Economic and Financial2
Pepsi Company (PepsiCo) is a multi-national company with businesses in manufacturing, marketing and selling various carbonated and non-carbonated beverages, as well as salty, sweet and grain-based snacks, and other foods. Besides the worldwide Pepsi-Cola brand, PepsiCo owns many other famous brands such as Quaker Oats, Gatorade, Frito-Lay, SoBe, Naked, and Tropicana. (Wikipedia, 2008-a)
Currently, a large number of Australian cities are facing serious water shortages and the Australian governments plan to reinforce technologies in re-circulating and purifying water, which could significantly affect the financial, social, environmental situations and the corporate governance of PepsiCo as well as the whole soft drink industry which highly counts on water in production.
This essay will introduce quadruple bottom line reporting which includes financial, social, environmental and corporate governance, and then examine how PepsiCo reports against the four bottom lines and how water shortage may impact the four bottom line perspectives.
Economic and Financial
According to the annual report of PepsiCo, (PepsiCo, 2008-a) the total net revenue in 2007 was $39,474 million which was made up of $11,586 million in Frito-Lay North America (FLNA), $10,230million in PepsiCo Beverages North America (PBNA), and $15,798 million in PepsiCo International (PI), and $1,860 million in Quaker Foods North America (QFNA). The net revenue grew 12%, which was approximately three times as the rate of global GDP growth, compared with that of $35,137 in 2006. The net revenue of FLNA and PBNA both increased 7% and that of PI and QFNA grew 22% and 5%, respectively. In addition, the net income of PepsiCo in 2007 was $5,599 million which increased 11% and the earnings per share was $3.38 million compared with $3.00 million in 2006.
In 2007, PepsiCo’s corporate unallocated expenses increased 2% primarily reflecting $35 million of increased research and development costs, partially offset by lower pension costs of $18 million (PepsiCo, 2008-a). Furthermore, sales incentives and discounts totaled $11.3 billion in 2007 and other marketplace spending, which included the costs of advertising and other marketing activities, totaled $2.9 billion. Moreover, distribution costs, including the costs of shipping and handling activities, were $5.1 billion and net capitalized software and development costs were $652 million (PepsiCo, 2008-b).
In 2007, PepsiCo used $3.7 billion for investing activities, involving capital spending of $2.4 billion and acquisitions of $1.3 billion which included the remaining interest in a snacks joint venture in Latin America, Naked Juice Company and Bluebird Foods. PepsiCo also incurred a charge of $102 million in conjunction with restructuring actions to close certain plants and production lines across FLNA, PBNA and PI. The charge was comprised of $57 million of asset impairments, $33 million of severance and other employee-related costs and $12 million of other costs. (PepsiCo, 2008-a)
PepsiCo also made considerable economic contributions to shareholders, associates, retailers, suppliers, governments as well as technology. First, PepsiCo provided shareholders with a strong return of 8% on their investments in 2007 by paying nearly $1.9 billion in dividends.
Secondly, PepsiCo directly employed approximately 168,000 people and their business partners, such as franchised bottlers and licensees, employed tens of thousands of additional people as they manufacture and distribute PepsiCo’s brands.
Furthermore, PepsiCo created income and profit for their customers, which mean jobs and opportunities in millions of retail establishments all over the world. Besides, PepsiCo purchased more than $12 billion in supplies, services and raw...