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Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations.

OUR BUSINESS

Executive Overview 30

Our Operations 31

Other Relationships 31

Our Business Risks 31

OUR FINANCIAL RESULTS

Results of Operations – Consolidated Review 37

Results of Operations – Division Review 39

Non-GAAP Measures 44

Items Affecting Comparability 46

Our Liquidity and Capital Resources 49

Material Changes in Line Items in Our Consolidated Financial Statements 52

Return on Invested Capital 54

OUR CRITICAL ACCOUNTING POLICIES AND ESTIMATES

Revenue Recognition 55

Goodwill and Other Intangible Assets 56

Income Tax Expense and Accruals 57

Pension and Retiree Medical Plans 58

CONSOLIDATED STATEMENT OF INCOME 60

CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOME 61

CONSOLIDATED STATEMENT OF CASH FLOWS 62

CONSOLIDATED BALANCE SHEET 64

CONSOLIDATED STATEMENT OF EQUITY 65

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

Note 1 – Basis of Presentation and Our Divisions 66

Note 2 – Our Significant Accounting Policies 72

Note 3 – Restructuring and Impairment Charges 76

Note 4 – Intangible Assets 78

Note 5 – Income Taxes 81

Note 6 – Share-Based Compensation 85

Note 7 – Pension, Retiree Medical and Savings Plans 88

Note 8 – Debt Obligations 95

Note 9 – Financial Instruments 97

Note 10 – Net Income Attributable to PepsiCo per Common Share 101

Note 11 – Accumulated Other Comprehensive Loss Attributable to PepsiCo 102

Note 13 – Acquisitions and Divestitures 105

Note 14 – Supplemental Financial Information 108

REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM 110

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Our discussion and analysis is intended to help the reader understand our results of operations and financial condition and is provided as an addition to, and should be read in connection with, our consolidated financial statements and the accompanying notes. Definitions of key terms can be found in the glossary. Unless otherwise noted, tabular dollars are presented in millions, except per share amounts. All per share amounts reflect common stock per share amounts, assume dilution unless otherwise noted, and are based on unrounded amounts. Percentage changes are based on unrounded amounts.

Discussion in this Form 10-K includes results of operations and financial condition for 2022 and 2021 and year-over-year comparisons between 2022 and 2021. For discussion on results of operations and financial condition pertaining to 2020 and year-over-year comparisons between 2021 and 2020, please refer to “Management’s Discussion and Analysis of Financial Condition and Results of Operations” in Part II, Item 7 of our Annual Report on Form 10-K for the year ended December 25, 2021.

OUR BUSINESS

Executive Overview

PepsiCo is a leading global beverage and convenient food company with a complementary portfolio of brands, including Lay’s, Doritos, Cheetos, Gatorade, Pepsi-Cola, Mountain Dew, Quaker and SodaStream. Through our operations, authorized bottlers, contract manufacturers and other third parties, we make, market, distribute and sell a wide variety of beverages and convenient foods, serving customers and consumers in more than 200 countries and territories.

As a global company with deep local ties, we faced many of the same challenges in 2022 as our consumers, customers, and competitors across the world, including supply chain disruptions; inflationary pressures; shifting consumer preferences and behaviors; another year of the COVID-19 pandemic; a worsening climate crisis; a highly competitive operating environment; a rapidly changing retail landscape, including the growth in e-commerce; continued macroeconomic and political volatility, including the deadly conflict in Ukraine; and an evolving regulatory landscape.

To meet the challenges of today – and those of tomorrow – we are driven by an approach called pep+ (PepsiCo Positive). pep+ is a strategic end-to-end transformation of our business, with sustainability and human capital at the center of how the company will strive to create growth and value by operating within planetary boundaries and inspiring positive change for the planet and people. pep+ guides how we are working to transform our business operations, from sourcing ingredients and making and selling products in a more sustainable way, to leveraging our more than one billion connections with consumers each day to take sustainability mainstream and engage people to make choices that are better for themselves and the planet.

pep+ drives action and progress across three key pillars, bringing together a number of industry-leading 2030 sustainability goals under a comprehensive framework:

•Positive Agriculture: We are working to spread regenerative practices to restore the earth across seven million acres of land, an area approximately equal to our entire agricultural footprint, sustainably source key crops and ingredients, and improve the livelihoods of more people in our agricultural supply chain. In 2022, we elevated a number of external strategic partnerships and key engagements with this focus, including a partnership with Archer Daniels Midland Company (ADM) to scale regenerative agriculture across our shared supply chains, up to 2 million acres; a research agreement with MIT to develop a more precise measurement of the greenhouse gas impact of regenerative agriculture practices; a strategic engagement with Corteva focused on agriculture sustainability, new substrates, and affordability in food corn and vegetable oils; and a joint effort with a start-up called N-Drip to scale advantaged micro irrigation technology that can provide water-saving, crop-enhancing benefits to farmers around the world.

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•Positive Value Chain: We are working to build a circular and inclusive value chain through actions to: achieve net-zero emissions by 2040; become net water positive by 2030; and introduce more sustainable packaging into the value chain. Our packaging goals include cutting virgin plastic per serving, using more recycled content in our plastic packaging, and scaling our SodaStream business globally, potentially eliminating the need for more than 200 billion plastic bottles by 2030. In 2022, we also announced a new global packaging goal intended to double the percentage of all beverage servings delivered through reusable models from 10% to 20% by 2030. Additionally, we are making progress on our diversity, equity and inclusion journey around the world. And we continue to empower each one of our approximately 315,000 employees to make a positive impact in their communities through our global workforce volunteering program, One Smile at a Time.

•Positive Choices: We continue working to evolve our portfolio of convenient food & beverage products so that they are better for the planet and people, including by incorporating more diverse ingredients in both new and existing products, prioritizing chickpeas, plant-based proteins and whole grains; expanding our position in the nuts & seeds category; accelerating our reduction of added sugars and sodium through the use of science-based targets across our portfolio; and offering more products with healthier oils. We are also continuing to scale new business models that require little or no single-use packaging, including the iconic SodaStream, already sold in more than 45 countries, and the new SodaStream Professional platform, allowing users to personalize their choices in reusable containers at home or on the go.

We believe these priorities will position our Company for long-term sustainable growth.

See also “Item 1A. Risk Factors” for further information about risks and uncertainties that the Company faces.

Our Operations

See “Item 1. Business” for information on our divisions and a description of our distribution network, ingredients and other supplies, brands and intellectual property rights, seasonality, customers, competition, research and development, regulatory matters and human capital. In addition, see Note 1 to our consolidated financial statements for financial information about our divisions and geographic areas.

Other Relationships

Certain members of our Board also serve on the boards of certain vendors and customers. These Board members do not participate in our vendor selection and negotiations nor in our customer negotiations. Our transactions with these vendors and customers are in the normal course of business and are consistent with terms negotiated with other vendors and customers. In addition, certain of our employees serve on the boards of Pepsi Bottling Ventures LLC and other affiliated companies of PepsiCo and do not receive incremental compensation for such services.

Our Business Risks

Risks Associated with Commodities and Our Supply Chain

During 2022, we continued to experience significantly higher operating costs, including on transportation, labor and commodity (including energy) costs, which we expect to continue in 2023. Many of the commodities used in the production and transportation of our products are purchased in the open market. The prices we pay for such items are subject to fluctuation, and we manage this risk through the use of fixed-price contracts and purchase orders, pricing agreements and derivative instruments, including swaps and futures. A number of external factors, including the deadly conflict in Ukraine, the COVID-19 pandemic, the inflationary cost environment, adverse weather conditions, supply chain disruptions

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(including raw material shortages) and labor shortages, have impacted and may continue to impact transportation, labor and commodity availability and costs. When prices increase, we may or may not pass on such increases to our customers without suffering reduced volume, revenue, margins and operating results.

See Note 9 to our consolidated financial statements for further information on how we manage our exposure to commodity prices.

Risks Associated with Climate Change

Certain jurisdictions in which our products are made, manufactured, distributed or sold have either imposed, or are considering imposing, new or increased legal and regulatory requirements to reduce or mitigate the potential effects of climate change, including regulation of greenhouse gas emissions and potential carbon pricing programs. These new or increased legal or regulatory requirements, along with initiatives to meet our sustainability goals, could result in significant increased costs and additional investments in facilities and equipment. However, we are unable to predict the scope, nature and timing of any new or increased environmental laws and regulations and therefore cannot predict the ultimate impact of such laws and regulations on our business or financial results. We continue to monitor existing and proposed laws and regulations in the jurisdictions in which our products are made, manufactured, distributed and sold and to consider actions we may take to potentially mitigate the unfavorable impact, if any, of such laws or regulations.

Risks Associated with International Operations

We are subject to risks in the normal course of business that are inherent to international operations. During the periods presented in this report, certain jurisdictions in which our products are made, manufactured, distributed or sold, including in certain developing and emerging markets, operated in a challenging environment, experiencing unstable economic, political and social conditions, civil unrest, natural disasters, debt and credit issues and currency controls or fluctuations. We continue to monitor the economic, operating and political environment in these markets closely, including risks of additional impairments or write-offs, and to identify actions to potentially mitigate any unfavorable impacts on our future results.

See Notes 1 and 4 to our consolidated financial statements for a discussion of impairment charges recognized in the year ended December 31, 2022.

Risks Associated with the Deadly Conflict in Ukraine

In addition to the risks associated with international operations discussed above, we continue to face risks associated with the deadly conflict in Ukraine. The conflict has continued to result in worldwide geopolitical and macroeconomic uncertainty, and certain of our operations in Ukraine remain suspended. We have suspended sales to our customers of Pepsi-Cola and certain of our other global beverage brands, our discretionary capital investments and advertising and promotional activities in Russia, which has negatively impacted and could continue to negatively impact our business. We continue to offer our other products in Russia. Our operations in Russia accounted for 5% and 4% of our consolidated net revenue for the year ended December 31, 2022 and December 25, 2021, respectively. Russia accounted for 4% and 5% of our consolidated assets, including 9% and 1% of our consolidated cash and cash equivalents, and 32% and 35% of our accumulated currency translation adjustment loss as of December 31, 2022 and December 25, 2021, respectively. Our operations in Ukraine accounted for 0.2% and 0.5% of our consolidated net revenue for the year ended December 31, 2022 and December 25, 2021, respectively. Ukraine accounted for 0.1% and 0.3% of our consolidated assets as of December 31, 2022 and December 25, 2021, respectively.

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The conflict has resulted and could continue to result in volatile commodity markets, supply chain disruptions, increased risk of cyber incidents or other disruptions to our information systems, reputational risks, heightened risks to employee safety, business disruptions (including labor shortages), significant volatility of the Russian ruble, limitations on access to credit markets and other corporate banking services, including working capital facilities, reduced availability and increased costs for transportation, energy, packaging, raw materials and other input costs, environmental, health and safety risks related to securing and maintaining facilities, additional sanctions, export controls and other legislation or regulations (including restrictions on the transfer of funds to and from Russia). The ongoing conflict could result in the temporary or permanent loss of assets or additional impairment charges. We cannot predict how and the extent to which the conflict will continue to affect our employees, customers, operations or business partners or our ability to achieve certain of our sustainability goals. The conflict has adversely affected and could continue to adversely affect demand for our products and our global business. See Notes 1 and 4 to our consolidated financial statements for a discussion of the Russia-Ukraine conflict charges, including impairment charges, recognized in the year ended December 31, 2022.

The extent of the impact of these tragic events on our business remains uncertain and will continue to depend on numerous evolving factors that we are not able to accurately predict, including the duration and scope of the conflict, regional instability and ongoing and additional financial and economic sanctions, export controls and other legislation imposed by governments. We will continue to monitor and assess the situation as circumstances evolve and to identify actions to potentially mitigate any unfavorable impacts on our future results.

Imposition of Taxes and Regulations on our Products

Certain jurisdictions in which our products are made, manufactured, distributed or sold have either imposed, or are considering imposing, new or increased taxes or regulations on the manufacture, distribution or sale of our products or their packaging, ingredients or substances contained in, or attributes of, our products or their packaging, commodities used in the production of our products or their packaging or the recyclability or recoverability of our packaging. These taxes and regulations vary in scope and form. For example, some taxes apply to all beverages, including non-caloric beverages, while others apply only to beverages with a caloric sweetener (e.g., sugar). Further, some regulations apply to all products using certain types of packaging (e.g., plastic), while others are designed to increase the sustainability of packaging, encourage waste reduction and increased recycling rates or facilitate the waste management process or restrict the sale of products in certain packaging.

We sell a wide variety of beverages and convenient foods in more than 200 countries and territories and the profile of the products we sell, the amount of revenue attributable to such products and the type of packaging used vary by jurisdiction. Because of this, we cannot predict the scope or form potential taxes, regulations or other limitations on our products or their packaging may take, and therefore cannot predict the impact of such taxes, regulations or limitations on our financial results. In addition, taxes, regulations and limitations may impact us and our competitors differently. We continue to monitor existing and proposed taxes and regulations in the jurisdictions in which our products are made, manufactured, distributed and sold and to consider actions we may take to potentially mitigate the unfavorable impact, if any, of such taxes, regulations or limitations, including advocating alternative measures with respect to the imposition, form and scope of any such taxes, regulations or limitations.

Retail Landscape

Our industry continues to be affected by disruption of the retail landscape, including the continued growth in sales through e-commerce websites and mobile commerce applications, including through subscription services, the integration of physical and digital operations among retailers and the international expansion of hard discounters. We have seen and expect to continue to see a further shift to e-commerce, online-to-

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offline and other online purchasing by consumers, including as a result of the COVID-19 pandemic. We continue to monitor changes in the retail landscape and seek to identify actions we may take to build our global e-commerce and digital capabilities, such as expanding our direct-to-consumer business, and distribute our products effectively through all existing and emerging channels of trade and potentially mitigate any unfavorable impacts on our future results.

See also “Item 1A. Risk Factors,” “Executive Overview” above and “Market Risks” below for more information about these risks and the actions we have taken to address key challenges.

Risk Management Framework

The achievement of our strategic and operating objectives involves risks, many of which evolve over time. To identify, assess, prioritize, address, manage, monitor and communicate these risks across the Company’s operations and foster a corporate culture of integrity and risk awareness, we leverage an integrated risk management framework. This framework includes the following:

•PepsiCo’s Board has oversight responsibility for PepsiCo’s integrated risk management framework. One of the Board’s primary responsibilities is overseeing and interacting with senior management with respect to key aspects of the Company’s business, including risk assessment and risk mitigation of the Company’s top risks. Throughout the year, the Board and relevant Committees of the Board receive updates from management with respect to various enterprise risk management issues and dedicate a portion of their meetings to reviewing and discussing specific risk topics in greater detail, including risks related to cybersecurity, food safety, sustainability, human capital management (including diversity, equity and inclusion) and supply chain and commodity inflation. The Board receives and provides feedback on regular updates from management regarding the Company’s top risks, including updates from members of management responsible for overseeing impacted areas (for example, the Global Chief Information Officer and Chief Information Security Officer), governance processes associated with managing these risks, the status of projects to strengthen the Company’s risk mitigation efforts and recent incidents impacting the industry and threat landscape. Given that cybersecurity risks can impact various areas of responsibility of the Committees of the Board, the Board believes it is useful and effective for the full Board to maintain direct oversight over cybersecurity matters. In evaluating top risks, the Board and management consider short-, medium- and long-term potential impacts on the Company’s business, financial condition and results of operations, including looking at the internal and external environment when evaluating risks, risk amplifiers and emerging trends, and considers the risk horizon as part of prioritizing the Company’s risk mitigation efforts. The Board receives updates through presentations, memos and other written materials, teleconferences and other appropriate means of communication, with numerous opportunities for discussion and feedback, and continuously evaluates its approach in addressing top risks as circumstances evolve. For example, as part of risk updates to the Board and relevant Committees during 2022, the Board or its relevant Committee were provided updates on the impact of disruptive events, such as the Russia-Ukraine conflict, COVID-19 and supply chain disruption and commodity inflation. The Board also receives periodic updates from external experts and advisers on global macroeconomic trends and conditions that may impact the Company’s strategy and financial performance, including geopolitical conflicts, economic instability, labor market trends, changing consumer behavior, retail disruption and digitalization.

The Board has tasked designated Committees of the Board with oversight of certain categories of risk management, and the Committees report to the Board regularly on these matters.

◦The Audit Committee of the Board reviews and assesses the guidelines and policies governing PepsiCo’s risk management and oversight processes, and assists the Board’s

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oversight of financial, compliance and employee safety risks facing PepsiCo. The Audit Committee also assists the Board’s oversight of the Company’s compliance with legal and regulatory requirements and the Chief Compliance & Ethics Officer, who reports to the General Counsel, meets regularly with the Audit Committee, including in executive session without management present;

◦The Compensation Committee of the Board reviews PepsiCo’s employee compensation policies and practices to assess whether such policies and practices could lead to unnecessary risk-taking behavior;

◦The Nominating and Corporate Governance Committee assists the Board in its oversight of the Company’s governance structure and other corporate governance matters, including succession planning; and

◦The Sustainability, Diversity and Public Policy Committee of the Board assists the Board in its oversight of PepsiCo’s policies, programs and related risks that concern key sustainability (including climate change), diversity, equity and inclusion, and public policy matters.

•The PepsiCo Risk Committee (PRC) meets regularly to identify, assess, prioritize and address top strategic, financial, operating, compliance, safety, reputational and other risks. The PRC is also responsible for reporting progress on our risk mitigation efforts to the Board. The PRC is comprised of a cross-functional, geographically diverse, senior management group, including PepsiCo’s Chairman of the Board of Directors and Chief Executive Officer, Chief Financial Officer, General Counsel, Sector Chief Executive Officers and the heads of Corporate Affairs, Human Resources, Research & Development, Information Technology, Sustainability, Strategy, Transformation, International Beverages, Commercial, Global Operations, Marketing and Financial Planning & Analysis;

•Division and key market risk committees, comprised of cross-functional senior management teams, meet regularly to identify, assess, prioritize and address division and country-specific business risks;

•PepsiCo’s Risk Management Office, which manages the overall risk management process, provides ongoing guidance, tools and analytical support to the PRC and the division and key country risk committees, identifies and assesses potential risks and facilitates ongoing communication between the parties, as well as with PepsiCo’s Board, the Audit Committee of the Board and other Committees of the Board;

•PepsiCo’s Internal Audit Department evaluates the ongoing effectiveness of our key internal controls through periodic audit and review procedures; and

•PepsiCo’s Compliance & Ethics and Law Departments lead and coordinate our compliance policies and practices.

•PepsiCo’s Disclosure Committee, comprised of the General Counsel, Controller and heads of Internal Audit, Financial Planning & Analysis and Investor Relations, evaluates information from PepsiCo’s integrated risk management framework as part of the Disclosure Committee’s monitoring of the integrity and effectiveness of the Company’s disclosure controls and procedures. PepsiCo’s risk oversight processes and disclosure controls and procedures are designed to appropriately escalate key risks to the Board as well as to analyze potential risks for disclosure.

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Market Risks

We are exposed to market risks arising from adverse changes in:

•commodity prices, affecting the cost of our raw materials and energy;

•foreign exchange rates and currency restrictions; and

•interest rates.

In the normal course of business, we manage commodity price, foreign exchange and interest rate risks through a variety of strategies, including productivity initiatives, global purchasing programs and hedging. Ongoing productivity initiatives involve the identification and effective implementation of meaningful cost-saving opportunities or efficiencies, including the use of derivatives. Our global purchasing programs include fixed-price contracts and purchase orders and pricing agreements. See “Item 1A. Risk Factors” for further discussion of our market risks.

The fair value of our derivatives fluctuates based on market rates and prices. The sensitivity of our derivatives to these market fluctuations is discussed below. See Note 9 to our consolidated financial statements for further discussion of these derivatives and our hedging policies. The fair value of our indefinite-lived intangible assets is impacted by changes in market conditions, including interest rates and inflationary, deflationary and recessionary conditions. See “Our Critical Accounting Policies and Estimates” for a discussion of the exposure of our goodwill and other intangible assets and pension and retiree medical plan assets and liabilities to risks related to market fluctuations.

Inflationary, deflationary and recessionary conditions impacting these market risks also impact the demand for and pricing of our products. See “Item 1A. Risk Factors” for further discussion.

Commodity Prices

Our commodity derivatives had a total notional value of $1.8 billion as of December 31, 2022 and $1.6 billion as ofDecember 25, 2021. At the end of 2022, the potential change in fair value of commodity derivative instruments, assuming a 10% decrease in the underlying commodity price, would have decreased our net unrealized gains in 2022 by $176 million, which would generally be offset by a reduction in the cost of the underlying commodity purchases.

Foreign Exchange

Our operations outside of the United States generated 43% of our consolidated net revenue in 2022, with Mexico, Russia, Canada, China, the United Kingdom and South Africa, collectively, comprising approximately 23% of our consolidated net revenue in 2022. As a result, we are exposed to foreign exchange risks in the international markets in which our products are made, manufactured, distributed or sold. Additionally, we are exposed to foreign exchange risk from net investments in foreign subsidiaries, foreign currency purchases, foreign currency assets and liabilities created in the normal course of business. During 2022, unfavorable foreign exchange reduced net revenue growth by 3 percentage points, primarily due to declines in the Turkish lira, euro, Egyptian pound, British pound sterling and South African rand, partially offset by an appreciation of the Russian ruble. Currency declines against the U.S. dollar which are not offset could adversely impact our future financial results.

In addition, volatile economic, political and social conditions and civil unrest in certain markets in which our products are made, manufactured, distributed or sold, including in Argentina, Brazil, China, Mexico, the Middle East, Russia, Turkey and Ukraine, and currency controls or fluctuations in certain of these international markets, continue to, and the threat or imposition of new or increased tariffs or sanctions or other impositions in or related to these international markets may, result in challenging operating environments.

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Our foreign currency derivatives had a total notional value of $3.0 billion as of December 31, 2022 and $2.8 billion as of December 25, 2021. At the end of 2022, we estimate that an unfavorable 10% change in the underlying exchange rates would have decreased our net unrealized gains in 2022 by $298 million, which would be significantly offset by an inverse change in the fair value of the underlying exposure.

The total notional amount of our debt instruments designated as net investment hedges was $2.9 billion as of December 31, 2022 and $2.1 billion as of December 25, 2021.

Interest Rates

Our interest rate derivatives had a total notional value of $1.3 billion as of December 31, 2022 and $2.1 billion as of December 25, 2021.Assuming year-end 2022 investment levels and variable rate debt, a 1-percentage-point increase in interest rates would have decreased our net interest expense in 2022 by $48 million due to higher cash and cash equivalents and short-term investments levels, as compared with our variable rate debt.

OUR FINANCIAL RESULTS

Results of Operations — Consolidated Review

Volume

Physical or unit volume is one of the key metrics management uses internally to make operating and strategic decisions, including the preparation of our annual operating plan and the evaluation of our business performance. We believe volume provides additional information to facilitate the comparison of our historical operating performance and underlying trends, and provides additional transparency on how we evaluate our business because it measures demand for our products at the consumer level. Beginning in 2022, unit volume growth adjusts for the impacts of acquisitions, divestitures and other structural changes. Further, our fiscal 2022 results include an additional week (53rd reporting week). Unit volume growth excludes the impact of the 53rd reporting week.

Beverage volume includes volume of concentrate sold to independent bottlers and volume of finished products bearing company-owned or licensed trademarks and allied brand products and joint venture trademarks sold by company-owned bottling operations. Beverage volume also includes volume of finished products bearing company-owned or licensed trademarks sold by our noncontrolled affiliates. Concentrate volume sold to independent bottlers is reported in concentrate shipments and equivalents (CSE), whereas finished beverage product volume is reported in bottler case sales (BCS). Both CSE and BCS convert all beverage volume to an 8-ounce-case metric. Typically, CSE and BCS are not equal in any given period due to seasonality, timing of product launches, product mix, bottler inventory practices and other factors. While our net revenue is not entirely based on BCS volume due to the independent bottlers in our supply chain, we believe that BCS is a better measure of the consumption of our beverage products. PBNA, LatAm, Europe, AMESA and APAC, either independently or in conjunction with third parties, make, market, distribute and sell ready-to-drink tea products through a joint venture with Unilever (under the Lipton brand name), and PBNA, either independently or in conjunction with third parties, makes, markets, distributes and sells ready-to-drink coffee products through a joint venture with Starbucks.

Convenient food volume includes volume sold by us and our noncontrolled affiliates of convenient food products bearing company-owned or licensed trademarks. Internationally, we measure convenient food product volume in kilograms, while in North America we measure convenient food product volume in pounds. FLNA makes, markets, distributes and sells Sabra refrigerated dips and spreads through a joint venture with Strauss Group.

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Consolidated Net Revenue and Operating Profit

See “Results of Operations – Division Review” for a tabular presentation and discussion of key drivers of net revenue.

Operating profit grew 3% while operating margin declined 0.7 percentage points. Operating profit growth was primarily driven by net revenue growth and productivity savings, partially offset by certain operating cost increases and a 42-percentage-point impact of higher commodity costs. The loss of net revenue due to the Juice Transaction reduced operating profit growth by 3 percentage points and was partially offset by a 1-percentage-point contribution from the 53rd reporting week.

Operating profit growth also reflects a 13-percentage-point unfavorable impact of impairment charges related to certain indefinite-lived intangible assets due to an increase in the weighted-average cost of capital as well as our most current estimates of future financial performance (other impairment charges), a 12-percentage-point unfavorable impact of the charges associated with the Russia-Ukraine conflict and a 6-percentage-point unfavorable impact of impairment on intangible assets, investment and property, plant and equipment and other charges as a result of management’s decision to reposition or discontinue the sale/distribution of certain brands and to sell an investment (brand portfolio impairment charges). These impacts were partially offset by a 29-percentage-point contribution from the gain associated with the Juice Transaction.

The operating margin decline primarily reflects the unfavorable impacts of other impairment charges, the charges associated with the Russia-Ukraine conflict and the brand portfolio impairment charges, partially offset by the gain associated with the Juice Transaction.

Juice Transaction

In the first quarter of 2022, we sold our Tropicana, Naked and other select juice brands to PAI Partners, while retaining a 39% noncontrolling interest in TBG, operating across North America and Europe. These juice businesses delivered approximately $3 billion in net revenue in 2021. In the United States, PepsiCo acts as the exclusive distributor for TBG’s portfolio of brands for small-format and foodservice customers with chilled DSD. See Note 13 to our consolidated financial statements for further information.

Other Consolidated Results

Other pension and retiree medical benefits income $ 132 $ 522 $ (390)

Net interest expense and other $ (939) $ (1,863) $ 924

Net income attributable to PepsiCo $ 8,910 $ 7,618 17 %

Net income attributable to PepsiCo per common share – diluted $ 6.42 $ 5.49 17 %

Other pension and retiree medical benefits income decreased $390 million, primarily due to higher settlement losses compared to the prior year.

Net interest expense and other decreased $924 million, reflecting the prior-year charge of $842 million related to our cash tender offers, higher interest rates on average cash balances and lower average debt balances, partially offset by losses on the market value of investments used to economically hedge a portion of our deferred compensation liability and higher interest rates on debt.

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The reported tax rate decreased 5.7 percentage points, primarily reflecting the impact of the Juice Transaction and adjustments to reserves for uncertain tax positions as a result of the Internal Revenue Service (IRS) audit.

Results of Operations — Division Review

See “Our Business Risks,” “Non-GAAP Measures” and “Items Affecting Comparability” for a discussion of items to consider when evaluating our results and related information regarding measures not in accordance with U.S. Generally Accepted Accounting Principles (GAAP).

In the discussions of net revenue and operating profit below, “effective net pricing” reflects the year-over-year impact of discrete pricing actions, sales incentive activities and mix resulting from selling varying products in different package sizes and in different countries. Additionally, “acquisitions and divestitures” reflect mergers and acquisitions activity, as well as divestitures and other structural changes, including changes in ownership or control in consolidated subsidiaries and nonconsolidated equity investees.

Net Revenue and Organic Revenue Growth

Organic revenue growth is a non-GAAP financial measure. For further information on this measure, see “Non-GAAP Measures.”

Impact of Impact of

(a)Amounts may not sum due to rounding.

(b)Excludes the impact of acquisitions, divestitures and other structural changes and the 53rd reporting week. In certain instances, the impact of organic volume growth on net revenue growth differs from the unit volume growth disclosed in the following divisional discussions due to the impacts of product mix, nonconsolidated joint venture volume, and, for our franchise-owned beverage businesses, temporary timing differences between BCS and CSE. We report net revenue from our franchise-owned beverage businesses based on CSE. The volume sold by our nonconsolidated joint ventures has no direct impact on our net revenue.

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Operating Profit/(Loss), Operating Profit/(Loss) Adjusted for Items Affecting Comparability and Operating Profit/(Loss) Performance Adjusted for Items Affecting Comparability on a Constant Currency Basis

Operating profit/(loss) adjusted for items affecting comparability and operating profit/(loss) performance adjusted for items affecting comparability on a constant currency basis are both non-GAAP financial measures. For further information on these measures, see “Non-GAAP Measures” and “Items Affecting Comparability.”

Operating Profit/(Loss) and Operating Profit/(Loss) Adjusted for Items Affecting Comparability

Items Affecting Comparability(a)

(a)See “Items Affecting Comparability.”

(b)Includes charges taken as a result of the COVID-19 pandemic. See Note 1 to our consolidated financial statements for further information.

(c)In 2021, income amount primarily relates to gains associated with the contingent consideration in connection with our acquisition of Rockstar Energy Beverages (Rockstar). This impact is partially offset by divestiture-related charges associated with the Juice Transaction. See Note 13 to our consolidated financial statements for further information.

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Operating Profit/(Loss) Performance and Operating Profit/(Loss) Performance Adjusted for Items Affecting Comparability on a Constant Currency Basis

Impact of Items Affecting Comparability(a) Impact of

QFNA 4.5 % — 1 — — — 6 % — 6 %

Corporate unallocated expenses 25 % (2.5) (2) (2.5) — — 18 % — 18 %

(a)See “Items Affecting Comparability.”

(b)Amounts may not sum due to rounding.

FLNA

Net revenue grew 19%, primarily driven by effective net pricing and a 2-percentage-point contribution from the 53rd reporting week.

Unit volume decreased 1%, primarily reflecting a double-digit decline in our Sabra joint venture products and a low-single-digit decline in variety packs, partially offset by low-single-digit growth in trademark Doritos and double-digit growth in trademark Popcorners.

Operating profit increased 9%, primarily reflecting the effective net pricing and productivity savings. These impacts were partially offset by certain operating cost increases, including strategic initiatives, a 17-percentage-point impact of higher commodity costs, primarily cooking oil, potatoes and seasoning, and higher advertising and marketing expenses. Additionally, impairment charges associated with a baked fruit convenient food brand reduced operating profit growth by 1.5 percentage points (other impairment charges). The 53rd reporting week contributed 2 percentage points to operating profit growth.

QFNA

Net revenue grew 15%, primarily driven by effective net pricing and a 2-percentage-point contribution from the 53rd reporting week, partially offset by a decrease in organic volume.

Unit volume declined 3%, primarily reflecting mid-single-digit declines in oatmeal and ready-to-eat cereals and a high-single-digit decline in pancake syrups and mixes, partially offset by mid-single-digit growth in rice/pasta sides and low-single-digit growth in bars.

Operating profit grew 4.5%, primarily reflecting the effective net pricing and productivity savings. These impacts were partially offset by a 37-percentage-point impact of higher commodity costs, primarily grains and packaging materials, certain operating cost increases, including incremental transportation costs, the decrease in organic volume and higher advertising and marketing expenses. The 53rd reporting week contributed 2 percentage points to operating profit growth.

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PBNA

Net revenue increased 4%, primarily driven by effective net pricing and an increase in organic volume. The 53rd reporting week contributed 2 percentage points to net revenue growth offset by a 9-percentage-point unfavorable impact of lower net revenue due to the Juice Transaction.

Unit volume grew slightly, driven by a 1% increase in our NCB volume, offset by a 1% decrease in CSD volume. The NCB volume increase primarily reflected a mid-single-digit increase in Gatorade sports drinks, partially offset by a double-digit decrease in our energy portfolio.

Operating profit increased 122%, primarily reflecting a 124-percentage-point impact of the gain of $3.0 billion associated with the Juice Transaction, partially offset by a 2-percentage-point impact of related transaction costs.Operating profit growth was also driven by the net revenue growth and productivity savings, partially offset by certain operating cost increases, including incremental transportation and information technology costs, and a 42-percentage-point impact of higher commodity costs, primarily aluminum and resin. A current-year gain associated with the sale of an asset and the 53rd reporting week contributed 6 percentage points and 2 percentage points, respectively, to operating profit growth. Additionally, operating profit growth was reduced by a 15-percentage-point impact of the lower net revenue due to the Juice Transaction.

As a result of our decision to terminate the agreement with Vital Pharmaceuticals, Inc. to distribute Bang energy drinks, we recorded impairment and other related charges which reduced operating profit growth by 7 percentage points (brand portfolio impairment charges).

LatAm

Net revenue increased 21%, primarily reflecting effective net pricing and organic volume growth.

Convenient foods unit volume grew 3.5%, primarily reflecting mid-single-digit growth in Mexico, partially offset by a low-single-digit decline in Brazil.

Beverage unit volume grew 6%, primarily reflecting double-digit growth in Argentina. Additionally, Brazil, Guatemala, Chile and Mexico each experienced mid-single-digit growth.

Operating profit increased 19%, primarily reflecting the net revenue growth, productivity savings and a 3-percentage-point favorable impact of lower charges taken as a result of the COVID-19 pandemic. These impacts were partially offset by certain operating cost increases, a 41-percentage-point impact of higher commodity costs, primarily cooking oil, packaging materials and grains, and higher advertising and marketing expenses. Additionally, impairment and other charges associated with the sale of certain non-strategic brands reduced operating profit growth by 4.5 percentage points (brand portfolio impairment charges).

Europe

Net revenue decreased 2%, reflecting a 9-percentage-point impact of unfavorable foreign exchange, an organic volume decline and a 4.5-percentage-point unfavorable impact of the Juice Transaction, partially offset by effective net pricing.

Convenient foods unit volume declined 4%, primarily reflecting double-digit declines in Russia and Ukraine and a mid-single-digit decline in Poland, partially offset by low-single-digit growth in the United Kingdom and France and mid-single-digit growth in Turkey. Additionally, the Netherlands experienced a low-single-digit decline.

Beverage unit volume declined 7%, primarily reflecting double-digit declines in Russia, Ukraine and Germany, partially offset by low-single-digit growth in France. Additionally, the United Kingdom experienced a low-single-digit decline and Turkey experienced a mid-single-digit decline.

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Operating profit decreased 207%, primarily reflecting a 110-percentage-point unfavorable impact of charges associated with the Russia-Ukraine conflict, a 98-percentage-point unfavorable impact of impairment charges related to the SodaStream brand (other impairment charges) and a 20-percentage-point unfavorable impact primarily related to the impairment of intangible assets due to the discontinuation or repositioning of certain juice and dairy brands in Russia (brand portfolio impairment charges), partially offset by a 23-percentage-point favorable impact of the gain associated with the Juice Transaction. Operating profit performance was also negatively impacted by a 91-percentage-point impact of higher commodity costs, primarily packaging materials, raw milk and potatoes, certain operating cost increases, the organic volume decline, a 4-percentage-point impact of less favorable settlements of promotional spending accruals compared to the prior year and a 4-percentage-point impact of payments to employees for a change in pension benefits. These impacts were partially offset by the effective net pricing, productivity savings and lower advertising and marketing expenses. Unfavorable foreign exchange negatively impacted operating profit performance by 7 percentage points.

AMESA

Net revenue increased 6%, primarily reflecting effective net pricing and organic volume growth, partially offset by a 3-percentage-point unfavorable impact of an extra month of net revenue in 2021 as we aligned Pioneer Food Group Ltd.’s (Pioneer Foods) reporting calendar with that of our AMESA division. Unfavorable foreign exchange reduced net revenue growth by 12 percentage points.

Convenient foods unit volume grew 2%, primarily reflecting double-digit growth in the Middle East and Pakistan and high-single-digit growth in India, partially offset by a low-single-digit decline in South Africa.

Beverage unit volume grew 14%, primarily reflecting double-digit growth in India. Additionally, the Middle East experienced high-single-digit growth, Nigeria experienced low-single-digit growth and Pakistan experienced double-digit growth.

Operating profit decreased 22%, primarily reflecting a 19-percentage-point impact of impairment and other charges associated with our decision to sell or discontinue certain non-strategic brands and an investment (brand portfolio impairment charges) and a 4-percentage-point impact of impairment charges primarily related to certain juice brands from the Pioneer Foods acquisition (other impairment charges). Operating profit performance was also negatively impacted by a 74-percentage-point impact of higher commodity costs, primarily packaging materials, grains and cooking oil, certain operating cost increases and higher advertising and marketing expenses, partially offset by the net revenue growth and productivity savings. Unfavorable foreign exchange negatively impacted operating profit performance by 9 percentage points.

APAC

Net revenue increased 4%, primarily reflecting effective net pricing and organic volume growth, partially offset by a 2-percentage-point unfavorable impact of an extra month of net revenue in 2021 as we aligned Hangzhou Haomusi Food Co., Ltd.’s (Be & Cheery) reporting calendar with that of our APAC division. Unfavorable foreign exchange reduced net revenue growth by 5 percentage points.

Convenient foods unit volume grew 3%,primarily reflecting low-single-digit growth in China and Australia and mid-single-digit growth in Thailand, partially offset by a low-single-digit decline in Taiwan.

Beverage unit volume grew 8%, primarily reflecting double-digit growth in Vietnam. Additionally, China experienced mid-single-digit growth, Thailand experienced low-single-digit growth and the Philippines experienced high-single-digit growth.

Operating profit decreased 20%, primarily reflecting a 25-percentage-point impact of impairment charges related to the Be & Cheery brand (other impairment charges). Operating profit performance was also

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negatively impacted by a 25-percentage-point impact of higher commodity costs, primarily cooking oil and potatoes, certain operating cost increases and higher advertising and marketing expenses, partially offset by the net revenue growth and productivity savings. Additionally, prior-year impairment charges associated with an equity method investment positively contributed 3 percentage points to operating profit performance. Unfavorable foreign exchange negatively impacted operating profit performance by 4 percentage points.

Non-GAAP Measures

Certain financial measures contained in this Form 10-K adjust for the impact of specified items and are not in accordance with GAAP. We use non-GAAP financial measures internally to make operating and strategic decisions, including the preparation of our annual operating plan, evaluation of our overall business performance and as a factor in determining compensation for certain employees. We believe presenting non-GAAP financial measures in this Form 10-K provides additional information to facilitate comparison of our historical operating results and trends in our underlying operating results and provides additional transparency on how we evaluate our business. We also believe presenting these measures in this Form 10-K allows investors to view our performance using the same measures that we use in evaluating our financial and business performance and trends.

We consider quantitative and qualitative factors in assessing whether to adjust for the impact of items that may be significant or that could affect an understanding of our ongoing financial and business performance or trends. Examples of items for which we may make adjustments include: amounts related to mark-to-market gains or losses (non-cash); charges related to restructuring plans; charges associated with mergers, acquisitions, divestitures and other structural changes; gains associated with divestitures; asset impairment charges (non-cash); pension and retiree medical-related amounts (including all settlement and curtailment gains and losses); charges or adjustments related to the enactment of new laws, rules or regulations, such as tax law changes; amounts related to the resolution of tax positions; tax benefits related to reorganizations of our operations; debt redemptions, cash tender or exchange offers; and remeasurements of net monetary assets. Prior to the fourth quarter of 2021, certain immaterial pension and retiree medical-related settlement and curtailment gains and losses were not considered items affecting comparability. Pension and retiree medical-related service cost, interest cost, expected return on plan assets, and other net periodic pension costs continue to be reflected in our core results. See below and “Items Affecting Comparability” for a description of adjustments to our GAAP financial measures in this Form 10-K.

Non-GAAP information should be considered as supplemental in nature and is not meant to be considered in isolation or as a substitute for the related financial information prepared in accordance with GAAP. In addition, our non-GAAP financial measures may not be the same as or comparable to similar non-GAAP measures presented by other companies.

The following non-GAAP financial measures contained in this Form 10-K are discussed below:

Cost of sales, gross profit, selling, general and administrative expenses, gain associated with the Juice Transaction, impairment of intangible assets, other pension and retiree medical benefits income, net interest expense and other, provision for income taxes, net income attributable to noncontrolling interests and net income attributable to PepsiCo, each adjusted for items affecting comparability, operating profit and net income attributable to PepsiCo per common share – diluted, each adjusted for items affecting comparability, and the corresponding constant currency growth rates

These measures exclude the net impact of mark-to-market gains and losses on centrally managed commodity derivatives that do not qualify for hedge accounting, restructuring and impairment charges related to our 2019 Multi-Year Productivity Plan (2019 Productivity Plan), charges associated with our acquisitions and divestitures, the gain associated with the Juice Transaction, impairment and other charges

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comprised of Russia-Ukraine conflict charges, brand portfolio impairment charges and other impairment charges, the impact of settlement and curtailment gains and losses related to pension and retiree medical plans, a charge related to cash tender offers, tax benefit related to the IRS audit and tax expense related to the Tax Cuts and Jobs Act (TCJ Act) (see “Items Affecting Comparability” for a detailed description of each of these items). We also evaluate performance on operating profit and net income attributable to PepsiCo per common share – diluted, each adjusted for items affecting comparability, on a constant currency basis, which measure our financial results assuming constant foreign currency exchange rates used for translation based on the rates in effect for the comparable prior-year period. In order to compute our constant currency results, we multiply or divide, as appropriate, our current-year U.S. dollar results by the current-year average foreign exchange rates and then multiply or divide, as appropriate, those amounts by the prior-year average foreign exchange rates. We believe these measures provide useful information in evaluating the results of our business because they exclude items that we believe are not indicative of our ongoing performance or that we believe impact comparability with the prior year.

Organic revenue growth

We define organic revenue growth as a measure that adjusts for the impacts of foreign exchange translation, acquisitions, divestitures and other structural changes, and every five or six years, the impact of the 53rd reporting week, including in our 2022 financial results. Adjusting for acquisitions and divestitures reflects mergers and acquisitions activity, including the impact in 2021 of an extra month of net revenue for our acquisitions of Pioneer Foods in our AMESA division and Be & Cheery in our APAC division as we aligned the reporting calendars of these acquisitions with those of our divisions, as well as divestitures and other structural changes, including changes in ownership or control in consolidated subsidiaries and nonconsolidated equity investees. We believe organic revenue growth provides useful information in evaluating the results of our business because it excludes items that we believe are not indicative of ongoing performance or that we believe impact comparability with the prior year.

See “Net Revenue and Organic Revenue Growth” in “Results of Operations – Division Review” for further information.

Free cash flow

We define free cash flow as net cash provided by operating activities less capital spending, plus sales of property, plant and equipment. Since net capital spending is essential to our product innovation initiatives and maintaining our operational capabilities, we believe that it is a recurring and necessary use of cash. As such, we believe investors should also consider net capital spending when evaluating our cash from operating activities. Free cash flow is used by us primarily for acquisitions and financing activities, including debt repayments, dividends and share repurchases. Free cash flow is not a measure of cash available for discretionary expenditures since we have certain non-discretionary obligations such as debt service that are not deducted from the measure.

See “Free Cash Flow” in “Our Liquidity and Capital Resources” for further information.

Return on invested capital (ROIC) and net ROIC, excluding items affecting comparability

We define ROIC as net income attributable to PepsiCo plus interest expense after-tax divided by the sum of quarterly average debt obligations and quarterly average common shareholders’ equity. Although ROIC is a common financial metric, numerous methods exist for calculating ROIC. Accordingly, the method used by management to calculate ROIC may differ from the methods other companies use to calculate their ROIC.

We believe this metric serves as a measure of how well we use our capital to generate returns. In addition, we use net ROIC, excluding items affecting comparability, to compare our performance over various reporting periods on a consistent basis because it removes from our operating results the impact of items that we believe are not indicative of our ongoing performance and reflects how management evaluates our

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operating results and trends. We define net ROIC, excluding items affecting comparability, as ROIC, adjusted for quarterly average cash, cash equivalents and short-term investments, after-tax interest income and items affecting comparability. We believe the calculation of ROIC and net ROIC, excluding items affecting comparability, provides useful information to investors and is an additional relevant comparison of our performance to consider when evaluating our capital allocation efficiency.

See “Return on Invested Capital” in “Our Liquidity and Capital Resources” for further information.

Items Affecting Comparability

Our reported financial results in this Form 10-K are impacted by the following items in each of the following years:

Items Affecting Comparability

Acquisition and divestiture-related charges — — (74) — — 74 6 14 — 66

Pension and retiree medical-related impact — — — — — — 307 69 — 238

Tax benefit related to the IRS audit — — — — — — — 319 — (319)

Tax expense related to the TCJ Act — — — — — — — (86) — 86

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Items Affecting Comparability

Acquisition and divestiture-related charges (1) 1 5 (4) — — 23 — (27)

Pension and retiree medical-related impact — — — — 12 — 1 — 11

Charge related to cash tender offers — — — — — 842 165 — 677

Tax expense related to the TCJ Act — — — — — — (190) — 190

(a)Provision for income taxes is the expected tax charge/benefit on the underlying item based on the tax laws and income tax rates applicable to the underlying item in its corresponding tax jurisdiction.

Mark-to-market net impact 0.03 0.01

Restructuring and impairment charges 0.24 0.15

Acquisition and divestiture-related charges 0.05 (0.02)

Gain associated with the Juice Transaction (2.08) —

Impairment and other charges 2.12 —

Pension and retiree medical-related impact 0.17 0.01

Charge related to cash tender offers — 0.49

Tax benefit related to the IRS audit (0.23) —

Tax expense related to the TCJ Act 0.06 0.14

Impact of foreign exchange translation 2

(a)Does not sum due to rounding.

Mark-to-Market Net Impact

We centrally manage commodity derivatives on behalf of our divisions. These commodity derivatives include agricultural products, energy and metals. Commodity derivatives that do not qualify for hedge accounting treatment are marked to market each period with the resulting gains and losses recorded in corporate unallocated expenses as either cost of sales or selling, general and administrative expenses, depending on the underlying commodity. These gains and losses are subsequently reflected in division results when the divisions recognize the cost of the underlying commodity in operating profit. Therefore, the divisions realize the economic effects of the derivative without experiencing any resulting mark-to-market volatility, which remains in corporate unallocated expenses.

Restructuring and Impairment Charges

2019 Multi-Year Productivity Plan

The 2019 Productivity Plan, publicly announced on February 15, 2019, will leverage new technology and business models to further simplify, harmonize and automate processes; re-engineer our go-to-market and information systems, including deploying the right automation for each market; and simplify our organization and optimize our manufacturing and supply chain footprint. To build on the successful

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implementation of the 2019 Productivity Plan, in the fourth quarter of 2022, we expanded and extended the plan through the end of 2028 to take advantage of additional opportunities within the initiatives described above. As a result, we expect to incur pre-tax charges of approximately $3.65 billion, including cash expenditures of approximately $2.9 billion. Plan to date through December 31, 2022, we have incurred pre-tax charges of $1.5 billion, including cash expenditures of $1.0 billion. In our 2023 financial results, we expect to incur pre-tax charges and cash expenditures of approximately $600 million each. These charges will be funded primarily through cash from operations. We expect to incur the majority of the remaining pre-tax charges and cash expenditures in our 2023 through 2024 financial results, with the balance to be incurred through 2028. Charges include severance and other employee costs, asset impairments and other costs.

See Note 3 to our consolidated financial statements for further information related to our 2019 Productivity Plan. We regularly evaluate productivity initiatives beyond the productivity plan and other initiatives discussed above and in Note 3 to our consolidated financial statements.

Acquisition and Divestiture-Related Charges

Acquisition and divestiture-related charges primarily include fair value adjustments to the acquired inventory included in the acquisition-date balance sheets (recorded in cost of sales), merger and integration charges and costs associated with divestitures (recorded in selling, general and administrative expenses). Merger and integration charges include liabilities to support socioeconomic programs in South Africa, gains associated with contingent consideration, employee-related costs, contract termination costs, closing costs and other integration costs. Divestiture-related charges reflect transaction expenses, including consulting, advisory and other professional fees.

See Note 13 to our consolidated financial statements for further information.

Gain Associated with the Juice Transaction

We recognized a gain associated with the Juice Transaction in our PBNA and Europe divisions.

See Note 13 to our consolidated financial statements for further information.

Impairment and Other Charges

We recognized Russia-Ukraine conflict charges, brand portfolio impairment charges and other impairment charges as described below.

Russia-Ukraine Conflict Charges

In connection with the deadly conflict in Ukraine, we recognized charges related to indefinite-lived intangible assets and property, plant and equipment impairment, allowance for expected credit losses, inventory write-downs and other costs.

See Notes 1 and 4 to our consolidated financial statements for further information.

Brand Portfolio Impairment Charges

We recognized intangible asset, investment and property, plant and equipment impairments and other charges as a result of management’s decision to reposition or discontinue the sale/distribution of certain brands and to sell an investment.

See Notes 1 and 4 to our consolidated financial statements for further information.

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Other Impairment Charges

We recognized impairment charges related to certain of our indefinite-lived intangible assets which reflect an increase in the weighted-average cost of capital as well as our most current estimates of future financial performance.

See Notes 1 and 4 to our consolidated financial statements for further information.

Pension and Retiree Medical-Related Impact

Pension and retiree medical-related impact primarily includes settlement charges related to lump sum distributions exceeding the total of annual service and interest costs, as well as curtailment gains.

See Notes 7 and 13 to our consolidated financial statements for further information.

Charge Related to Cash Tender Offers

As a result of the cash tender offers for some of our long-term debt, we recorded a charge primarily representing the tender price paid over the carrying value of the tendered notes and loss on treasury rate locks used to mitigate the interest rate risk on the cash tender offers.

See Note 8 to our consolidated financial statements for further information.

Tax Benefit Related to the IRS Audit

We recognized a non-cash tax benefit resulting from our agreement with the IRS to settle one of the issues assessed in the 2014 through 2016 tax audit. The agreement covers tax years 2014 through 2019.

See Note 5 to our consolidated financial statements for further information.

Tax Expense Related to the TCJ Act

Tax expense related to the TCJ Act reflects adjustments to the mandatory transition tax liability under the TCJ Act.

See Note 5 to our consolidated financial statements for further information.

Our Liquidity and Capital Resources

We believe that our cash generating capability and financial condition, together with our revolving credit facilities, working capital lines and other available methods of debt financing, such as commercial paper borrowings and long-term debt financing, will be adequate to meet our operating, investing and financing needs, including with respect to our net capital spending plans. Our primary sources of liquidity include cash from operations, pre-tax cash proceeds of approximately $3.5 billion from the Juice Transaction,proceeds obtained from issuances of commercial paper and long-term debt, and cash and cash equivalents. These sources of cash are available to fund cash outflows that have both a short- and long-term component, including debt repayments and related interest payments; payments for acquisitions; operating leases; purchase, marketing, and other contractual commitments, including capital expenditures and the transition tax liability under the TCJ Act. In addition, these sources of cash fund other cash outflows including anticipated dividend payments and share repurchases. We do not have guarantees or off-balance sheet financing arrangements, including variable interest entities, that we believe could have a material impact on our liquidity. See “Item 1A. Risk Factors,” “Our Business Risks” and Note 8 to our consolidated financial statements for further information.

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Our sources and uses of cash were not materially adversely impacted by the Russia-Ukraine conflict and, to date, we have not identified any material liquidity deficiencies as a result of the conflict. Based on the information currently available to us, we do not expect the impact of the Russia-Ukraine conflict to have a material impact on our future liquidity. We will continue to monitor and assess the impact the Russia-Ukraine conflict may have on our business and financial results. See “Item 1A. Risk Factors,” “Our Business Risks” and Note 1 to our consolidated financial statements for further information related to the impact of the Russia-Ukraine conflict on our business and financial results.

As of December 31, 2022, cash, cash equivalents and short-term investments in our consolidated subsidiaries subject to currency controls or currency exchange restrictions were not material.

The TCJ Act imposed a one-time mandatory transition tax on undistributed international earnings. As of December 31, 2022, our mandatory transition tax liability was $2.6 billion, which must be paid through 2026 under the provisions of the TCJ Act; we currently expect to pay approximately $309 million of this liability in 2023. Any additional guidance issued by the IRS may impact our recorded amounts for this transition tax liability. See Note 5 to our consolidated financial statements for further discussion of the TCJ Act.

As part of our evolving market practices, we work with our suppliers to optimize our terms and conditions, which include the extension of payment terms. Our current payment terms with a majority of our suppliers generally range from 60 to 90 days, which we deem to be commercially reasonable. We will continue to monitor economic conditions and market practice working with our suppliers to adjust as necessary. We also maintain voluntary supply chain finance agreements with several participating global financial institutions. Under these agreements, our suppliers, at their sole discretion, may elect to sell their accounts receivable with PepsiCo to these participating global financial institutions. Supplier participation in these financing arrangements is voluntary. Our suppliers negotiate their financing agreements directly with the respective global financial institutions and we are not a party to these agreements. These financing arrangements allow participating suppliers to leverage PepsiCo’s creditworthiness in establishing credit spreads and associated costs, which generally provides our suppliers with more favorable terms than they would be able to secure on their own. Neither PepsiCo nor any of its subsidiaries provide any guarantees to any third party in connection with these financing arrangements. We have no economic interest in our suppliers’ decision to participate in these agreements. Our obligations to our suppliers, including amounts due and scheduled payment terms, are not impacted. All outstanding amounts related to suppliers participating in such financing arrangements are recorded within accounts payable and other current liabilities in our consolidated balance sheet. We were informed by the participating financial institutions that as of both December 31, 2022 and December 25, 2021, $1.5 billion of our accounts payable to suppliers who participate in these financing arrangements are outstanding. These supply chain finance arrangements did not have a material impact on our liquidity or capital resources in the periods presented and we do not expect such arrangements to have a material impact on our liquidity or capital resources for the foreseeable future.

Furthermore, our cash provided from operating activities is somewhat impacted by seasonality. Working capital needs are impacted by weekly sales, which are generally highest in the third quarter due to seasonal and holiday-related patterns and generally lowest in the first quarter. On a continuing basis, we consider various transactions to increase shareholder value and enhance our business results, including acquisitions, divestitures, joint ventures, dividends, share repurchases, productivity and other efficiency initiatives and other structural changes. These transactions may result in future cash proceeds or payments.

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The table below summarizes our cash activity:

Net cash provided by operating activities $ 10,811 $ 11,616

Net cash used for investing activities $ (2,430) $ (3,269)

Net cash used for financing activities $ (8,523) $ (10,780)

Operating Activities

In 2022, net cash provided by operating activities was $10.8 billion, compared to $11.6 billion in the prior year. The decrease in operating cash flow primarily reflects unfavorable working capital comparisons and higher net cash tax payments, partially offset by favorable operating profit performance and lower pre-tax pension and retiree medical plan contributions in the current year.

Investing Activities

In 2022, net cash used for investing activities was $2.4 billion, primarily reflecting net capital spending of $5.0 billion and our investment in Celsius Holdings, Inc. (Celsius) convertible preferred stock and agreement to distribute Celsius energy drinks of $0.8 billion, partially offset by proceeds associated with the Juice Transaction of $3.5 billion.

In 2021, net cash used for investing activities was $3.3 billion, primarily reflecting net capital spending of $4.5 billion, partially offset by maturities of short-term investments with maturities greater than three months of $1.1 billion.

See Note 1 to our consolidated financial statements for further discussion of capital spending by division; see Notes 4 and 9 to our consolidated financial statements for further discussion of our agreement with and investment in Celsius; and see Note 13 to our consolidated financial statements for further discussion of our acquisitions.

We regularly review our plans with respect to net capital spending, including in light of the ongoing uncertainty caused by the Russia-Ukraine conflict on our business, and believe that we have sufficient liquidity to meet our net capital spending needs.

Financing Activities

In 2022, net cash used for financing activities was $8.5 billion, primarily reflecting the return of operating cash flow to our shareholders through dividend payments of $6.2 billion and share repurchases of $1.5 billion, payments of long-term debt borrowings of $2.5 billion and debt redemptions/cash tender offers of $1.7 billion, partially offset by proceeds from issuances of long-term debt of $3.4 billion.

In 2021, net cash used for financing activities was $10.8 billion, primarily reflecting the return of operating cash flow to our shareholders largely through dividend payments of $5.8 billion, cash tender offers/debt redemption of $4.8 billion, payments of long-term debt borrowings of $3.5 billion and payments of acquisition-related contingent consideration of $0.8 billion, partially offset by proceeds from issuances of long-term debt of $4.1 billion.

See Note 8 to our consolidated financial statements for further discussion of debt obligations.

We annually review our capital structure with our Board, including our dividend policy and share repurchase activity. On February 10, 2022, we announced a share repurchase program providing for the repurchase of up to $10.0 billion of PepsiCo common stock which commenced on February 11, 2022 and will expire on February 28, 2026. In addition, on February 9, 2023, we announced a 10.0% increase in our annualized dividend to $5.06 per share from $4.60 per share, effective with the dividend expected to be paid in June 2023. We expect to return a total of approximately $7.7 billion to shareholders in 2023, comprising dividends of approximately $6.7 billion and share repurchases of approximately $1.0 billion.

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Free Cash Flow

The table below reconciles net cash provided by operating activities, as reflected on our cash flow statement, to our free cash flow.Free cash flow is a non-GAAP financial measure. For further information on free cash flow, see “Non-GAAP Measures.”

Net cash provided by operating activities, GAAP measure $ 10,811 $ 11,616 (7) %

Sales of property, plant and equipment 251 166

Free cash flow, non-GAAP measure $ 5,855 $ 7,157 (18) %

We use free cash flow primarily for acquisitions and financing activities, including debt repayments, dividends and share repurchases. We expect to continue to return free cash flow to our shareholders primarily through dividends and share repurchases while maintaining Tier 1 commercial paper access, which we believe will facilitate appropriate financial flexibility and ready access to global capital and credit markets at favorable interest rates. However, see “Item 1A. Risk Factors” and “Our Business Risks” for certain factors that may impact our credit ratings or our operating cash flows.

Any downgrade of our credit ratings by a credit rating agency, especially any downgrade to below investment grade, whether or not as a result of our actions or factors which are beyond our control, could increase our future borrowing costs and impair our ability to access capital and credit markets on terms commercially acceptable to us, or at all. In addition, any downgrade of our current short-term credit ratings could impair our ability to access the commercial paper market with the same flexibility that we have experienced historically, and therefore require us to rely more heavily on more expensive types of debt financing. See “Item 1A. Risk Factors,” “Our Business Risks” and Note 8 to our consolidated financial statements for further information.

Material Changes in Line Items in Our Consolidated Financial Statements

Material changes in line items in our consolidated statement of income are discussed in “Results of Operations – Consolidated Review,” “Results of Operations – Division Review” and “Items Affecting Comparability.”

Material changes in line items in our consolidated statement of cash flows are discussed in “Our Liquidity and Capital Resources.”

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Material changes in line items in our consolidated balance sheet are discussed below:

Decrease in cash and cash equivalents (b) $ (0.6)

Increase in accounts and notes receivable, net (c) $ 1.5

Increase in inventories (d) $ 0.9

Decrease in assets held for sale (e) $ (1.8)

Increase in property, plant and equipment, net (f) $ 1.9

Decrease in other indefinite-lived intangible assets (g) $ (2.8)

Increase in investments in noncontrolled affiliates (h) $ 0.7

Increase in other assets (i) $ 0.8

Decrease in short-term debt obligations (j) $ (0.9)

Increase in accounts payable and other current liabilities (k) $ 2.2

Decrease in liabilities held for sale (e) $ (0.8)

Decrease in deferred income taxes (l) $ (0.7)

Decrease in other liabilities (m) $ (0.8)

(a)In billions.

(b)See consolidated statement of cash flows.

(c)Primarily reflects strong revenue performance across much of our portfolio in 2022. See Note 14 to our consolidated financial statements for further information.

(d)Primarily reflects higher commodity costs in 2022. See Note 14 to our consolidated financial statements for further information.

(e)Reflects closing of the Juice Transaction. See Note 13 to our consolidated financial statements for further information.

(f)Primarily reflects capital spending, partially offset by depreciation. See Notes 1 and 14 to our consolidated financial statements for further information.

(g)Primarily reflects impairments. See Notes 1 and 4 to our consolidated financial statements for further information.

(h)Primarily reflects closing of the Juice Transaction. See Note 13 to our consolidated financial statements for further information.

(i)Primarily reflects our investment in Celsius convertible preferred stock. See Note 9 to our consolidated financial statements for further information.

(j)Primarily reflects debt payments and redemptions, partially offset by debt maturing within one year. See Note 8 to our consolidated financial statements for further information.

(k)Primarily reflects higher commodity costs and capital expenditures in 2022. See Note 14 to our consolidated financial statements for further information.

(l)Primarily reflects certain impairments and the capitalization of research and development expenses under the TCJ Act, partially offset by the deferred tax impacts of our Juice Transaction. See Note 5 to our consolidated financial statements for further information.

(m)Primarily reflects changes related to pension and retiree medical plans. See Note 7 to our consolidated financial statements for further information.

Material changes in equity line items are discussed in our consolidated statement of equity and notes 7 and 11 to our consolidated financial statements.

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Return on Invested Capital

ROIC is a non-GAAP financial measure. For further information on ROIC, see “Non-GAAP Measures.”

Net income attributable to PepsiCo $ 8,910 $ 7,618

Tax on interest expense (248) (441)

Average common shareholders’ equity (b) 17,785 14,924

ROIC, non-GAAP measure 17.0 % 16.0 %

(a)Includes a quarterly average of short-term and long-term debt obligations.

(b)Includes a quarterly average of common stock, capital in excess of par value, retained earnings, accumulated other comprehensive loss and repurchased common stock.

The table below reconciles ROIC as calculated above to net ROIC, excluding items affecting comparability.

ROIC, non-GAAP measure 17.0 % 16.0 %

Impact of:

Average cash, cash equivalents and short-term investments 2.1 2.2

Interest income (0.3) (0.2)

Tax on interest income 0.1 —

Mark-to-market net impact 0.1 0.1

Restructuring and impairment charges 0.3 0.2

Acquisition and divestiture-related charges 0.1 (0.1)

Gain associated with the Juice Transaction (3.3) —

Impairment and other charges 3.7 —

Pension and retiree medical-related impact 0.3 (0.1)

Charge related to cash tender offers (0.2) —

Tax benefit related to the IRS audit (0.4) —

Tax expense related to the TCJ Act 0.1 0.3

Core Net ROIC, non-GAAP measure 19.6 % 18.4 %

OUR CRITICAL ACCOUNTING POLICIES AND ESTIMATES

An appreciation of our critical accounting policies and estimates is necessary to understand our financial results. These policies may require management to make difficult and subjective judgments regarding uncertainties, including the business and economic uncertainty resulting from the Russia-Ukraine conflict and the high interest rate and inflationary cost environment, and as a result, such estimates may significantly impact our financial results. The precision of these estimates and the likelihood of future changes depend on a number of underlying variables and a range of possible outcomes. We applied our critical accounting policies and estimation methods consistently in all material respects and for all periods presented. We have discussed our critical accounting policies and estimates with our Audit Committee.

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Our critical accounting policies and estimates are:

•revenue recognition;

•goodwill and other intangible assets;

•income tax expense and accruals; and

•pension and retiree medical plans.

Revenue Recognition

We recognize revenue when our performance obligation is satisfied. Our primary performance obligation (the distribution and sales of beverage and convenient food products) is satisfied upon the shipment or delivery of products to our customers, which is also when control is transferred. The transfer of control of products to our customers is typically based on written sales terms that do not allow for a right of return. However, our policy for DSD, including certain chilled products, is to remove and replace damaged and out-of-date products from store shelves to ensure that consumers receive the product quality and freshness they expect. Similarly, our policy for certain warehouse-distributed products is to replace damaged and out-of-date products. As a result, we record reserves, based on estimates, for anticipated damaged and out-of-date products.

Our products are sold for cash or on credit terms. Our credit terms, which are established in accordance with local and industry practices, typically require payment within 30 days of delivery in the United States, and generally within 30 to 90 days internationally, and may allow discounts for early payment.

We estimate and reserve for our expected credit loss exposure based on our experience with past due accounts and collectibility, write-off history, the aging of accounts receivable, our analysis of customer data, and forward-looking information (including the expected impact of a high interest rate and inflationary cost environment), leveraging estimates of creditworthiness and projections of default and recovery rates for certain of our customers.

Our policy is to provide customers with product when needed. In fact, our commitment to freshness and product dating serves to regulate the quantity of product shipped or delivered. In addition, DSD products are placed on the shelf by our employees with customer shelf space and storerooms limiting the quantity of product. For product delivered through other distribution networks, we monitor customer inventory levels.

As discussed in “Our Customers” in “Item 1. Business,” we offer sales incentives and discounts through various programs to customers and consumers. Total marketplace spending includes sales incentives, discounts, advertising and other marketing activities. Sales incentives and discounts are primarily accounted for as a reduction of revenue and include payments to customers for performing activities on our behalf, such as payments for in-store displays, payments to gain distribution of new products, payments for shelf space and discounts to promote lower retail prices. Sales incentives and discounts also include support provided to our independent bottlers through funding of advertising and other marketing activities.

A number of our sales incentives, such as bottler funding to independent bottlers and customer volume rebates, are based on annual targets, and accruals are established during the year, as products are delivered, for the expected payout, which may occur after year-end once reconciled and settled. These accruals are based on contract terms and our historical experience with similar programs and require management judgment with respect to estimating customer and consumer participation and performance levels. Differences between estimated expense and actual incentive costs are normally insignificant and are recognized in earnings in the period such differences are determined. In addition, certain advertising and marketing costs are also based on annual targets and recognized during the year as incurred.

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See Note 2 to our consolidated financial statements for further information on our revenue recognition and related policies, including total marketplace spending.

Goodwill and Other Intangible Assets

We sell products under a number of brand names, many of which were developed by us. Brand development costs are expensed as incurred. We also purchase brands and other intangible assets in acquisitions. In a business combination, the consideration is first assigned to identifiable assets and liabilities, including brands and other intangible assets, based on estimated fair values, with any excess recorded as goodwill. Determining fair value requires significant estimates and assumptions, including those related to the Russia-Ukraine conflict and a high interest rate and inflationary cost environment, based on an evaluation of a number of factors, such as marketplace participants, product life cycles, market share, consumer awareness, brand history and future expansion expectations, amount and timing of future cash flows and the discount rate applied to the cash flows.

We believe that a brand has an indefinite life if it has a history of strong revenue and cash flow performance and we have the intent and ability to support the brand with marketplace spending for the foreseeable future. If these indefinite-lived brand criteria are not met, brands are amortized over their expected useful lives, which generally range from 20 to 40 years. Determining the expected life of a brand requires management judgment and is based on an evaluation of a number of factors, including market share, consumer awareness, brand history, future expansion expectations and regulatory restrictions, as well as the macroeconomic environment of the countries in which the brand is sold.

In connection with previous acquisitions, we reacquired certain franchise rights which provided the exclusive and perpetual rights to manufacture and/or distribute beverages for sale in specified territories. In determining the useful life of these franchise rights, many factors were considered, including the pre-existing perpetual bottling arrangements, the indefinite period expected for these franchise rights to contribute to our future cash flows, as well as the lack of any factors that would limit the useful life of these franchise rights to us, including legal, regulatory, contractual, competitive, economic or other factors. Therefore, certain of these franchise rights are considered as indefinite-lived. Franchise rights that are not considered indefinite-lived are amortized over the remaining contractual period of the contract in which the right was granted.

Indefinite-lived intangible assets and goodwill are not amortized and, as a result, are assessed for impairment at least annually, using either a qualitative or quantitative approach. We perform this annual assessment during our third quarter, or more frequently if circumstances indicate that the carrying value may not be recoverable. Where we use the qualitative assessment, first we determine if, based on qualitative factors, it is more likely than not that an impairment exists. Factors considered include macroeconomic conditions (including those related to the Russia-Ukraine conflict and a high interest rate and inflationary cost environment), industry and competitive conditions, legal and regulatory environment, historical financial performance and significant changes in the brand or reporting unit. If the qualitative assessment indicates that it is more likely than not that an impairment exists, then a quantitative assessment is performed.

In the quantitative assessment for indefinite-lived intangible assets and goodwill, an assessment is performed to determine the fair value of the indefinite-lived intangible asset and the reporting unit, respectively. Estimated fair value is determined using discounted cash flows and requires an analysis of several estimates including future cash flows or income consistent with management’s strategic business plans, annual sales growth rates, perpetuity growth assumptions and the selection of assumptions underlying a discount rate (weighted-average cost of capital) based on market data available at the time. Significant management judgment is necessary to estimate the impact of competitive operating, macroeconomic and other factors (including those related to the Russia-Ukraine conflict and a high

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interest rate and inflationary cost environment) to estimate future levels of sales, operating profit or cash flows. All assumptions used in our impairment evaluations for indefinite-lived intangible assets and goodwill, such as forecasted growth rates (including perpetuity growth assumptions) and weighted-average cost of capital, are based on the best available market information and are consistent with our internal forecasts and operating plans. A deterioration in these assumptions could adversely impact our results. These assumptions could be adversely impacted by certain of the risks described in “Item 1A. Risk Factors” and “Our Business Risks.”

In 2022, we recorded $1.3 billion ($1.1 billion after-tax or $0.78 per share) of indefinite-lived intangible asset impairment charges related to the SodaStream brand in Europe. As a result, its carrying value as of December 31, 2022 is equal to its fair value and the brand is at a heightened risk of future impairment if certain assumptions and estimates were to change. For example, a mutually exclusive 100-basis-point increase in the discount rate and a 100-basis-point decrease in the perpetuity growth rate used to estimate the fair value of the SodaStream brand would result in an additional estimated impairment charge of approximately $0.2 billion and $0.1 billion, respectively. We will continue to monitor the performance of the SodaStream brand and goodwill, as well as all of our indefinite-lived intangible assets.

Amortizable intangible assets are only evaluated for impairment upon a significant change in the operating or macroeconomic environment. If an evaluation of the undiscounted future cash flows indicates impairment, the asset is written down to its estimated fair value, which is based on its discounted future cash flows.

See Notes 2 and 4 to our consolidated financial statements for further information.

Income Tax Expense and Accruals

Our annual tax rate is based on our income, statutory tax rates and tax structure and transactions, including transfer pricing arrangements, available to us in the various jurisdictions in which we operate. Significant judgment is required in determining our annual tax rate and in evaluating our tax positions. We establish reserves when, despite our belief that our tax return positions are fully supportable, we believe that certain positions are subject to challenge and that we likely will not succeed. We adjust these reserves, as well as the related interest, in light of changing facts and circumstances, such as the progress of a tax audit, new tax laws, relevant court cases or tax authority settlements. See “Item 1A. Risk Factors” for further discussion.

An estimated annual effective tax rate is applied to our quarterly operating results. In the event there is a significant or unusual item recognized in our quarterly operating results, the tax attributable to that item is separately calculated and recorded at the same time as that item. We consider the tax adjustments from the resolution of prior-year tax matters to be among such items.

Tax law requires items to be included in our tax returns at different times than the items are reflected in our consolidated financial statements. As a result, our annual tax rate reflected in our consolidated financial statements is different than that reported in our tax returns (our cash tax rate). Some of these differences are permanent, such as expenses that are not deductible in our tax return, and some differences reverse over time, such as depreciation expense. These temporary differences create deferred tax assets and liabilities. Deferred tax assets generally represent items that can be used as a tax deduction or credit in our tax returns in future years for which we have already recorded the tax benefit on our consolidated financial statements. We establish valuation allowances for our deferred tax assets if, based on the available evidence, it is not more likely than not that some portion or all of the deferred tax assets will be realized. Deferred tax liabilities generally represent tax expense recognized in our consolidated financial statements for which payment has been deferred, or expense for which we have already taken a deduction in our tax return but have not yet recognized as expense in our consolidated financial statements.

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In 2022, our annual tax rate was 16.1% compared to 21.8% in 2021. See “Other Consolidated Results” for further information.

See Note 5 to our consolidated financial statements for further information.

Pension and Retiree Medical Plans

Our pension plans cover certain employees in the United States and certain international employees. Benefits are determined based on either years of service or a combination of years of service and earnings. Certain U.S. and Canada retirees are also eligible for medical and life insurance benefits (retiree medical) if they meet age and service requirements. Generally, our share of retiree medical costs is capped at specified dollar amounts, which vary based upon years of service, with retirees contributing the remainder of the cost. In addition, we have been phasing out certain subsidies of retiree medical benefits.

See “Items Affecting Comparability” and Note 7 to our consolidated financial statements for information about changes and settlements within our pension plans.

Our Assumptions

The determination of pension and retiree medical expenses and obligations requires the use of assumptions to estimate the amount of benefits that employees earn while working, as well as the present value of those benefits. Annual pension and retiree medical expense amounts are principally based on four components: (1) the value of benefits earned by employees for working during the year (service cost), (2) the increase in the projected benefit obligation due to the passage of time (interest cost), and (3) other gains and losses as discussed in Note 7 to our consolidated financial statements, reduced by (4) the expected return on assets for our funded plans.

Significant assumptions used to measure our annual pension and retiree medical expenses include:

•certain employee-related demographic factors, such as turnover, retirement age and mortality;

•the expected rate of return on assets in our funded plans;

•the spot rates along the yield curve used to determine service and interest costs and the present value of liabilities;

•for pension expense, the rate of salary increases for plans where benefits are based on earnings; and

•for retiree medical expense, health care cost trend rates.

Certain assumptions reflect our historical experience and management’s best judgment regarding future expectations. All actuarial assumptions are reviewed annually, except in the case of an interim remeasurement due to a significant event such as a curtailment or settlement. Due to the significant management judgment involved, these assumptions could have a material impact on the measurement of our pension and retiree medical expenses and obligations.

At each measurement date, the discount rates are based on interest rates for high-quality, long-term corporate debt securities with maturities comparable to those of our liabilities. Our U.S. obligation and pension and retiree medical expense is based on the discount rates determined using the Mercer Above Mean Curve. This curve includes bonds that closely match the timing and amount of our expected benefit payments and reflects the portfolio of investments we would consider to settle our liabilities.

See Note 7 to our consolidated financial statements for information about the expected rate of return on plan assets and our plans’ investment strategy. Although we review our expected long-term rates of return on an annual basis, our asset returns in a given year do not significantly influence our evaluation of long-term rates of return.

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The health care trend rate used to determine our retiree medical plans’ obligation and expense is reviewed annually. Our review is based on our claims experience, information provided by our health plans and actuaries, and our knowledge of the health care industry. Our review of the trend rate considers factors such as demographics, plan design, new medical technologies and changes in medical carriers.

Weighted-average assumptions for pension and retiree medical expense are as follows:

Pension

Service cost discount rate (a) 5.5 % 3.2 % 2.6 %

Interest cost discount rate (a) 5.4 % 2.9 % 1.9 %

Expected rate of return on plan assets (a) 7.0 % 6.3 % 6.2 %

Expected rate of salary increases 3.3 % 3.1 % 3.1 %

Retiree medical

Service cost discount rate 5.4 % 2.8 % 2.3 %

Interest cost discount rate 5.3 % 2.1 % 1.6 %

Expected rate of return on plan assets 7.1 % 5.7 % 5.4 %

Current health care cost trend rate 5.5 % 5.8 % 5.5 %

(a)2022 rates reflect remeasurement of a U.S. qualified defined benefit pension plan in the second quarter of 2022.

In 2022, lump sum distributions exceeded the total of annual service and interest cost and triggered pre-tax settlement charges for certain U.S defined pension plans. In addition, we expect the recognition of fixed income losses on plan assets, partially offset by higher discount rates, to increase our pension and retiree medical expense in 2023.

Sensitivity of Assumptions

A decrease in each of the collective discount rates or in the expected rate of return assumptions would increase expense for our benefit plans. A 25-basis-point decrease in each of the above discount rates and expected rate of return assumptions would individually increase 2023 pre-tax pension and retiree medical expense as follows:

Assumption Amount

Discount rates used in the calculation of expense $ 13

Expected rate of return $ 38

Funding

We make contributions to pension trusts that provide plan benefits for certain pension plans. These contributions are made in accordance with applicable tax regulations that provide for current tax deductions for our contributions and taxation to the employee only upon receipt of plan benefits. Generally, we do not fund our pension plans when our contributions would not be currently tax deductible. As our retiree medical plans are not subject to regulatory funding requirements, we generally fund these plans on a pay-as-you-go basis, although we periodically review available options to make additional contributions toward these benefits.

We made a discretionary contribution of $125 million to a U.S. qualified defined benefit plan in January 2023 and expect to make an additional $125 million in the third quarter of 2023.

Our pension and retiree medical plan contributions are subject to change as a result of many factors, such as changes in interest rates, deviations between actual and expected asset returns and changes in tax or other benefit laws. We regularly evaluate different opportunities to reduce risk and volatility associated with our pension and retiree medical plans. See Note 7 to our consolidated financial statements for our past and expected contributions and estimated future benefit payments.

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Consolidated Statement of Income

PepsiCo, Inc. and Subsidiaries

Fiscal years ended December 31, 2022, December 25, 2021 and December 26, 2020

(in millions except per share amounts)

Gain associated with the Juice Transaction (see Note 13) (3,321) — —

Impairment of intangible assets (see Notes 1 and 4) 3,166 — 42

Other pension and retiree medical benefits income 132 522 117

Less: Net income attributable to noncontrolling interests 68 61 55

Net Income Attributable to PepsiCo per Common Share

Weighted-average common shares outstanding

See accompanying notes to the consolidated financial statements.

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Consolidated Statement of Comprehensive Income

PepsiCo, Inc. and Subsidiaries

Fiscal years ended December 31, 2022, December 25, 2021 and December 26, 2020

(in millions)

Other comprehensive (loss)/income, net of taxes:

Net currency translation adjustment (643) (369) (650)

Net change on cash flow hedges (158) 155 7

Net pension and retiree medical adjustments 389 770 (532)

Less: Comprehensive income attributable to noncontrolling interests 64 61 55

Comprehensive Income Attributable to PepsiCo $ 8,506 $ 8,196 $ 5,944

See accompanying notes to the consolidated financial statements.

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Consolidated Statement of Cash Flows

PepsiCo, Inc. and Subsidiaries

Fiscal years ended December 31, 2022, December 25, 2021 and December 26, 2020

(in millions)

Operating Activities

Gain associated with the Juice Transaction (3,321) — —

Impairment and other charges 3,618 — —

Operating lease right-of-use asset amortization 517 505 478

Restructuring and impairment charges 411 247 289

Cash payments for restructuring charges (224) (256) (255)

Acquisition and divestiture-related charges 80 (4) 255

Cash payments for acquisition and divestiture-related charges (46) (176) (131)

Pension and retiree medical plan expenses 419 123 408

Pension and retiree medical plan contributions (384) (785) (562)

Deferred income taxes and other tax charges and credits (873) 298 361

Tax expense related to the TCJ Act 86 190 —

Tax payments related to the TCJ Act (309) (309) (78)

Change in assets and liabilities:

Prepaid expenses and other current assets 118 159 26

Accounts payable and other current liabilities 1,842 1,762 766

Investing Activities

Sales of property, plant and equipment 251 166 55

Proceeds associated with the Juice Transaction 3,456 — —

Short-term investments, by original maturity:

More than three months - purchases (291) — (1,135)

More than three months - maturities 150 1,135 —

Three months or less, net 24 (58) 27

Other investing, net 11 5 40

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Consolidated Statement of Cash Flows (continued)

PepsiCo, Inc. and Subsidiaries

Fiscal years ended December 31, 2022, December 25, 2021 and December 26, 2020

(in millions)

Financing Activities

Proceeds from issuances of long-term debt $ 3,377 $ 4,122 $ 13,809

Short-term borrowings, by original maturity:

More than three months - proceeds 1,969 8 4,077

Payments of acquisition-related contingent consideration — (773) —

Proceeds from exercises of stock options 138 185 179

Net Cash (Used for)/Provided by Financing Activities (8,523) (10,780) 3,819

See accompanying notes to the consolidated financial statements.

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Consolidated Balance Sheet

PepsiCo, Inc. and Subsidiaries

December 31, 2022 and December 25, 2021

(in millions except per share amounts)

ASSETS

Current Assets

Cash and cash equivalents $ 4,954 $ 5,596

Accounts and notes receivable, net 10,163 8,680

Prepaid expenses and other current assets 806 980

Assets held for sale — 1,788

Amortizable Intangible Assets, net 1,277 1,538

Other Indefinite-Lived Intangible Assets 14,309 17,127

Investments in Noncontrolled Affiliates 3,073 2,350

LIABILITIES AND EQUITY

Current Liabilities

Short-term debt obligations $ 3,414 $ 4,308

Accounts payable and other current liabilities 23,371 21,159

Liabilities held for sale — 753

Commitments and contingencies

PepsiCo Common Shareholders’ Equity

Capital in excess of par value 4,134 4,001

Accumulated other comprehensive loss (15,302) (14,898)

Total PepsiCo Common Shareholders’ Equity 17,149 16,043

Noncontrolling interests 124 108

See accompanying notes to the consolidated financial statements.

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Consolidated Statement of Equity

PepsiCo, Inc. and Subsidiaries

Fiscal years ended December 31, 2022, December 25, 2021 and December 26, 2020

(in millions except per share amounts)

Shares Amount Shares Amount Shares Amount

Common Stock

Change in repurchased common stock (6) — 3 — (11) —

Capital in Excess of Par Value

Stock option exercises, RSUs and PSUs converted (102) (118) (143)

Withholding tax on RSUs and PSUs converted (107) (92) (96)

Other (4) (1) —

Retained Earnings

Cumulative effect of accounting changes — — (34)

Accumulated Other Comprehensive Loss

Other comprehensive (loss)/income attributable to PepsiCo (404) 578 (1,176)

Repurchased Common Stock

Stock option exercises, RSUs and PSUs converted 3 240 4 303 4 322

Other — 2 — 1 — 1

Noncontrolling Interests

Balance, beginning of year 108 98 82

Net income attributable to noncontrolling interests 68 61 55

Distributions to noncontrolling interests (69) (49) (44)

PEP US Equity

PEP · 10-K · period ended 2022-12-31

Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations.

PEP US Equity☆

PEP · 10-K · period ended 2022-12-31

Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations.

PEP US Equity