects and there can be no assurance that the
unrealized values reflected in this presentation will be realized. This presentation does not recommend the purchase or sale of any security.
(1)
Reflects projected closing balance sheet as of 12/31/13.
(2)
PepsiCo can use incremental debt proceeds to fund a one-time share repurchase or special dividend (shareholders would participate based on relative % ownership). We
model a share repurchase for simplicity and to make pro forma EPS comparable to existing EPS. A dividend may be the better alternative depending on tax implications
and the required premium to repurchase shares.

49

Alternative A: Pro Forma Capital Structure(1)

(1) Reflects closing balance sheet on 12/31/13

Note: The estimates, projections, pro forma information and potential impact of the opportunities identified by Trian Partners herein are based on assumptions that Trian
Partners believes to be reasonable as of the date of this presentation, but there can be no assurance or guarantee that actual results or performance will not differ, and
such differences may be material. Unless otherwise indicated, the figures set forth in this presentation have not been calculated using generally accepted accounting
principles (GAAP) and have not been audited by independent accountants. Such figures may vary from GAAP accounting in material respects and there can be no
assurance that the unrealized values reflected in this presentation will be realized. This presentation does not recommend the purchase or sale of any security.

50

Alternative A: Summary Financials

"SnacksCo"

"BeveragesCo"

2012a
Income Statement
Revenue
% - Growth
EBIT
% - Growth
% - Margin

Fiscal Year Ending December 31,

% CAGR
2013e
2014e
2015e
2016e
12 - 16

$67,939

$70,639
4.0%

$75,456
6.8%

$80,671
6.9%

$86,127
6.8%

6.1%

$10,191

$10,640
4.4%
15.1%

$12,432
16.8%
16.5%

$14,697
18.2%
18.2%

$17,035
15.9%
19.8%

13.7%

$6,222
1,824
$3.41

$7,530
1,820
$4.14
21.3%

$9,090
1,811
$5.02
21.3%

15.0%

Net income
Fully diluted shares
Earnings per share
% - Growth
Memo: Synergies/dis-synergies net of amortization
Credit statistics
Debt
EBITDA
Debt / EBITDA
Dividend
Dividend Per Share
% of FCF
% of EPS

$911

$2,161

$3,411

2013 PF(1)
$62,659 $62,659 $61,112 $59,055 $56,438
$13,924 $12,924 $15,131 $17,484 $19,921
4.50x
4.85x
4.04x
3.38x
2.83x

$1.88
50%
45%

$2.30
50%
46%

478 bps

$10,817 % CAGR
1,802 13-16
$6.00
20.7%
19.6%

$2.77
50%
46%

2012a
Income Statement
Revenue
% - Growth
EBIT
% - Growth
% - Margin

Fiscal Year Ending December 31,

2013e
2014e
2015e
2016e

$32,324

$32,800
1.5%

$33,891
3.3%

$35,025
3.3%

$36,202
3.4%

2.9%

$3,726

$3,889
4.4%
11.9%

$3,955
1.7%
11.7%

$4,432
12.1%
12.7%

$4,921
11.0%
13.6%

7.2%

$2,076
1,824
$1.14

$2,124
1,820
$1.17
2.6%

$2,445
1,773
$1.38
18.2%

$2,735 % CAGR
1,686 13-16
$1.62
12.6%
17.6%

($400)

($400)

($400)

11.5%

Net income
Fully diluted shares
Earnings per share
% - Growth
Memo: Synergies/dis-synergies net of amortization
Credit statistics
Debt
EBITDA
Debt / EBITDA

% CAGR
12 - 16

207 bps

2013 PF(1)
$22,174 $22,174 $21,994 $23,731 $25,831
$4,928
$5,328
$5,423
$5,933
$6,458
4.50x
4.16x
4.06x
4.00x
4.00x

Dividend
Dividend Per Share
% of FCF
% of EPS

$0.81
70%
70%

$0.96
70%
69%

$1.12
70%
69%

IRR Pepsi shareholders

35.0%

12/31/2015 Implied Target Value Per Share (excl. dividends)

$168.0

12/31/2015 Total Implied Value Per Share (incl. dividends)

$175.1

IRR Mondelez Shareholders

43.2%

Blended IRR

39.1%

(1) Pro forma for $1bn out-of-box cost synergies at Snacks Co and $400mm out-of-box dis-synergies at Beverages Co ($800m, 50% offset)
Note: The estimates, projections, pro forma information and potential impact of the opportunities identified by Trian Partners herein are based on assumptions that Trian
Partners believes to be reasonable as of the date of this presentation, but there can be no assurance or guarantee that actual results or performance will not differ, and
such differences may be material. Unless otherwise indicated, the figures set forth in this presentation, including internal rates of return (IRR), have not been calculated
using generally accepted accounting principles (GAAP) and have not been audited by independent accountants. Such figures may vary from GAAP accounting in material
respects and there can be no assurance that the unrealized values reflected in this presentation will be realized. This presentation does not recommend the purchase or
sale of any security.
Note: EBIT margin declines from 2013 to 2014 in Beverages due to dis-synergies from the separation.

51

Alternative A: Accretion / (Dilution)

Summary Accretion / (Dilution): Consolidated PepsiCo
Fiscal Year Ending December 31,
2013e
2014e
2015e
2016e
PepsiCo: EPS base case
% Growth

$4.36

$4.78
9.4%

$5.26
10.1%

$5.77
9.8%

Dividend per share

$2.24

$2.55

$2.80

$3.07

Pro forma for merger & spin:

SnacksCo EPS
BeveragesCo EPS
Combined EPS

$3.41
1.14
$4.55

$4.14
1.17
$5.31

$5.02
1.38
$6.40

$6.00
1.62
$7.62

4%

11%

22%

32%

$1.88
0.81
$2.69
6%

$2.30
0.96
$3.26
16%

$2.77
1.12
$3.90
27%

% Accretion / (dilution)
SnacksCo dividend per share
BeveragesCo dividend per share
Total dividend per share
% Increase in dividend

(1) Reflects closing balance sheet on 12/31/13

Note: The estimates, projections, pro forma information and potential impact of the opportunities identified by Trian Partners herein are based on assumptions that Trian
Partners believes to be reasonable as of the date of this presentation, but there can be no assurance or guarantee that actual results or performance will not differ, and
such differences may be material. Unless otherwise indicated, the figures set forth in this presentation have not been calculated using generally accepted accounting
principles (GAAP) and have not been audited by independent accountants. Such figures may vary from GAAP accounting in material respects and there can be no
assurance that the unrealized values reflected in this presentation will be realized.
This presentation does not recommend the purchase or sale of any security.

52

PepsiCo Has Indicated That It Is Not Inclined To Pursue A

Mondelez Transaction: We Disagree With Their Rationale
PepsiCo Rationale:
Salty snacks are
taking occasions
from sweet snacks

Combined company
is too big to grow

Trian Perspective:
Its not a zero-sum game; both sweet and salty snacks are growing
Recently sweet snacks (e.g., Hershey) have been growing faster than salty snacks in developed markets
like the U.S.
In emerging markets, PepsiCos goal should be to build scale and position itself for maximum long-term
growth, not to take occasions from sweet snacks
Additional scale from Mondelez combination ($35bn of revenue) is largely offset by separating
beverages ($33bn of revenue)

Nestle has a market capitalization of almost $200bn and delivered a superior total shareholder return vs.
PepsiCo over the past decade
Biscuit margins are an opportunity at Mondelez

Biscuits is
inherently a low
margin business

Limited synergies
between salty /
sweet snacks

Too much debt for

capital markets to
bear

EBIT margin within Kelloggs U.S. Snacks business has averaged 16% over the past three years,
significantly higher than Mondelezs N. American (Nabisco) operating margin
Danones biscuit business, bought by Mondelez in 2007, had a solid 16% EBIT margin when purchased
Even if biscuits (32% of Mondelez sales) are slightly less profitable than other snacks businesses,
Mondelezs consolidated EBIT margin of only 12% has meaningful upside potential
Of the 16 previously referenced large-cap consumer acquisitions, the average and median of announced
synergies was +8% of target sales
For 12 of those acquisitions, synergies were in excess of 7% of target sales
We do not understand how PepsiCo claims significant cost synergies between beverages and salty snacks
but limited cost synergies between salty snacks and sweet snacks
Incremental debt raised in proposed transactions should not be difficult as both companies would remain
investment grade; large deals like InBev / Anheuser-Busch were financed in worse credit markets
In the current depressed interest rate environment, we believe there would be healthy demand from fixed
income investors to own a combined PepsiCo / Mondelez snacks business and a high cash flow global
beverages business
53

If PepsiCo Does Not Pursue Mondelez,

Company Must Separate Snacks / Beverages
Trian believes a merger with Mondelez and separation of beverages can
create up to $175 of value per PepsiCo share by the end of 2015
But PepsiCo management has indicated that they are not interested in a
Mondelez transaction
If PepsiCo does not pursue Mondelez, we believe it must announce a
separation of snacks/ beverages concurrent with specific commitments to
unlock shareholder value
More efficient capital structures / capital policies at both new standalone companies
Productivity initiatives that hit the bottom-line

54

B.

Separate Snacks / Beverages

Into Two Standalone Companies
Realize Productivity That Drops To The
Bottom-Line
Greater Capital Return

Separation of Snacks And Beverages: Key Assumptions

PepsiCo spins-off its beverages business

- 4.0x gross debt target leverage for BeveragesCo
- 2.5x gross debt target leverage for SnacksCo
- Assumes 6% of share count immediately acquired using cash proceeds from modest debt
increase

Initial SnacksCo / BeveragesCo P&L based on PepsiCo guidance, Wall St. research

Assumes Europe / AMEA snacks and beverages have same margin as consolidated
segments; uses PepsiCo disclosure on food/beverage breakdown to estimate revenue

SnacksCo has 5.2% revenue growth, 9.3% EBIT growth

- Debt steady at 2.5x from 2013 2016; 50% dividend payout ratio (2.1% yield)
- $750mm productivity savings fall to bottom line by FY 2016

BeveragesCo has 2.9% revenue growth, 7.2% EBIT growth

- Debt held flat at 4.0x; 70% dividend payout ratio (3.75% yield)
- $750mm productivity savings fall to bottom line by FY 2016
- Assumes $800m of initial dis-synergies identified, 50% offset by management action

Valuation
- SnacksCo trades to 23x forward earnings (modest discount to Hershey)

Transaction
Overview

Operating
Assumptions
(12-16e)

Returns

BeveragesCo trades to a 3.75% dividend yield (18.5x forward EPS) (discount to Kraft Foods)

PepsiCo shareholder returns

- ~25% IRR over first 2.5 years through value creation at BeveragesCo and SnacksCo

Note: The estimates, projections, pro forma information and potential impact of the opportunities identified by Trian Partners herein are based on assumptions that Trian
Partners believes to be reasonable as of the date of this presentation, but there can be no assurance or guarantee that actual results or performance will not differ, and
such differences may be material. Unless otherwise indicated, the figures set forth in this presentation, including internal rates of return (IRR), have not been calculated
using generally accepted accounting principles (GAAP) and have not been audited by independent accountants. Such figures may vary from GAAP accounting in material
respects and there can be no assurance that the unrealized values reflected in this presentation will be realized.
This presentation does not recommend the purchase or sale of any security.

56

Pro Forma Capital Structure And Share Count(1)

Pro Forma Capital Structures (12/31/13 Close)

Sources and Uses of Proceeds

Snacks Co

Beverages Co

PF
Combined

$34,781

$32,800

$67,581

$7,526
0
$7,526
21.6%

$5,328
(400)
$4,928
15.0%

$12,854
(400)
$12,454
18.4%

Gross Debt / EBITDA Target

x PF EBITDA
Gross Debt
Cash
Net Debt

2.50x
$7,526
$18,815
(4,691)
$14,124

4.00x
$4,928
$19,710
(3,321)
$16,390

3.09x
$12,454
$38,525
(8,012)
$30,514

$ - Gross Debt
x Cost of Funds
Interest Expense

$18,815
4.00%
$753

$19,710
4.50%
$887

$38,525
4.26%
$1,640

Revenue
Segment EBITDA
Less: Dis-Synergies
Pro Forma EBITDA
% - Margin (PF)

Key Credit Metrics

Debt / EBITDA
Net Debt / EBITDA

2.5x
1.9x

4.0x
3.3x

3.1x
2.5x

Sources / (Uses) of Funds

Pro Forma Gross Debt
Less: 12/31/13 Expected Gross Debt
"Incremental Proceeds"
Less: Fees & Expenses
Proceeds Available for Repurchases

$
$38,525
(29,400)
$9,125
(500)
$8,625

Buyback Price
Price
Premium
Price to Acquire Shares

$84.55
10%
$93.01

Share Repurchase
$- Share Repurchase
Share Price at Repurchase
Shares Acquired

$8,625
$93.0
93

Shares
Starting Share Balance (12/31/2013)
Shares Acquired
Ending Shares
% Shares Acquired

1,535
(93)
1,443
6.0%

(1) Reflects closing balance sheet on 12/31/13

Note: The estimates, projections, pro forma information and potential impact of the opportunities identified by Trian Partners herein are based on assumptions that Trian
Partners believes to be reasonable as of the date of this presentation, but there can be no assurance or guarantee that actual results or performance will not differ, and
such differences may be material. Unless otherwise indicated, the figures set forth in this presentation have not been calculated using generally accepted accounting
principles (GAAP) and have not been audited by independent accountants. Such figures may vary from GAAP accounting in material respects and there can be no
assurance that the unrealized values reflected in this presentation will be realized. This presentation does not recommend the purchase or sale of any security.

57

Separating Snacks/Beverages Creates Meaningful Value

"SnacksCo"

"BeveragesCo"

2012a
Income Statement
Revenue
% - Growth
EBIT
% - Growth
% - Margin
Net income
Fully diluted shares
Earnings per share
% - Growth
Credit statistics
Debt
EBITDA
Debt / EBITDA
Dividend
Dividend Per Share
% of FCF
% of EPS

Fiscal Year Ending December 31,

% CAGR
2013e
2014e
2015e
2016e
12 - 16

$33,168

$34,781
4.9%

$36,626
5.3%

$38,571
5.3%

$40,621
5.3%

5.2%

$5,956

$6,301
5.8%
18.1%

$7,007
11.2%
19.1%

$7,743
10.5%
20.1%

$8,513
9.9%
21.0%

9.3%

$4,058
1,443
$2.81

$4,573
1,418
$3.23
14.7%

$5,056
1,369
$3.69
14.5%

$5,561 % CAGR
1,323 13-16
$4.20
14.3%
13.8%

18.0%

2013 PF(1)
$18,815 $18,815 $20,642 $22,553 $24,555
$7,526
$7,526
$8,257
$9,021
$9,822
2.50x
2.50x
2.50x
2.50x
2.50x

$1.52
50%
47%

$1.74
50%
47%

$1.98
50%
47%

300 bps

2012a
Income Statement
Revenue
% - Growth
EBIT
% - Growth
% - Margin

% CAGR
12 - 16

$32,324

$32,800
1.5%

$33,891
3.3%

$35,025
3.3%

$36,202
3.4%

2.9%

$3,726

$3,889
4.4%
11.9%

$3,955
1.7%
11.7%

$4,432
12.1%
12.7%

$4,921
11.0%
13.6%

7.2%

$2,171
1,443
$1.50

$2,219
1,402
$1.58
5.2%

$2,502
1,326
$1.89
19.2%

$2,790 % CAGR
1,257 13-16
$2.22
13.8%
17.6%

11.5%

Net income
Fully diluted shares
Earnings per share
% - Growth
Credit statistics
Debt
EBITDA
Debt / EBITDA

Fiscal Year Ending December 31,

2013e
2014e
2015e
2016e

207 bps

2013 PF(1)
$19,710 $19,710 $21,691 $23,731 $25,831
$4,928
$5,328
$5,423
$5,933
$6,458
4.00x
3.70x
4.00x
4.00x
4.00x

Dividend
Dividend Per Share
% of FCF
% of EPS

$1.10
70%
70%

$1.31
70%
69%

$1.54
70%
69%

IRR Pepsi shareholders

24.8%

12/31/2015 Implied Target Value Per Share (excl. dividends)

$137.6

12/31/2015 Total Implied Value Per Share (incl. dividends)

$144.4

(1) Pro forma for $800mm out-of-box dis-synergies at Beverages from separation (assume while $800m are identified, 50% offset by managements actions.
Note: The estimates, projections, pro forma information and potential impact of the opportunities identified by Trian Partners herein are based on assumptions that Trian
Partners believes to be reasonable as of the date of this presentation, but there can be no assurance or guarantee that actual results or performance will not differ, and
such differences may be material. Unless otherwise indicated, the figures set forth in this presentation, including internal rates of return (IRR), have not been calculated
using generally accepted accounting principles (GAAP) and have not been audited by independent accountants. Such figures may vary from GAAP accounting in material
respects and there can be no assurance that the unrealized values reflected in this presentation will be realized. This presentation does not recommend the purchase or
sale of any security.
Note: EBIT margin declines from 2013 to 2014 in Beverages due to dis-synergies from the separation.

58

12/31/15e Total Implied Value Per PepsiCo Share(1)

While the difference between separating all
or parts of beverages is ~$8 per share in
value, we believe the intangible benefits
of separating the entire business are
considerable: 1) creates two pure-plays; 2)
preserves global brands; 3) maximizes
probability of value-add strategic moves for
each business in the future

Alternative B

$136

$138

12/31/15e
Value Per
Mondelez
Share: $72

Alternative A

$175
$144

$108
$85

Current Price

% - Upside

Status Quo

+28%

(2)

Spin North
Spin Americas (4)
America Beverage (3) Beverage

+61%

+63%

Spin all of
Beverage

+71%

(5)

Buy Mondelez and

Spin Beverage (6)

+107%

Note: The estimates, projections, pro-forma information and potential impact of Trians ideas set forth herein are based on assumptions that Trian believes to be reasonable, but there can be
no assurance or guarantee that actual results or performance of the Issuer will not differ, and such differences may be material. This presentation does not recommend the purchase or sale
of any security.
(1) Includes cumulative dividends per share received through 12/31/15. PepsiCo share price as of 7/11/13 close.
(2) Assumes 2013E EPS and dividends are grown at the middle of managements long-term target of high-single-digits. Assumes an 18.4x NTM multiple (PepsiCos current multiple)
(3) Assumes $1.5bn of productivity savings and $200mm of beverage separation dis-synergies. 4.0x debt/EBITDA at beverage and 2.5x debt/EBITDA at snacks. Assumes snacks trades at
20.5x P/E and beverage trades at 15.1x P/E (5.00% dividend yield with a 70% payout ratio).
(4) Assumes $1.5bn of productivity savings and $250mm of beverage separation dis-synergies; 4.0x debt/EBITDA at beverage and 2.5x debt/EBITDA at snacks. Assumes snacks trades at
21x P/E and beverage trades at 16.0x P/E (4.75% dividend yield with a 70% payout ratio).
(5) Assumes $1.5bn of productivity savings and $400mm of beverage separation dis-synergies; 4.0x debt/EBITDA at beverage and 2.5x debt EBITDA at snacks. Assumes snacks trades at
23x P/E and beverage trades at 18.5x P/E (3.75% dividend yield with a 70% payout ratio).
(6) $35 offer for Mondelez and 4.5x gross leverage (snack de-levers to 2.8x constant debt/EBITDA by 2016 and beverage de-levers to 4.0x constant debt/EBITDA). Assumes $3.7bn of cost
synergies and Mondelez margin improvement; $3bn of revenue synergies. Assumes snacks trades at 23x P/E and beverage trades at 18.5x P/E (3.75% dividend yield with a 70%
payout ratio). Assumes $750mm of productivity savings at beverage and $400mm of beverage separation dis-synergies.
59