10-Q

UNITED STATES SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, D.C. 20549

FORM 10-Q

(Mark One)

X QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the quarterly period ended June 11, 2011 (24 weeks)

OR

TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the transition period from             to            

Commission file number 1-1183

PepsiCo, Inc.

(Exact Name of Registrant as Specified in its Charter)

North Carolina	13-1584302
(State or Other Jurisdiction of Incorporation or Organization)	(I.R.S. Employer Identification No.)
700 Anderson Hill Road, Purchase, New York	10577
(Address of Principal Executive Offices)	(Zip Code)

                                 914-253-2000                                 

(Registrant’s Telephone Number, Including Area Code)

N/A

(Former Name, Former Address and Former Fiscal Year, if Changed Since Last Report)

Indicate by check mark whether the registrant: (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.    YES   X   NO      

Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T (§ 232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files).     YES   X     NO      

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, or a smaller reporting company. See the definitions of “large accelerated filer,” “accelerated filer” and “smaller reporting company” in Rule 12b-2 of the Exchange Act.

Large accelerated filer  X	Accelerated filer
Non-accelerated filer      (Do not check if a smaller reporting company)	Smaller reporting company

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).  YES    NO X 

Number of shares of Common Stock outstanding as of July 15, 2011: 1,582,605,338

PEPSICO, INC. AND SUBSIDIARIES

INDEX

	Page No.
Part I Financial Information
Item 1. Condensed Consolidated Financial Statements	3
Condensed Consolidated Statement of Income – 12 and 24 Weeks Ended June 11, 2011 and June 12, 2010	3
Condensed Consolidated Statement of Cash Flows – 24 Weeks Ended June 11, 2011 and June 12, 2010	4-5
Condensed Consolidated Balance Sheet – June 11, 2011 and December 25, 2010	6-7
Condensed Consolidated Statement of Equity – 24 Weeks Ended June 11, 2011 and June 12, 2010	8
Condensed Consolidated Statement of Comprehensive Income – 12 and 24 Weeks Ended June 11, 2011 and June 12, 2010	9
Notes to the Condensed Consolidated Financial Statements	10-27
Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations	28-47
Report of Independent Registered Public Accounting Firm	48
Item 3. Quantitative and Qualitative Disclosures About Market Risk	49
Item 4. Controls and Procedures	49
Part II Other Information
Item 1. Legal Proceedings	50
Item 1A. Risk Factors	50
Item 2. Unregistered Sales of Equity Securities and Use of Proceeds	51-52
Item 4. (Removed and Reserved)	52
Item 6. Exhibits	52

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PART I FINANCIAL INFORMATION

ITEM 1. Condensed Consolidated Financial Statements.

PEPSICO, INC. AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENT OF INCOME

(in millions except per share amounts, unaudited)

	12 Weeks Ended						24 Weeks Ended
	6/11/11			6/12/10			6/11/11			6/12/10
Net Revenue	$	16,827		$	14,801		$	28,764		$	24,169
Cost of sales		7,963			6,745			13,410			11,208
Selling, general and administrative expenses		6,070			5,563			10,809			9,612
Amortization of intangible assets		40			32			65			48
Operating Profit		2,754			2,461			4,480			3,301
Bottling equity income		–			9			–			718
Interest expense		(199	)		(172	)		(379	)		(326	)
Interest income		20			2			37			8
Income before income taxes		2,575			2,300			4,138			3,701
Provision for income taxes		670			687			1,089			654
Net income		1,905			1,613			3,049			3,047
Less: Net income attributable to noncontrolling interests		20			10			21			14
Net Income Attributable to PepsiCo	$	1,885		$	1,603		$	3,028		$	3,033
Net Income Attributable to PepsiCo per Common Share
Basic	$	1.19		$	1.00		$	1.91		$	1.90
Diluted	$	1.17		$	0.98		$	1.89		$	1.87
Cash dividends declared per common share	$	0.515		$	0.48		$	0.995		$	0.93

See accompanying notes to the condensed consolidated financial statements.

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PEPSICO, INC. AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENT OF CASH FLOWS

(in millions, unaudited)

	24 Weeks Ended
	6/11/11			6/12/10
Operating Activities
Net income	$	3,049		$	3,047
Depreciation and amortization		1,187			969
Stock-based compensation expense		146			119
Cash payments for restructuring charges		(1	)		(28	)
Merger and integration costs		113			476
Cash payments for merger and integration costs		(207	)		(209	)
Gain on previously held equity interests in The Pepsi Bottling Group, Inc. (PBG) and PepsiAmericas, Inc. (PAS)		–			(958	)
Asset write-off		–			145
Non-cash foreign exchange loss related to Venezuela devaluation		–			120
Excess tax benefits from share-based payment arrangements		(52	)		(47	)
Pension and retiree medical plan contributions		(116	)		(694	)
Pension and retiree medical plan expenses		254			248
Bottling equity income, net of dividends		–			42
Deferred income taxes and other tax charges and credits		(146	)		186
Change in accounts and notes receivable		(1,491	)		(994	)
Change in inventories		(742	)		40
Change in prepaid expenses and other current assets		(144	)		(139	)
Change in accounts payable and other current liabilities		(65	)		(55	)
Change in income taxes payable		849			337
Other, net		(281	)		(163	)
Net Cash Provided by Operating Activities		2,353			2,442
Investing Activities
Capital spending		(1,231	)		(968	)
Sales of property, plant and equipment		34			37
Acquisitions of PBG and PAS, net of cash and cash equivalents acquired		–			(2,833	)
Acquisition of manufacturing and distribution rights from Dr Pepper Snapple Group, Inc. (DPSG)		–			(900	)
Acquisition of Wimm-Bill-Dann Foods OJSC (WBD), net of cash and cash equivalents acquired		(2,428	)		–
Investment in WBD		(164	)		–
Other acquisitions and investments in noncontrolled affiliates		(61	)		(34	)
Short-term investments, by original maturity
More than three months – purchases		–			(6	)
More than three months – maturities		10			15
Three months or less, net		(10	)		(46	)
Other investing, net		(2	)		(10	)
Net Cash Used For Investing Activities		(3,852	)		(4,745	)

(Continued on following page)

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PEPSICO, INC. AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENT OF CASH FLOWS (continued)

(in millions, unaudited)

	24 Weeks Ended
	6/11/11			6/12/10
Financing Activities
Proceeds from issuances of long-term debt	$	1,754		$	4,216
Payments of long-term debt		(285	)		(26	)
Short-term borrowings, by original maturity
More than three months – proceeds		180			31
More than three months – payments		(152	)		(19	)
Three months or less, net		(290	)		3,329
Cash dividends paid		(1,530	)		(1,451	)
Share repurchases – common		(746	)		(3,308	)
Share repurchases – preferred		(4	)		(2	)
Proceeds from exercises of stock options		652			464
Excess tax benefits from share-based payment arrangements		52			47
Acquisition of noncontrolling interests		(1,327	)		(159	)
Other financing		(3	)		(6	)
Net Cash (Used for)/Provided by Financing Activities		(1,699	)		3,116
Effect of exchange rate changes on cash and cash equivalents		168			(227	)
Net (Decrease)/Increase in Cash and Cash Equivalents		(3,030	)		586
Cash and Cash Equivalents, Beginning of Year		5,943			3,943
Cash and Cash Equivalents, End of Period	$	2,913		$	4,529
Non-cash activity:
Issuance of common stock and equity awards in connection with our acquisitions of PBG and PAS, as reflected in investing and financing activities		–		$	4,451

See accompanying notes to the condensed consolidated financial statements.

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PEPSICO, INC. AND SUBSIDIARIES

CONDENSED CONSOLIDATED BALANCE SHEET

(in millions)

	(Unaudited)
	6/11/11			12/25/10
Assets
Current Assets
Cash and cash equivalents	$	2,913		$	5,943
Short-term investments		431			426
Accounts and notes receivable, less allowance: 6/11 – $154, 12/10 – $144		8,283			6,323
Inventories
Raw materials		2,296			1,654
Work-in-process		283			128
Finished goods		1,960			1,590
		4,539			3,372
Prepaid expenses and other current assets		1,751			1,505
Total Current Assets		17,917			17,569
Property, Plant and Equipment		35,979			33,041
Accumulated Depreciation		(15,125	)		(13,983	)
		20,854			19,058
Amortizable Intangible Assets, net		2,480			2,025
Goodwill		16,299			14,661
Other Nonamortizable Intangible Assets		15,548			11,783
Nonamortizable Intangible Assets		31,847			26,444
Investments in Noncontrolled Affiliates		1,449			1,368
Other Assets		1,133			1,689
Total Assets	$	75,680		$	68,153

(Continued on following page)

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PEPSICO, INC. AND SUBSIDIARIES

CONDENSED CONSOLIDATED BALANCE SHEET (continued)

(in millions except per share amounts)

	(Unaudited)
	6/11/11			12/25/10
Liabilities and Equity
Current Liabilities
Short-term obligations	$	5,715		$	4,898
Accounts payable and other current liabilities		11,433			10,923
Income taxes payable		909			71
Total Current Liabilities		18,057			15,892
Long-term Debt Obligations		21,607			19,999
Other Liabilities		6,669			6,729
Deferred Income Taxes		4,977			4,057
Total Liabilities		51,310			46,677
Commitments and Contingencies
Preferred Stock, no par value		41			41
Repurchased Preferred Stock		(154	)		(150	)
PepsiCo Common Shareholders’ Equity
Common stock, par value 1 2/3 cents per share:
Authorized 3,600 shares, issued 6/11 and 12/10 – 1,865 shares		31			31
Capital in excess of par value		4,358			4,527
Retained earnings		38,527			37,090
Accumulated other comprehensive loss		(2,254	)		(3,630	)
Less: repurchased common stock, at cost:
6/11 – 281 shares, 12/10 – 284 shares		(16,597	)		(16,745	)
Total PepsiCo Common Shareholders’ Equity		24,065			21,273
Noncontrolling interests		418			312
Total Equity		24,370			21,476
Total Liabilities and Equity	$	75,680		$	68,153

See accompanying notes to the condensed consolidated financial statements.

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PEPSICO, INC. AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENT OF EQUITY

(in millions, unaudited)

	24 Weeks Ended
	6/11/11						6/12/10
	Shares			Amount			Shares			Amount
Preferred Stock		0.8		$	41			0.8		$	41
Repurchased Preferred Stock
Balance, beginning of year		(0.6	)		(150	)		(0.6	)		(145	)
Redemptions		(–	)		(4	)		(–	)		(2	)
Balance, end of period		(0.6	)		(154	)		(0.6	)		(147	)
Common Stock
Balance, beginning of year		1,865			31			1,782			30
Shares issued in connection with our acquisitions of PBG and PAS		–			–			83			1
Balance, end of period		1,865			31			1,865			31
Capital in Excess of Par Value
Balance, beginning of year					4,527						250
Stock-based compensation expense					146						119
Stock option exercises/RSUs converted(a)					(281	)					(321	)
Withholding tax on RSUs converted					(50	)					(55	)
Equity issued in connection with our acquisitions of PBG and PAS					–						4,451
Other					16						95
Balance, end of period					4,358						4,539
Retained Earnings
Balance, beginning of year					37,090						33,805
Net income attributable to PepsiCo					3,028						3,033
Cash dividends declared – common					(1,580	)					(1,510	)
Cash dividends declared – preferred					(1	)					(1	)
Cash dividends declared – RSUs					(10	)					(6	)
Other					–						7
Balance, end of period					38,527						35,328
Accumulated Other Comprehensive Loss
Balance, beginning of year					(3,630	)					(3,794	)
Currency translation adjustment					1,382						(581	)
Cash flow hedges, net of tax:
Net derivative losses					(17	)					(86	)
Reclassification of net losses to net income					7						23
Reclassification of pension and retiree medical losses to net income, net of tax					23						211
Unrealized (losses)/gains on securities, net of tax					(2	)					1
Other					(17	)					–
Balance, end of period					(2,254	)					(4,226	)
Repurchased Common Stock
Balance, beginning of year		(284	)		(16,745	)		(217	)		(13,383	)
Share repurchases		(12	)		(811	)		(52	)		(3,370	)
Stock option exercises		14			858			11			696
Other		1			101			(14	)		117
Balance, end of period		(281	)		(16,597	)		(272	)		(15,940	)
Total Common Shareholders’ Equity					24,065						19,732
Noncontrolling Interests
Balance, beginning of year					312						638
Net income attributable to noncontrolling interests					21						14
Contributions from/(distributions to) noncontrolling interests, net					13						(350	)
Currency translation adjustment					72						(14	)
Balance, end of period					418						288
Total Equity				$	24,370					$	19,914

^(a)  Includes total tax benefits of $33 million in 2011 and $30 million in 2010.

See accompanying notes to the condensed consolidated financial statements.

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PEPSICO, INC. AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENT

OF COMPREHENSIVE INCOME

(in millions, unaudited)

	12 Weeks Ended						24 Weeks Ended
	6/11/11			6/12/10			6/11/11			6/12/10
Net Income	$	1,905		$	1,613		$	3,049		$	3,047
Other Comprehensive Income
Currency translation adjustment		809			(700	)		1,454			(595	)
Cash flow hedges, net of tax:
Net derivative losses		(25	)		(38	)		(17	)		(86	)
Reclassification of net losses to net income		3			5			7			23
Reclassification of pension and retiree medical losses to net income, net of tax		26			75			23			211
Unrealized gains/(losses) on securities, net of tax		11			2			(2	)		1
Other		1			–			(17	)		–
		825			(656	)		1,448			(446	)
Comprehensive Income		2,730			957			4,497			2,601
Comprehensive income attributable to noncontrolling interests		(64	)		(11	)		(93	)		–
Comprehensive Income Attributable to PepsiCo	$	2,666		$	946		$	4,404		$	2,601

See accompanying notes to the condensed consolidated financial statements.

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PEPSICO, INC. AND SUBSIDIARIES

NOTES TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

Basis of Presentation and Our Divisions

Basis of Presentation

Our Condensed Consolidated Balance Sheet as of June 11, 2011 and the Condensed Consolidated Statements of Income and Comprehensive Income for the 12 and 24 weeks ended June 11, 2011 and June 12, 2010, and the Condensed Consolidated Statements of Cash Flows and Equity for the 24 weeks ended June 11, 2011 and June 12, 2010 have not been audited. These statements have been prepared on a basis that is substantially consistent with the accounting principles applied in our Annual Report on Form 10-K for the fiscal year ended December 25, 2010 and in our Current Report on Form 8-K dated March 31, 2011. In our opinion, these financial statements include all normal and recurring adjustments necessary for a fair presentation. The results for the 12 and 24 weeks are not necessarily indicative of the results expected for the full year.

While the majority of our results are reported on a period basis, most of our international operations report on a monthly calendar basis for which the months of March, April and May are reflected in our second quarter results.

On February 26, 2010, we completed our acquisitions of PBG and PAS. The results of the acquired companies in the U.S. and Canada are reflected in our condensed consolidated results as of the acquisition date, and the international results of the acquired companies have been reported as of the beginning of our second quarter of 2010, consistent with our monthly international reporting calendar. Prior to our acquisitions of PBG and PAS, we recorded our share of equity income or loss from the acquired companies in bottling equity income in our income statement. Additionally, in the first quarter of 2010, in connection with our acquisitions of PBG and PAS, we recorded a gain on our previously held equity interests of $958 million, comprising $735 million which was non-taxable and recorded in bottling equity income and $223 million related to the reversal of deferred tax liabilities associated with these previously held equity interests. Our share of income or loss from noncontrolled affiliates is reflected as a component of selling, general and administrative expenses. See also Acquisitions and “Items Affecting Comparability” in Management’s Discussion and Analysis of Financial Condition and Results of Operations.

In the first quarter of 2011, Quaker Foods North America (QFNA) changed its method of accounting for certain U.S. inventories from the last-in, first-out (LIFO) method to the average cost method. This change is considered preferable by management as we believe that the average cost method of accounting for all U.S. foods inventories will improve our financial reporting by better matching revenues and expenses and better reflecting the current value of inventory. In addition, the change from the LIFO method to the average cost method will enhance the comparability of QFNA’s financial results with our other food businesses, as well as with peer companies where the average cost method is widely used. The impact of this change on consolidated net income in the first quarter of 2011 was approximately $9 million (or less than a penny per share). Prior periods were not restated as the impact of the change on previously issued financial statements was not considered material.

Our significant interim accounting policies include the recognition of a pro rata share of certain estimated annual sales incentives, and certain advertising and marketing costs, generally in proportion to revenue, and the recognition of income taxes using an estimated annual effective tax

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rate. Raw materials, direct labor and plant overhead, as well as purchasing and receiving costs, costs directly related to production planning, inspection costs and raw material handling facilities, are included in cost of sales. The costs of moving, storing and delivering finished product are included in selling, general and administrative expenses.

The following information is unaudited. Tabular dollars are in millions, except per share amounts. All per share amounts reflect common per share amounts, assume dilution unless otherwise noted, and are based on unrounded amounts. Certain reclassifications were made to the prior year’s amounts to conform to the 2011 presentation. This report should be read in conjunction with our Annual Report on Form 10-K for the fiscal year ended December 25, 2010 and our Current Report on Form 8-K dated March 31, 2011, in which we reclassified historical segment information on a basis consistent with our current segment reporting structure.

Our Divisions

We are organized into four business units, as follows:

1. PepsiCo Americas Foods (PAF), which includes Frito-Lay North America (FLNA), Quaker Foods North America (QFNA) and all of our Latin American food and snack businesses (LAF);

2. PepsiCo Americas Beverages (PAB), which includes PepsiCo Beverages Americas and Pepsi Beverages Company;

3. PepsiCo Europe, which includes all beverage, food and snack businesses in Europe; and

4. PepsiCo Asia, Middle East and Africa (AMEA), which includes all beverage, food and snack businesses in AMEA.

Our four business units comprise six reportable segments (also referred to as divisions), as follows:

• FLNA,

• QFNA,

• LAF,

• PAB,

• Europe, and

• AMEA.

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	12 Weeks Ended						24 Weeks Ended
	6/11/11			6/12/10			6/11/11			6/12/10
Net Revenue
FLNA	$	3,090		$	2,992		$	5,994		$	5,856
QFNA		583			582			1,223			1,265
LAF		1,808			1,538			2,916			2,521
PAB		5,629			5,548			10,160			8,313
Europe(a)		3,794			2,498			5,420			3,542
AMEA		1,923			1,643			3,051			2,672
	$	16,827		$	14,801		$	28,764		$	24,169
	12 Weeks Ended						24 Weeks Ended
	6/11/11			6/12/10			6/11/11			6/12/10
Operating Profit
FLNA	$	853		$	800		$	1,627		$	1,528
QFNA		167			159			381			354
LAF		274			233			445			378
PAB		983			952			1,541			1,025
Europe		407			276			470			394
AMEA		299			267			445			422
Total division		2,983			2,687			4,909			4,101
Corporate Unallocated
Net impact of mark-to-market on commodity hedges		(9	)		(4	)		22			42
Merger and integration costs		(12	)		(24	)		(54	)		(112	)
Venezuela currency devaluation		–			–			–			(129	)
Asset write-off		–			–			–			(145	)
Foundation contribution		–			–			–			(100	)
Other		(208	)		(198	)		(397	)		(356	)
	$	2,754		$	2,461		$	4,480		$	3,301

	Total Assets
	6/11/11		12/25/10
FLNA	$	6,217	$	6,027
QFNA		1,194		1,217
LAF		4,327		4,053
PAB		33,006		31,622
Europe(a)		21,637		13,032
AMEA		5,906		5,569
Total division		72,287		61,520
Corporate(b)		3,393		6,394
Investments in bottling affiliates		–		239
	$	75,680	$	68,153

^(a)  Change in 2011 relates primarily to our acquisition of WBD.

^(b)  Corporate assets consist principally of cash and cash equivalents, short-term investments, derivative instruments and property, plant and equipment.

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Acquisitions

PBG and PAS

On February 26, 2010, we acquired PBG and PAS to create a more fully integrated supply chain and go-to-market business model, improving the effectiveness and efficiency of the distribution of our brands and enhancing our revenue growth. The total purchase price was approximately $12.6 billion, which included $8.3 billion of cash and equity and the fair value of our previously held equity interests in PBG and PAS of $4.3 billion. The acquisitions were accounted for as business combinations, and, accordingly, the identifiable assets acquired and liabilities assumed were recorded at their estimated fair values at the date of acquisition. Our fair market valuations of the identifiable assets acquired and liabilities assumed have been completed and the final valuations did not materially differ from those fair values reported as of December 25, 2010.

The following table presents unaudited consolidated pro forma financial information as if the closing of our acquisitions of PBG and PAS had occurred on December 27, 2009 for purposes of the financial information presented for the 24 weeks ended June 12, 2010.

	(unaudited) 24 Weeks Ended
	6/12/10
Net Revenue	$	25,913
Net Income Attributable to PepsiCo	$	2,569
Net Income Attributable to PepsiCo per Common Share – Diluted	$	1.56

The unaudited consolidated pro forma financial information was prepared in accordance with the acquisition method of accounting under existing standards, and the regulations of the U.S. Securities and Exchange Commission, and is not necessarily indicative of the results of operations that would have occurred if our acquisitions of PBG and PAS had been completed on the date indicated, nor is it indicative of the future operating results of PepsiCo.

The historical unaudited consolidated financial information has been adjusted to give effect to pro forma events that are (1) directly attributable to the acquisitions, (2) factually supportable, and (3) expected to have a continuing impact on the combined results of PepsiCo, PBG and PAS.

The unaudited pro forma results have been adjusted with respect to certain aspects of our acquisitions of PBG and PAS to reflect:

• the consummation of the acquisitions;

• consolidation of PBG and PAS which are now owned 100% by PepsiCo and the corresponding gain resulting from the remeasurement of our previously held equity interests in PBG and PAS;

• the elimination of related party transactions between PepsiCo and PBG, and PepsiCo and PAS;

• changes in assets and liabilities to record their acquisition date fair values and changes in certain expenses resulting therefrom; and

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• additional indebtedness, including, but not limited to, debt issuance costs and interest expense, incurred in connection with the acquisitions.

The unaudited pro forma results do not reflect future events that either have occurred or may occur after the acquisitions, including, but not limited to, the anticipated realization of ongoing savings from operating synergies in subsequent periods. They also do not give effect to certain one-time charges we expect to incur in connection with the acquisitions, including, but not limited to, charges that are expected to achieve ongoing cost savings and synergies.

WBD

On February 3, 2011, we acquired the ordinary shares, including shares underlying American Depositary Shares (ADSs) and Global Depositary Shares (GDSs), of WBD, a company incorporated in the Russian Federation, which represented in the aggregate approximately 66% of WBD’s outstanding ordinary shares, pursuant to the purchase agreement dated December 1, 2010 between PepsiCo and certain selling shareholders of WBD for approximately $3.8 billion in cash. The acquisition of those shares increased our total ownership of WBD to approximately 77%. Under the guidance on accounting for business combinations, the total consideration transferred was approximately $5.8 billion, which included the $3.8 billion of cash (or $2.4 billion, net of cash and cash equivalents acquired), the fair value of our previously held equity interest in WBD of $0.7 billion and the fair value of the remaining noncontrolling interests in WBD of $1.3 billion. The preliminary estimates of the fair value of the identifiable assets acquired and liabilities assumed in WBD as of the acquisition date include goodwill and other intangible assets of $4.9 billion; property, plant and equipment of $1.3 billion; debt obligations of $1.1 billion; and other net assets of $0.7 billion, all of which are recorded in our Europe segment. The preliminary estimates of the fair value of identifiable assets acquired and liabilities assumed are subject to revisions, which may result in adjustments to the preliminary values discussed above as valuations are finalized. We expect to finalize these amounts as soon as possible but no later than by the end of 2011.

Under the guidance on accounting for business combinations, merger and integration costs are not included as components of consideration transferred but are accounted for as expenses in the period in which the costs are incurred. See Merger and Integration Charges for details on the expenses incurred during 2011.

On March 10, 2011, we commenced our tender offers in Russia and the U.S. for all remaining outstanding ordinary shares and ADSs of WBD for 3,883.70 Russian rubles per ordinary share and 970.925 Russian rubles per ADS, respectively. The Russian offer was made to all holders of ordinary shares and the U.S. offer was made to all holders of ADSs. We completed the Russian offer on May 19, 2011 and the U.S. offer on May 16, 2011. After completion of the offers, we paid approximately $1.3 billion for WBD’s ordinary shares (including shares underlying ADSs) and increased our total ownership of WBD to approximately 98.6%.

On June 30, 2011, we elected to exercise our squeeze-out rights under Russian law with respect to all remaining WBD ordinary shares not already owned by us. Therefore, under Russian law, all remaining WBD shareholders will be required to sell their ordinary shares (including those underlying ADSs) to us at the same price that was offered to WBD shareholders in the Russian tender offer. Accordingly, all registered holders of ordinary shares on August 15, 2011 (including the ADS depository) will be entitled to receive 3,883.70 Russian rubles per ordinary share. The ADS depository will convert the Russian rubles paid to it with respect to the ordinary shares

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underlying the ADSs (970.925 Russian rubles per ADS) to U.S. dollars at the spot market conversion rates available to it during the period it takes to complete such conversion. The squeeze-out process is expected to be concluded by mid-September 2011, after which time we expect to own 100% of WBD.

Intangible Assets

	6/11/11			12/25/10
Amortizable intangible assets, net
Acquired franchise rights	$	974		$	949
Reacquired franchise rights		110			110
Brands		1,543			1,463
Other identifiable intangibles		1,170			747
		3,797			3,269
Accumulated amortization		(1,317	)		(1,244	)
	$	2,480		$	2,025

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The change in the book value of nonamortizable intangible assets is as follows:

	Balance 12/25/10		Acquisitions		Translation and Other		Balance 6/11/11
FLNA
Goodwill	$	313	$	–	$	6	$	319
Brands		31		–		1		32
		344		–		7		351
QFNA
Goodwill		175		–		–		175
LAF
Goodwill		497		–		13		510
Brands		143		–		4		147
		640		–		17		657
PAB
Goodwill		9,946		26		22		9,994
Reacquired franchise rights		7,283		20		38		7,341
Acquired franchise rights		1,565		–		3		1,568
Brands		182		8		5		195
Other		10		–		1		11
		18,986		54		69		19,109
Europe(a)
Goodwill		3,040		1,228		314		4,582
Reacquired franchise rights		793		–		62		855
Acquired franchise rights		227		–		19		246
Brands		1,380		3,300		296		4,976
		5,440		4,528		691		10,659
AMEA
Goodwill		690		–		29		719
Brands		169		–		8		177
		859		–		37		896
Total goodwill		14,661		1,254		384		16,299
Total reacquired franchise rights		8,076		20		100		8,196
Total acquired franchise rights		1,792		–		22		1,814
Total brands		1,905		3,308		314		5,527
Total other		10		–		1		11
	$	26,444	$	4,582	$	821	$	31,847

^(a)  Net increases in 2011 relate primarily to our acquisition of WBD.

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Stock-Based Compensation

For the 12 weeks ended June 11, 2011, we recognized stock-based compensation expense of $76 million ($74 million recorded as stock-based compensation expense and $2 million included in merger and integration charges). For the 24 weeks ended June 11, 2011, we recognized stock-based compensation expense of $155 million ($146 million recorded as stock-based compensation expense and $9 million included in merger and integration charges). For the 12 weeks ended June 12, 2010, we recognized stock-based compensation expense of $85 million ($72 million recorded as stock-based compensation expense and $13 million included in merger and integration charges). For the 24 weeks ended June 12, 2010, we recognized stock-based compensation expense of $159 million ($119 million recorded as stock-based compensation expense and $40 million included in merger and integration charges).

For the 12 weeks ended June 11, 2011, our grants of stock options and restricted stock units (RSU) were nominal. For the 24 weeks ended June 11, 2011, we granted 6.4 million stock options at a weighted-average grant price of $63.78 and 5.2 million RSUs at a weighted-average grant price of $63.81, under the terms of our 2007 Long-Term Incentive Plan. For the 12 and 24 weeks ended June 12, 2010, we granted 12.0 million stock options and 4.6 million RSUs at weighted-average grant prices of $66.50 and $66.46, respectively, under the terms of our 2007 Long-Term Incentive Plan.

Our weighted-average Black-Scholes fair value assumptions are as follows:

	24 Weeks Ended
	6/11/11			6/12/10
Expected life		6 yrs.			5 yrs.
Risk free interest rate		2.6	%		2.3	%
Expected volatility(a)		16	%		17	%
Expected dividend yield		2.9	%		2.8	%

^(a)  Reflects movements in our stock price over the most recent historical period equivalent to the expected life.

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Pension and Retiree Medical Benefits

The components of net periodic benefit cost for pension and retiree medical plans are as follows:

	12 Weeks Ended
	Pension												Retiree Medical
	6/11/11			6/12/10			6/11/11			6/12/10			6/11/11			6/12/10
	U.S.						International
Service cost	$	80		$	69		$	23		$	19		$	11		$	14
Interest cost		126			120			28			26			21			23
Expected return on plan assets		(162	)		(150	)		(33	)		(31	)		(4	)		–
Amortization of prior service cost/(benefit)		4			2			1			1			(6	)		(4	)
Amortization of experience loss		34			25			9			6			3			1
		82			66			28			21			25			34
Settlement/Curtailment gain		–			(2	)		–			–			–			–
Special termination benefits		–			15			–			–			–			1
Total expense	$	82		$	79		$	28		$	21		$	25		$	35

	24 Weeks Ended
	Pension												Retiree Medical
	6/11/11			6/12/10			6/11/11			6/12/10			6/11/11			6/12/10
	U.S.						International
Service cost	$	162		$	130		$	40		$	33		$	23		$	26
Interest cost		252			218			49			44			41			43
Expected return on plan assets		(324	)		(275	)		(57	)		(53	)		(7	)		–
Amortization of prior service cost/(benefit)		7			5			1			1			(13	)		(8	)
Amortization of experience loss		67			50			16			10			6			2
		164			128			49			35			50			63
Settlement/Curtailment gain		(9	)		(2	)		–			–			–			–
Special termination benefits		10			23			–			–			1			1
Total expense	$	165		$	149		$	49		$	35		$	51		$	64

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Income Taxes

A rollforward of our reserves for all federal, state and foreign tax jurisdictions, is as follows:

	6/11/11			12/25/10
Balance, beginning of year	$	2,022		$	1,731
Additions for tax positions related to the current year		85			204
Additions for tax positions from prior years		4			517
Reductions for tax positions from prior years		(54	)		(391	)
Settlement payments		(87	)		(30	)
Statute of limitations expiration		(5	)		(7	)
Translation and other		(2	)		(2	)
Balance, end of period	$	1,963		$	2,022

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Net Income Attributable to PepsiCo per Common Share

The computations of basic and diluted net income attributable to PepsiCo per common share are as follows:

	12 Weeks Ended
	6/11/11					6/12/10
	Income			Shares(a)		Income			Shares(a)
Net income attributable to PepsiCo	$	1,885				$	1,603
Preferred shares:
Dividends		(1	)				(1	)
Redemption premium		(1	)				(1	)
Net income available for PepsiCo common shareholders	$	1,883			1,583	$	1,601			1,608
Basic net income attributable to PepsiCo per common share	$	1.19				$	1.00
Net income available for PepsiCo common shareholders	$	1,883			1,583	$	1,601			1,608
Dilutive securities:
Stock options and RSUs(b)		–			21		–			25
ESOP convertible preferred stock		2			1		2			1
Diluted	$	1,885			1,605	$	1,603			1,634
Diluted net income attributable to PepsiCo per common share	$	1.17				$	0.98

	24 Weeks Ended
	6/11/11					6/12/10
	Income			Shares(a)		Income			Shares(a)
Net income attributable to PepsiCo	$	3,028				$	3,033
Preferred shares:
Dividends		(1	)				(1	)
Redemption premium		(3	)				(2	)
Net income available for PepsiCo common shareholders	$	3,024			1,583	$	3,030			1,595
Basic net income attributable to PepsiCo per common share	$	1.91				$	1.90
Net income available for PepsiCo common shareholders	$	3,024			1,583	$	3,030			1,595
Dilutive securities:
Stock options and RSUs(b)		–			21		–			24
ESOP convertible preferred stock		4			1		3			1
Diluted	$	3,028			1,605	$	3,033			1,620
Diluted net income attributable to PepsiCo per common share	$	1.89				$	1.87

^(a) Weighted-average common shares outstanding (in millions).

^(b)  Options to purchase 10.1 million and 20.7 million shares, respectively, for the 12 and 24 weeks in 2011 were not included in the calculation of earnings per share because these options were out-of-the-money. These out-of-the-money options had average exercise prices of $68.88 and $67.35, respectively. Options to purchase 22.9 million and 21.8 million shares, respectively, for the 12 and 24 weeks in 2010 were not included in the calculation of earnings per share because these options were out-of-the-money. Out-of-the-money options for the 12 and 24 weeks in 2010 had average exercise prices of $67.60 and $67.33, respectively.

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Debt Obligations and Commitments

In the second quarter of 2011, we issued $750 million of floating rate notes maturing in 2013, which bear interest at a rate equal to the three-month London Inter-Bank Offered Rate (LIBOR) plus 8 basis points, and $1.0 billion of 2.50% senior notes maturing in 2016. The net proceeds from the issuance of these notes were used for general corporate purposes.

Subsequent to the end of the second quarter of 2011, we entered into a new four-year unsecured revolving credit agreement (Four-Year Credit Agreement) which enables us to borrow up to $2.875 billion, subject to customary terms and conditions, and expires in June 2015. We may request to increase the commitments under this agreement to up to $3.5 billion. Additionally, we may, once a year, request renewal of the agreement for an additional one-year period.

Also, subsequent to the end of the second quarter of 2011, we entered into a new 364-day unsecured revolving credit agreement (364-Day Credit Agreement) which enables us to borrow up to $2.875 billion, subject to customary terms and conditions, and expires in June 2012. We may request to increase the commitments under this agreement to up to $3.5 billion. We may request renewal of this facility for an additional 364-day period or convert any amounts outstanding into a term loan for a period of up to one year, which would mature no later than June 2013.

The Four-Year Credit Agreement and the 364-Day Credit Agreement, together replaced our $2 billion unsecured revolving credit agreement, our $2.575 billion 364-day unsecured revolving credit agreement and our $1.080 billion amended PBG credit facility. Funds borrowed under the Four-Year Credit Agreement and the 364-Day Credit Agreement may be used for general corporate purposes, including but not limited to repayment of outstanding commercial paper issued by us and our subsidiaries, working capital, capital investments and/or acquisitions.

Subsequent to the end of the second quarter of 2011, we paid $784 million in a cash tender offer to repurchase $766 million (aggregate principal amount) of certain WBD debt obligations. As a result of this debt repurchase, we will record a $16 million charge to interest expense in the third quarter, primarily representing the premium paid in the tender offer.

As of June 11, 2011, we had $2.2 billion of commercial paper outstanding.

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Long-Term Contractual Commitments^(a)

	Payments Due by Period
	Total		2011		2012 – 2013		2014 – 2015		2016 and beyond
Long-term debt obligations(b)	$	21,016	$	–	$	5,167	$	4,353	$	11,496
Interest on debt obligations(c)		7,556		467		1,574		1,125		4,390
Operating leases		1,901		253		678		406		564
Purchasing commitments		3,496		931		2,077		406		82
Marketing commitments		2,555		102		562		543		1,348
	$	36,524	$	1,753	$	10,058	$	6,833	$	17,880

^(a) Reflects non-cancelable commitments as of June 11, 2011 based on foreign exchange rates in effect on that date and excludes any reserves for uncertain tax positions as we are unable to reasonably predict the ultimate amount or timing of settlement.

^(b) Excludes $2.4 billion related to current maturities of long-term debt, as well as $591 million related to the fair value step-up of debt acquired in connection with our acquisitions of PBG and PAS.

^(c)  Interest payments on floating-rate debt are estimated using interest rates effective as of June 11, 2011.

Most long-term contractual commitments, except for our long-term debt obligations, are not recorded on our balance sheet. Non-cancelable operating leases primarily represent building leases. Non-cancelable purchasing commitments are primarily for packaging materials, sugar and other sweeteners, oranges and orange juice. Non-cancelable marketing commitments are primarily for sports marketing. Bottler funding to independent bottlers is not reflected in our long-term contractual commitments as it is negotiated on an annual basis. Accrued liabilities for pension and retiree medical plans are not reflected in our long-term contractual commitments because they do not represent expected future cash outflows. See Pension and Retiree Medical Benefits for additional information regarding our pension and retiree medical obligations.

Merger and Integration Charges

In the 12 weeks ended June 11, 2011, we incurred merger and integration charges of $58 million ($45 million after-tax or $0.03 per share) related to our acquisitions of PBG, PAS and WBD, including $32 million recorded in the PAB segment, $14 million recorded in the Europe segment and $12 million recorded in corporate unallocated expenses. In the 24 weeks ended June 11, 2011, we incurred merger and integration charges of $113 million ($94 million after-tax or $0.06 per share) related to our acquisitions of PBG, PAS and WBD, including $53 million recorded in the PAB segment, $6 million recorded in the Europe segment and $54 million recorded in corporate unallocated expenses. All of these net charges were recorded in selling, general and administrative expenses. These charges also include closing costs and advisory fees related to our acquisition of WBD. Substantially all cash payments related to the above charges are expected to be paid by the end of 2011.

In the 12 weeks ended June 12, 2010, we incurred merger and integration charges of $155 million related to our acquisitions of PBG and PAS, including $103 million recorded in the PAB segment, $28 million recorded in the Europe segment and $24 million recorded in corporate unallocated expenses. In the 24 weeks ended June 12, 2010, we incurred merger and integration charges of $467 million related to our acquisitions of PBG and PAS, including $296 million recorded in the PAB segment, $29 million recorded in the Europe segment, $112 million recorded in corporate unallocated expenses and $30 million recorded in interest expense. All of these charges, other than

22

the interest expense portion, were recorded in selling, general and administrative expenses. These charges also include closing costs, one-time financing costs and advisory fees related to our acquisitions of PBG and PAS. In addition, in the first quarter of 2010, we recorded $9 million of charges, representing our share of the respective merger costs of PBG and PAS, in bottling equity income. Substantially all cash payments related to the above charges are expected to be paid by the end of 2011. In total, these charges had an after-tax impact of $119 million ($0.07 per share) and $380 million ($0.23 per share) for the 12 and 24 weeks ended June 12, 2010, respectively.

A summary of our merger and integration activity in 2011 is as follows:

	Severance and Other Employee Costs			Other Costs			Total
Liability as of December 25, 2010	$	179		$	25		$	204
2011 merger and integration charges		36			77			113
Cash payments		(101	)		(106	)		(207	)
Non-cash charges		(35	)		14			(21	)
Liability as of June 11, 2011	$	79		$	10		$	89

Financial Instruments

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

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

• foreign exchange risks, and

• interest rates.

In the normal course of business, we manage these risks through a variety of strategies, including the use of derivatives. Certain derivatives are designated as either cash flow or fair value hedges and qualify for hedge accounting treatment, while others do not qualify and are marked to market through earnings. Ineffectiveness of our hedges is not material. We do not use derivative instruments for trading or speculative purposes. We perform assessments of our counterparty credit risk regularly, including a review of credit ratings, credit default swap rates and potential nonperformance of the counterparty. Based on our most recent assessment of our counterparty credit risk, we consider this risk to be low. In addition, we enter into derivative contracts with a variety of financial institutions that we believe are creditworthy in order to reduce our concentration of credit risk.

Commodity Prices

We are subject to commodity price risk because our ability to recover increased costs through higher pricing may be limited in the competitive environment in which we operate. This risk is managed through the use of fixed-price purchase orders, pricing agreements, geographic diversity and derivatives. We use derivatives, with terms of no more than three years, to economically hedge price fluctuations related to a portion of our anticipated commodity purchases, primarily for natural gas, diesel fuel and aluminum. For those derivatives that qualify for hedge accounting, any ineffectiveness is recorded immediately in corporate unallocated expenses. We classify both the earnings and cash flow impact from these derivatives consistent with the underlying hedged item. During the next 12 months, we expect to reclassify net gains of $30 million related to these hedges from accumulated other comprehensive loss into net income. Derivatives used to hedge

23

commodity price risk that do not qualify for hedge accounting are marked to market each period and reflected in our income statement.

Our open commodity derivative contracts that qualify for hedge accounting had a face value of $590 million as of June 11, 2011 and $587 million as of June 12, 2010. These contracts resulted in net unrealized gains of $61 million as of June 11, 2011 and net unrealized losses of $15 million as of June 12, 2010.

Our open commodity derivative contracts that do not qualify for hedge accounting had a face value of $356 million as of June 11, 2011 and $246 million as of June 12, 2010. These contracts resulted in net gains of $45 million as of June 11, 2011 and net losses of $14 million as of June 12, 2010.

Foreign Exchange

Financial statements of foreign subsidiaries are translated into U.S. dollars using period-end exchange rates for assets and liabilities and weighted-average exchange rates for revenues and expenses. Adjustments resulting from translating net assets are reported as a separate component of accumulated other comprehensive loss within common shareholders’ equity as currency translation adjustment.

We may enter into derivatives, primarily forward contracts with terms of no more than two years, to manage our exposure to foreign currency transaction risk. Exchange rate gains or losses related to foreign currency transactions are recognized as transaction gains or losses in our income statement as incurred.

Our foreign currency derivatives had a total face value of $2.3 billion as of June 11, 2011 and $1.3 billion as of June 12, 2010. The contracts that qualify for hedge accounting resulted in net unrealized losses of $29 million as of June 11, 2011 and net unrealized gains of $5 million as of June 12, 2010. During the next 12 months, we expect to reclassify net losses of $28 million related to these hedges from accumulated other comprehensive loss into net income. The contracts that do not qualify for hedge accounting resulted in net losses of $7 million as of June 11, 2011 and net gains of $6 million as of June 12, 2010. All losses and gains were offset by changes in the underlying hedged items, resulting in no net material impact on earnings.

Interest Rates

We centrally manage our debt and investment portfolios considering investment opportunities and risks, tax consequences and overall financing strategies. We use various interest rate derivative instruments including, but not limited to, interest rate swaps, cross currency interest rate swaps, Treasury locks and swap locks to manage our overall interest expense and foreign exchange risk. These instruments effectively change the interest rate and currency of specific debt issuances. Certain of our fixed rate indebtedness has been swapped to floating rates. The notional amount, interest payment and maturity date of the interest rate and cross-currency swaps match the principal, interest payment and maturity date of the related debt. Our Treasury locks and swap locks are entered into to protect against unfavorable interest rate changes relating to forecasted debt transactions.

The notional amounts of the interest rate derivative instruments outstanding as of June 11, 2011 and June 12, 2010 were $8.73 billion and $8.60 billion, respectively. For those interest rate derivative instruments that qualify for cash flow hedge accounting, any ineffectiveness is recorded immediately. We classify both the earnings and cash flow impact from these interest rate

24

derivative instruments consistent with the underlying hedged item. During the next 12 months, we expect to reclassify net losses of $16 million related to these hedges from accumulated other comprehensive loss into net income.

As of June 11, 2011, approximately 42% of total debt, after the impact of the related interest rate derivative instruments, was exposed to variable rates, compared to 43% as of December 25, 2010.

Fair Value Measurements

The fair values of our financial assets and liabilities as of June 11, 2011 and June 12, 2010 are categorized as follows:

	2011				2010
	Assets(a)		Liabilities(a)		Assets(a)		Liabilities(a)
Available-for-sale securities(b)	$	85	$	–	$	79	$	–
Short-term investments – index funds(c)	$	176	$	–	$	144	$	–
Deferred compensation(d)	$	–	$	547	$	–	$	554
Derivatives designated as hedging instruments:
Forward exchange contracts(e)	$	7	$	36	$	24	$	19
Interest rate derivatives(f)		345		14		268		27
Commodity contracts – other(g)		73		3		37		27
Commodity contracts – futures(h)		1		10		–		26
	$	426	$	63	$	329	$	99
Derivatives not designated as hedging instruments:
Forward exchange contracts(e)	$	8	$	15	$	12	$	6
Interest rate derivatives(f)		44		81		7		48
Commodity contracts – other(g)		47		2		5		19
Commodity contracts – futures(h)		–		–		–		1
Prepaid forward contracts(i)		41		–		61		–
	$	140	$	98	$	85	$	74
Total derivatives at fair value	$	566	$	161	$	414	$	173
Total	$	827	$	708	$	637	$	727

^(a)  Financial assets are classified on our balance sheet within other assets, with the exception of short-term investments. Financial liabilities are classified on our balance sheet within other current liabilities and other liabilities. Unless specifically indicated, all financial assets and liabilities are categorized as Level 2 assets or liabilities.

^(b)  Based on the price of common stock. Categorized as a Level 1 asset.

^(c)  Based on price changes in index funds used to manage a portion of market risk arising from our deferred compensation liability. Categorized as a Level 1 asset.

^(d)  Based on the fair value of investments corresponding to employees’ investment elections. As of June 11, 2011 and June 12, 2010, $46 million and $144 million, respectively, are categorized as Level 1 liabilities. The remaining balances are categorized as Level 2 liabilities.

^(e)  Based on observable market transactions of spot and forward rates.

^(f)  Based on LIBOR and recently reported transactions in the marketplace.

^(g)  Based on recently reported transactions in the marketplace, primarily swap arrangements.

^(h)  Based on average prices on futures exchanges. Categorized as a Level 1 asset or liability.

⁽ⁱ⁾  Based primarily on the price of our common stock.

The fair value of our debt obligations as of June 11, 2011 was $29.2 billion, based upon prices of similar instruments in the marketplace.

25

The effective portion of the pre-tax losses/(gains) on our derivative instruments are categorized in the tables below.

	12 Weeks Ended
	Fair Value/Non- designated Hedges						Cash Flow Hedges
	Losses/(Gains) Recognized in Income Statement(a)						Losses/(Gains) Recognized in Accumulated Other Comprehensive Loss						Losses/(Gains) Reclassified from Accumulated Other Comprehensive Loss into Income Statement(b)
		6/11/11			6/12/10			6/11/11			6/12/10			6/11/11			6/12/10
Forward exchange contracts	$	2		$	(11	)	$	12		$	(21	)	$	16		$	11
Interest rate derivatives		(56	)		(70	)		35			23			3			–
Prepaid forward contracts		(4	)		3			–			–			–			–
Commodity contracts		(7	)		3			(15	)		70			(19	)		–
Total	$	(65	)	$	(75	)	$	32		$	72		$	–		$	11
	24 Weeks Ended
	Fair Value/Non- designated Hedges						Cash Flow Hedges
	Losses/(Gains) Recognized  in Income Statement(a)						Losses/(Gains) Recognized in Accumulated Other Comprehensive Loss						Losses/(Gains) Reclassified from Accumulated Other Comprehensive Loss into Income Statement(b)
		6/11/11			6/12/10			6/11/11			6/12/10			6/11/11			6/12/10
Forward exchange contracts	$	1		$	(5	)	$	37		$	(8	)	$	21		$	22
Interest rate derivatives		(78	)		(60	)		29			36			6			–
Prepaid forward contracts		(2	)		(15	)		–			–			–			–
Commodity contracts		(46	)		(43	)		(55	)		58			(25	)		16
Total	$	(125	)	$	(123	)	$	11		$	86		$	2		$	38

^(a)  Interest rate gains/losses are included in interest expense in our income statement. All other gains/losses are included in corporate unallocated expenses.

^(b)  Interest rate losses are included in interest expense in our income statement. All other gains/losses are included in cost of sales in our income statement.

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Recent Accounting Pronouncements

In June 2011, the Financial Accounting Standards Board (FASB) amended its guidance on the presentation of comprehensive income in financial statements to improve the comparability, consistency and transparency of financial reporting and to increase the prominence of items that are recorded in other comprehensive income. The new accounting guidance requires entities to report components of comprehensive income in either (1) a continuous statement of comprehensive income or (2) two separate but consecutive statements. The provisions of this new guidance are effective for fiscal years, and interim periods within those years, beginning after December 15, 2011. We are currently evaluating the impact of adopting this guidance on our financial statements.

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ITEM 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations.

FINANCIAL REVIEW

Our discussion and analysis is an integral part of understanding our financial results. Also refer to Basis of Presentation and Our Divisions in the notes to the condensed consolidated financial statements. Tabular dollars are in millions, except per share amounts. All per share amounts reflect common per share amounts, assume dilution unless otherwise noted and are based on unrounded amounts. Percentage changes are based on unrounded amounts.

Our Critical Accounting Policies

Sales Incentives and Advertising and Marketing Costs

We offer sales incentives and discounts through various programs to customers and consumers. These incentives are accounted for as a reduction of revenue. Certain sales incentives are recognized at the time of sale while other incentives, such as bottler funding and customer volume rebates, are recognized during the year incurred, generally in proportion to revenue, based on annual targets. Anticipated payments are estimated based on historical experience with similar programs and require management judgment with respect to estimating customer 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 recognized during the year incurred, generally in proportion to revenue, based on annual targets.

Income Taxes

In determining our quarterly provision for income taxes, we use an estimated annual effective tax rate which is based on our expected annual income, statutory tax rates and tax planning opportunities available to us in the various jurisdictions in which we operate. Subsequent recognition, derecognition and measurement of a tax position taken in a previous period are separately recognized in the quarter in which they occur.

Our Business Risks

This Quarterly Report on Form 10-Q contains statements reflecting our views about our future performance that constitute “forward-looking statements” within the meaning of the Private Securities Litigation Reform Act of 1995 (the “Reform Act”). Statements that constitute forward-looking statements within the meaning of the Reform Act are generally identified through the inclusion of words such as “believe,” “expect,” “intend,” “estimate,” “project,” “anticipate,” “will” and variations of such words and other similar expressions. All statements addressing our future operating performance, and statements addressing events and developments that we expect or anticipate will occur in the future, are forward-looking statements within the meaning of the Reform Act. These forward-looking statements are based on currently available information, operating plans and projections about future events and trends. They inherently involve risks and uncertainties that could cause actual results to differ materially from those predicted in any such forward-looking statements. Investors are cautioned not to place undue reliance on any such forward-looking statements, which speak only as of the date they are made. We undertake no

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obligation to update any forward-looking statement, whether as a result of new information, future events or otherwise.

Our operations outside of the United States generated approximately 50% of our net revenue in the 24 weeks ended June 11, 2011. As a result, we are exposed to foreign currency risks, including unforeseen economic changes and political unrest. During the 12 weeks ended June 11, 2011, favorable foreign currency increased net revenue growth by nearly 3 percentage points, primarily due to appreciation of the euro, Mexican peso, Canadian dollar and Brazilian real. During the 24 weeks ended June 11, 2011, favorable foreign currency increased net revenue growth by 2 percentage points, primarily due to appreciation of the Mexican peso, Canadian dollar, euro and Brazilian real. Currency declines against the U.S. dollar which are not offset could adversely impact our future results.

We expect to be able to reduce the impact of volatility in our raw material and energy costs through our hedging strategies and ongoing sourcing initiatives.

See Financial Instruments in the notes to the condensed consolidated financial statements for further discussion of our derivative instruments, including their fair values as of June 11, 2011 and June 12, 2010. Cautionary statements included in Item 1A. Risk Factors in our Annual Report on Form 10-K for the fiscal year ended December 25, 2010 and in Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations – Our Business Risks included in Exhibit 99.1 to our Current Report on Form 8-K dated March 31, 2011, should be considered when evaluating our trends and future results.

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Results of Operations – Consolidated Review

Items Affecting Comparability

Our reported financial results are impacted by the following items in each of the following periods:

	12 Weeks Ended						24 Weeks Ended
	6/11/11			6/12/10			6/11/11			6/12/10
Operating profit
Mark-to-market net (losses)/gains	$	(9	)	$	(4	)	$	22		$	42
Merger and integration charges	$	(58	)	$	(155	)	$	(113	)	$	(437	)
Inventory fair value adjustments	$	(4	)	$	(76	)	$	(38	)	$	(357	)
Venezuela currency devaluation	$	–		$	–		$	–		$	(120	)
Asset write-off	$	–		$	–		$	–		$	(145	)
Foundation contribution	$	–		$	–		$	–		$	(100	)
Bottling equity income
Gain on previously held equity interests	$	–		$	–		$	–		$	735
Merger and integration charges	$	–		$	–		$	–		$	(9	)
Interest expense
Merger and integration charges	$	–		$	–		$	–		$	(30	)
Net income attributable to PepsiCo
Mark-to-market net (losses)/gains	$	(5	)	$	(3	)	$	14		$	26
Gain on previously held equity interests	$	–		$	–		$	–		$	958
Merger and integration charges	$	(45	)	$	(119	)	$	(94	)	$	(380	)
Inventory fair value adjustments	$	(2	)	$	(68	)	$	(23	)	$	(308	)
Venezuela currency devaluation	$	–		$	–		$	–		$	(120	)
Asset write-off	$	–		$	–		$	–		$	(92	)
Foundation contribution	$	–		$	–		$	–		$	(64	)
Net income attributable to PepsiCo per common share – diluted
Mark-to-market net (losses)/gains	$	(–	)	$	(–	)	$	0.01		$	0.02
Gain on previously held equity interests	$	–		$	–		$	–		$	0.60
Merger and integration charges	$	(0.03	)	$	(0.07	)	$	(0.06	)	$	(0.23	)
Inventory fair value adjustments	$	(–	)	$	(0.04	)	$	(0.01	)	$	(0.19	)
Venezuela currency devaluation	$	–		$	–		$	–		$	(0.07	)
Asset write-off	$	–		$	–		$	–		$	(0.06	)
Foundation contribution	$	–		$	–		$	–		$	(0.04	)

Mark-to-Market Net Impact

We centrally manage commodity derivatives on behalf of our divisions. These commodity derivatives include energy, fruit, aluminum and other raw materials. Certain of these commodity derivatives do not qualify for hedge accounting treatment and are marked to market with the resulting gains and losses recognized in corporate unallocated expenses. These gains and losses are subsequently reflected in division results when the divisions take delivery of the underlying commodity. Therefore, the divisions realize the economic effects of the derivative without experiencing any resulting mark-to-market volatility which remains in corporate unallocated expenses.

For the 12 weeks ended June 11, 2011, we recognized $9 million ($5 million after-tax with a nominal impact per share) of mark-to-market net losses on commodity hedges in corporate unallocated expenses. For the 24 weeks ended June 11, 2011, we recognized $22 million ($14

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million after-tax or $0.01 per share) of mark-to-market net gains on commodity hedges in corporate unallocated expenses.

For the 12 weeks ended June 12, 2010, we recognized $4 million ($3 million after-tax with a nominal impact per share) of market-to-market net losses on commodity hedges in corporate unallocated expenses. For the 24 weeks ended June 12, 2010, we recognized $42 million ($26 million after-tax or $0.02 per share) of market-to-market net gains on commodity hedges in corporate unallocated expenses.

Gain on Previously Held Equity Interests

In the first quarter of 2010, in connection with our acquisitions of PBG and PAS, we recorded a gain on our previously held equity interests of $958 million ($0.60 per share), comprising $735 million which is non-taxable and recorded in bottling equity income and $223 million related to the reversal of deferred tax liabilities associated with these previously held equity interests.

Merger and Integration Charges

In the 12 weeks ended June 11, 2011, we incurred merger and integration charges of $58 million ($45 million after-tax or $0.03 per share) related to our acquisitions of PBG, PAS and WBD, including $32 million recorded in the PAB segment, $14 million recorded in the Europe segment and $12 million recorded in corporate unallocated expenses. In the 24 weeks ended June 11, 2011, we incurred merger and integration charges of $113 million ($94 million after-tax or $0.06 per share) related to our acquisitions of PBG, PAS and WBD, including $53 million recorded in the PAB segment, $6 million recorded in the Europe segment and $54 million recorded in corporate unallocated expenses. These charges also include closing costs and advisory fees related to our acquisition of WBD.

In the 12 weeks ended June 12, 2010, we incurred merger and integration charges of $155 million related to our acquisitions of PBG and PAS, including $103 million recorded in the PAB segment, $28 million recorded in the Europe segment and $24 million recorded in corporate unallocated expenses. In the 24 weeks ended June 12, 2010, we incurred merger and integration charges of $467 million related to our acquisitions of PBG and PAS, including $296 million recorded in the PAB segment, $29 million recorded in the Europe segment, $112 million recorded in corporate unallocated expenses and $30 million recorded in interest expense. These charges also include closing costs, one-time financing costs and advisory fees related to our acquisitions of PBG and PAS. In addition, in the first quarter of 2010, we recorded $9 million of charges, representing our share of the respective merger costs of PBG and PAS, in bottling equity income. In total, these charges had an after-tax impact of $119 million ($0.07 per share) and $380 million ($0.23 per share) for the 12 and 24 weeks ended June 12, 2010, respectively.

Inventory Fair Value Adjustments

In the 12 and 24 weeks ended June 11, 2011, we recorded $4 million ($2 million after-tax with a nominal impact per share) and $38 million ($23 million after-tax or $0.01 per share), respectively, of incremental costs in cost of sales related to fair value adjustments to the acquired inventory included in WBD’s balance sheet at the acquisition date and other related hedging contracts included in PBG’s and PAS’s balance sheets at the acquisition date.

In the 12 and 24 weeks ended June 12, 2010, we recorded $76 million ($68 million after-tax or $0.04 per share) and $357 million ($308 million after-tax or $0.19 per share), respectively, of incremental costs related to fair value adjustments to the acquired inventory and other related

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hedging contracts included in PBG’s and PAS’s balance sheets at the acquisition date. Substantially all of these costs were recorded in cost of sales.

Venezuela Currency Devaluation

As of the beginning of our 2010 fiscal year, we recorded a one-time $120 million net charge related to our change to hyperinflationary accounting for our Venezuelan businesses and the related devaluation of the bolivar. $129 million of this net charge was recorded in corporate unallocated expenses, with the balance (income of $9 million) recorded in our PAB segment. In total, this net charge had an after-tax impact of $120 million or $0.07 per share.

Asset Write-Off

In the first quarter of 2010, we recorded a $145 million charge ($92 million after-tax or $0.06 per share) related to a change in scope of one release in our ongoing migration to SAP software. This change was driven, in part, by a review of our North America systems strategy following our acquisitions of PBG and PAS. This change does not impact our overall commitment to continue our implementation of SAP across our global operations over the next few years.

Foundation Contribution

In the first quarter of 2010, we made a $100 million ($64 million after-tax or $0.04 per share) contribution to The PepsiCo Foundation, Inc., in order to fund charitable and social programs over the next several years. This contribution was recorded in corporate unallocated expenses.

Non-GAAP Measures

Certain measures contained in this Form 10-Q are financial measures that are adjusted for items affecting comparability (see “Items Affecting Comparability” for a detailed list and description of each of these items), as well as, in certain instances, adjusted for foreign currency. These measures are not in accordance with U.S. Generally Accepted Accounting Principles (GAAP). Items adjusted for currency assume foreign currency exchange rates used for translation based on the rates in effect for the comparable prior-year period. We believe investors should consider these non-GAAP measures in evaluating our results as they are more indicative of our ongoing performance and with how management evaluates our operational results and trends. These measures are not, and should not be viewed as, a substitute for U.S. GAAP reporting measures. See also “Management Operating Cash Flow.”

Volume

Since our divisions each use different measures of physical unit volume, a common servings metric is necessary to reflect our consolidated physical unit volume. For the 12 weeks ended June 11, 2011, total servings increased 6%. For the 24 weeks ended June 11, 2011, total servings increased 7%.

We discuss volume for our beverage businesses on a bottler case sales (BCS) basis in which all beverage volume is converted to an 8-ounce-case metric. Most of our beverage volume is sold by our company-owned and franchise-owned bottlers, and that portion is based on our bottlers’ sales to retailers and independent distributors. The remainder of our volume is based on our direct shipments to retailers and independent distributors. We report our international beverage volume on a monthly basis. Our second quarter includes beverage volume outside of North America for

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March, April and May. Concentrate shipments and equivalents (CSE) represent our physical beverage volume shipments to independent bottlers, retailers and independent distributors, and is the measure upon which our revenue is based.

Consolidated Results

Total Net Revenue and Operating Profit

	12 Weeks Ended									24 Weeks Ended
	6/11/11			6/12/10			Change			6/11/11			6/12/10			Change
Total net revenue	$	16,827		$	14,801			14	%	$	28,764		$	24,169			19	%
Operating profit
FLNA	$	853		$	800			6	%	$	1,627		$	1,528			6	%
QFNA		167			159			5.5	%		381			354			8	%
LAF		274			233			18	%		445			378			18	%
PAB		983			952			3	%		1,541			1,025			50	%
Europe		407			276			47	%		470			394			19	%
AMEA		299			267			12	%		445			422			5	%
Corporate Unallocated
Mark-to-market net (losses)/gains		(9	)		(4	)		167	%		22			42			(49	)%
Merger and integration charges		(12	)		(24	)		(57	)%		(54	)		(112	)		(53	)%
Venezuela currency devaluation		–			–			–			–			(129	)		n/m
Asset write-off		–			–			–			–			(145	)		n/m
Foundation contribution		–			–			–			–			(100	)		n/m
Other		(208	)		(198	)		6	%		(397	)		(356	)		12	%
Total operating profit	$	2,754		$	2,461			12	%	$	4,480		$	3,301			36	%
Total operating profit margin		16.4	%		16.6	%		(0.2	)		15.6	%		13.7	%		1.9

n/m = not meaningful

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

12 Weeks

On a reported basis, total operating profit increased 12% and operating margin decreased 0.2 percentage points. Operating profit performance was primarily driven by the net revenue growth, partially offset by higher commodity costs. Items affecting comparability (see “Items Affecting Comparability”) contributed 7 percentage points to the total operating profit growth and positively contributed 1.2 percentage points to the total operating margin performance.

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24 Weeks

On a reported basis, total operating profit increased 36% and operating margin increased 1.9 percentage points. Operating profit performance was primarily driven by items affecting comparability (see “Items Affecting Comparability”), which contributed 31 percentage points to the total operating profit growth and 4.2 percentage points to the total operating margin increase.

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Other Consolidated Results

	12 Weeks Ended									24 Weeks Ended
	6/11/11			6/12/10			Change			6/11/11			6/12/10			Change
Bottling equity income	$	–		$	9		$	(9	)	$	–		$	718		$	(718	)
Interest expense, net	$	(179	)	$	(170	)	$	(9	)	$	(342	)	$	(318	)	$	(24	)
Tax rate		26.0	%		29.9	%					26.3	%		17.7	%
Net income attributable to PepsiCo	$	1,885		$	1,603			18	%	$	3,028		$	3,033			–
Net income attributable to PepsiCo per common share – diluted	$	1.17		$	0.98			20	%	$	1.89		$	1.87			1	%
Mark-to-market net losses/(gains)		–			–						(0.01	)		(0.02	)
Gain on previously held equity interests		–			–						–			(0.60	)
Merger and integration charges		0.03			0.07						0.06			0.23
Inventory fair value adjustments		–			0.04						0.01			0.19
Venezuela currency devaluation		–			–						–			0.07
Asset write-off		–			–						–			0.06
Foundation contribution		–			–						–			0.04
Net income attributable to PepsiCo per common share – diluted, excluding above items*	$	1.21	**	$	1.10	**		10	%	$	1.95		$	1.86	**		5	%
Impact of foreign currency translation								(2	)								(2	)
Growth in net income attributable to PepsiCo per common share – diluted, excluding above items, on a constant currency basis*								8	%								3	%

* See “Non-GAAP Measures”

** Does not sum due to rounding

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12 Weeks

Net interest expense increased $9 million, primarily reflecting higher average debt balances, partially offset by higher average rates on our investment balances.

The reported tax rate decreased 3.9% compared to the prior year, primarily reflecting tax benefits related to a portion of our international bottling operations in the current year and the impact of the Patient Protection and Affordable Care Act in the prior year.

Net income attributable to PepsiCo increased 18% and net income attributable to PepsiCo per common share increased 20%. Items affecting comparability (see “Items Affecting Comparability”) increased both net income attributable to PepsiCo and net income attributable to PepsiCo per common share by 10 percentage points.

24 Weeks

Bottling equity income decreased $718 million, primarily reflecting the gain in the prior year on our previously held equity interests in connection with our acquisitions of PBG and PAS.

Net interest expense increased $24 million, primarily reflecting higher average debt balances, partially offset by lower average rates on our debt balances as well as bridge and term financing costs in the prior year in connection with our acquisitions of PBG and PAS.

The reported tax rate increased 8.6% compared to the prior year, primarily reflecting the prior year non-taxable gain and reversal of deferred taxes attributable to our previously held equity interests in connection with our acquisitions of PBG and PAS.

Net income attributable to PepsiCo was unchanged and net income attributable to PepsiCo per common share increased 1%. Items affecting comparability (see “Items Affecting Comparability”) decreased both net income attributable to PepsiCo and net income attributable to PepsiCo per common share by 4 percentage points.

Results of Operations – Division Review

The results and discussions below are based on how our Chief Executive Officer monitors the performance of our divisions. For additional information, see Our Divisions and Merger and Integration Charges in the notes to the condensed consolidated financial statements and “Items Affecting Comparability.”

Furthermore, 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, and “net pricing” reflects the year-over-year combined impact of list price changes, weight changes per package, discounts and allowances. Additionally, “acquisitions”, except as otherwise noted, reflect all mergers and acquisitions activity, including the impact of acquisitions, divestitures and changes in ownership or control in consolidated subsidiaries and nonconsolidated equity investees.

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Net Revenue
12 Weeks Ended	FLNA			QFNA			LAF			PAB			Europe			AMEA			Total
June 11, 2011	$	3,090		$	583		$	1,808		$	5,629		$	3,794		$	1,923		$	16,827
June 12, 2010	$	2,992		$	582		$	1,538		$	5,548		$	2,498		$	1,643		$	14,801
% Impact of:
Volume(a)		1	%		(2)	%		5	%		(1	)%		5	%		14	%		3	%
Effective net pricing(b)		2			1			6			1			6			0.5			3
Foreign exchange		0.5			1			7			1			7			2			3
Acquisitions		–			–			–			–			33			–			6
% Change(c)		3	%		–	%		18	%		1	%		52	%		17	%		14	%
Net Revenue
24 Weeks Ended	FLNA			QFNA			LAF			PAB			Europe			AMEA			Total
June 11, 2011	$	5,994		$	1,223		$	2,916		$	10,160		$	5,420		$	3,051		$	28,764
June 12, 2010	$	5,856		$	1,265		$	2,521		$	8,313		$	3,542		$	2,672		$	24,169
% Impact of:
Volume(a)		1	%		(6)	%		4	%		*			*			10	%		*
Effective net pricing(b)		1			1			6			*			*			1.5			*
Foreign exchange		0.5			1			6			1			4			2			2
Acquisitions		–			–			–			*			*			–			*
% Change(c)		2	%		(3)	%		16	%		22	%		53	%		14	%		19	%

^(a)  Excludes the impact of acquisitions. In certain instances, volume growth varies from the amounts disclosed in the following divisional discussions due to nonconsolidated joint venture volume, and, for our beverage businesses, temporary timing differences between BCS and CSE. Our net revenue excludes nonconsolidated joint venture volume, and, for our beverage businesses, is based on CSE.

^(b) Includes 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.

^(c)  Amounts may not sum due to rounding.

* It is impractical to separately determine and quantify the impact of our acquisitions of PBG and PAS from changes in our pre-existing beverage business since we now manage these businesses as an integrated system.

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Frito-Lay North America

	12 Weeks Ended				%			24 Weeks Ended				%
	6/11/11		6/12/10		Change			6/11/11		6/12/10		Change
Net revenue	$	3,090	$	2,992		3		$	5,994	$	5,856		2
Impact of foreign currency translation						(0.5	)						(0.5	)
Net revenue growth, on a constant currency basis*						3	**						2	**
Operating profit	$	853	$	800		6		$	1,627	$	1,528		6
Impact of foreign currency translation						(0.5	)						–
Operating profit growth, on a constant currency basis*						6	**						6

* See “Non-GAAP Measures”

** Does not sum due to rounding

12 Weeks

Net revenue increased 3% and pound volume grew 2%. The volume increase primarily reflects double-digit growth in both our Sabra joint venture and variety packs, partially offset by a low-single-digit decline in trademark Lay’s. Net revenue growth also benefited from effective net pricing.

Operating profit grew 6%, primarily reflecting the net revenue growth and lower advertising and marketing expenses in the quarter.

24 Weeks

Net revenue and pound volume each grew 2%. Pound growth primarily reflects double-digit growth in our Sabra joint venture and high-single-digit growth in both variety packs and trademark Ruffles. These gains were partially offset by a double-digit decline in trademark SunChips. Net revenue growth also benefited from effective net pricing.

Operating profit grew 6%, primarily reflecting the net revenue growth, as well as lower advertising and marketing expenses and lower commodity costs, primarily cooking oil.

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Quaker Foods North America

	12 Weeks Ended				% Change			24 Weeks Ended				% Change
	6/11/11		6/12/10					6/11/11		6/12/10
Net revenue	$	583	$	582		–		$	1,223	$	1,265		(3	)
Impact of foreign currency translation						(1	)						(1	)
Net revenue growth, on a constant currency basis*						(1	)						(4	)
Operating profit	$	167	$	159		5.5		$	381	$	354		8
Impact of foreign currency translation						(1	)						(1	)
Operating profit growth, on a constant currency basis*						5	**						7

* See “Non-GAAP Measures”

** Does not sum due to rounding

12 Weeks

Net revenue was flat and volume declined 2%. The volume decline primarily reflects double-digit declines in ready-to-eat cereals and mid-single-digit declines in Chewy granola bars, partially offset by low-single-digit increases in Aunt Jemima syrup and mix, as well as in Oatmeal. The impact of positive net pricing, driven primarily by price increases taken in the fourth quarter of 2010, was largely offset by negative mix. Favorable foreign currency positively contributed 1 percentage point to the net revenue performance.

Operating profit grew 5.5%, primarily reflecting the favorable effective net pricing and lower selling and distribution costs. Favorable foreign currency contributed 1 percentage point to operating profit growth.

24 Weeks

Net revenue declined 3% and volume declined 6%. The volume decline primarily reflects double-digit-declines in ready-to-eat cereals and trademark Roni, as well as mid-single-digit declines in Aunt Jemima syrup and mix and in Chewy granola bars. The impact of positive net pricing, driven primarily by price increases taken in the fourth quarter of 2010, was largely offset by negative mix. Favorable foreign currency positively contributed 1 percentage point to the net revenue performance.

Operating profit grew 8%, largely reflecting a change in accounting methodology for inventory which contributed 4 percentage points to the operating profit growth (see Basis of Presentation in the notes to the condensed consolidated financial statements). Additionally, lower selling and distribution costs and lower advertising and marketing expenses contributed to the operating profit growth. Favorable foreign currency contributed nearly 1 percentage point to operating profit growth.

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Latin America Foods

	12 Weeks Ended				%			24 Weeks Ended				%
	6/11/11		6/12/10		Change			6/11/11		6/12/10		Change
Net revenue	$	1,808	$	1,538		18		$	2,916	$	2,521		16
Impact of foreign currency translation						(7	)						(6	)
Net revenue growth, on a constant currency basis*						11							9	**
Operating profit	$	274	$	233		18		$	445	$	378		18
Impact of foreign currency translation						(6	)						(6	)
Operating profit growth, on a constant currency basis*						12							12

* See “Non-GAAP Measures”

** Does not sum due to rounding

12 Weeks

Volume grew 5%, primarily reflecting double-digit increases in Brazil and Argentina. Additionally, Gamesa in Mexico grew at a low-single-digit rate and Sabritas in Mexico was up slightly.

Net revenue increased 18%, primarily reflecting favorable effective net pricing and the volume growth. Favorable foreign currency increased net revenue growth by 7 percentage points.

Operating profit increased 18%, primarily reflecting the net revenue growth, partially offset by higher commodity costs and selling and distribution costs. Additionally, an unfavorable legal settlement in the prior year increased operating profit growth by 5 percentage points. Favorable foreign currency increased operating profit by 6 percentage points.

24 Weeks

Volume grew 4%, primarily reflecting a mid-single-digit increase in Brazil and double-digit growth in Argentina. Additionally, both Gamesa and Sabritas in Mexico grew at a low-single-digit rate.

Net revenue increased 16%, primarily reflecting favorable effective net pricing and the volume growth. Favorable foreign currency increased net revenue growth by 6 percentage points.

Operating profit increased 18%, reflecting the net revenue growth, partially offset by higher selling and distribution costs. Additionally, the unfavorable legal settlement in the prior year increased operating profit growth by 3 percentage points. Favorable foreign currency increased operating profit by 6 percentage points.

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PepsiCo Americas Beverages

	12 Weeks Ended				%			24 Weeks Ended					%
	6/11/11		6/12/10		Change			6/11/11		6/12/10			Change
Net revenue	$	5,629	$	5,548		1		$	10,160	$	8,313			22
Impact of foreign currency translation						(1	)							(1	)
Net revenue growth, on a constant currency basis*						–								21
Operating profit	$	983	$	952		3		$	1,541	$	1,025			50
Merger and integration charges		32		103					53		296
Inventory fair value adjustments		4		36					13		317
Venezuela currency devaluation		–		–					–		(9	)
Operating profit excluding above items*	$	1,019	$	1,091		(7	)	$	1,607	$	1,629			(1	)
Impact of foreign currency translation						(1	)							(1	)
Operating profit growth excluding above items, on a constant currency basis*						(7	)**							(2	)

* See “Non-GAAP Measures”

** Does not sum due to rounding

12 Weeks

Volume decreased 1%, primarily reflecting a 2% volume decline in North America, partially offset by a 2% volume increase in Latin America. The volume decline in North America was driven by a 5% decline in CSD volume, partially offset by a 2% increase in non-carbonated beverage volume. The non-carbonated beverage volume growth primarily reflected a mid-single-digit increase in Gatorade sports drinks.

Net revenue increased 1%, as the volume declines were more than offset by effective net pricing. Favorable foreign currency contributed 1 percentage point to net revenue growth.

Reported operating profit increased 3%, primarily driven by the items affecting comparability in the above table (see “Items Affecting Comparability”). Excluding the items affecting comparability, operating profit decreased 7%, mainly driven by higher commodity costs and higher selling and distribution costs. These costs were partially offset by the impact of more-favorable settlements of promotional spending accruals in the current year and certain insurance adjustments, which collectively contributed 5 percentage points to the reported operating profit increase.

41

24 Weeks

Volume increased 4%, primarily reflecting volume from incremental brands related to our acquisition of PBG’s operations in Mexico, as well as incremental volume related to our DPSG manufacturing and distribution agreement, each of which contributed 2 percentage points to volume growth. North America volumes, excluding the impact of the incremental DPSG volume, decreased slightly, as a 3% decline in CSD volume was almost entirely offset by a 4% increase in non-carbonated beverage volume. The non-carbonated beverage volume performance primarily reflected a double-digit increase in Gatorade sports drinks.

Net revenue increased 22%, primarily reflecting the incremental finished goods revenue related to our acquisitions of PBG and PAS. Favorable foreign currency contributed 1 percentage point to net revenue growth.

Reported operating profit increased 50%, primarily reflecting the items affecting comparability in the above table (see “Items Affecting Comparability”). Excluding these items, operating profit decreased 1%, mainly driven by higher commodity costs and higher selling and distribution costs, partially offset by the incremental profit related to our acquisitions of PBG and PAS. Operating profit performance also benefited from the impact of more-favorable settlements of promotional spending accruals in the current year and certain insurance adjustments, which collectively contributed nearly 5 percentage points to the reported operating profit growth.

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Europe

	12 Weeks Ended				%			24 Weeks Ended				%
	6/11/11		6/12/10		Change			6/11/11		6/12/10		Change
Net revenue	$	3,794	$	2,498		52		$	5,420	$	3,542		53
Impact of foreign currency translation						(7	)						(4	)
Net revenue growth, on a constant currency basis*						45							49
Operating profit	$	407	$	276		47		$	470	$	394		19
Merger and integration charges		14		28					6		29
Inventory fair value adjustments		–		40					25		40
Operating profit excluding above items*	$	421	$	344		23		$	501	$	463		8
Impact of foreign currency translation						(7	)						(5	)
Operating profit growth excluding above items, on a constant currency basis*						16							4	**

* See “Non-GAAP Measures”

** Does not sum due to rounding

12 Weeks

Snacks volume grew 40%, primarily reflecting our acquisition of WBD, which contributed 35 percentage points to the volume growth. Double-digit increases in Turkey and South Africa, and a high-single-digit increase in Russia (ex-WBD), were partially offset by a low-single-digit decline at Walkers in the United Kingdom and a mid-single-digit decline in Spain.

Beverage volume increased 27%, primarily reflecting our acquisition of WBD, which contributed 22 percentage points to the volume growth. Double-digit increases in Germany and Turkey were partially offset by a high-single-digit decline in the Ukraine. Additionally, Russia (ex-WBD) and the United Kingdom each grew at a low-single-digit rate.

Net revenue grew 52%, primarily reflecting our acquisition of WBD, which contributed 33 percentage points to net revenue growth. Effective net pricing and the volume gains also drove net revenue growth. Favorable foreign currency contributed 7 percentage points to net revenue growth.

Reported operating profit increased 47%, primarily reflecting the net revenue growth, offset by higher commodity costs and increased investments in strategic markets. The accelerated timing of concentrate shipments in connection with our global SAP implementation and the impact of more-favorable settlements of promotional spending accruals in the current year each contributed 6

43

percentage points to operating profit growth. Our acquisition of WBD contributed 17 percentage points to the reported operating profit growth and reflected net charges of $4 million included in items affecting comparability in the above table (see “Items Affecting Comparability”). Excluding the items affecting comparability in the above table, operating profit increased 23%. Favorable foreign currency increased operating profit performance by 7 percentage points.

24 Weeks

Snacks volume grew 34%, primarily reflecting our acquisition of WBD, which contributed 29 percentage points to the volume growth. Double-digit growth in Turkey, South Africa and Russia (ex-WBD) was partially offset by a mid-single-digit decline in Spain. Additionally, Walkers in the United Kingdom was up slightly.

Beverage volume increased 27%, primarily reflecting our acquisition of WBD, which contributed 20 percentage points to the volume growth, and incremental brands related to our acquisitions of PBG and PAS, which contributed nearly 2 percentage points to the volume growth. Double-digit increases in Turkey and Germany were partially offset by a mid-single-digit decline in the Ukraine. Additionally, Russia (ex-WBD) grew at a mid-single-digit rate and the United Kingdom grew at a low-single-digit rate.

Net revenue grew 53%, primarily reflecting our acquisition of WBD, which contributed 30 percentage points to net revenue growth, and the incremental finished goods revenue related to our acquisitions of PBG and PAS. Favorable foreign currency contributed over 4 percentage points to net revenue growth.

Reported operating profit increased 19%, primarily reflecting the net revenue growth, offset by higher commodity costs and increased investments in strategic markets. The accelerated concentrate shipments and the impact of more-favorable settlements of promotional spending accruals in the current year each contributed over 4 percentage points to operating profit growth. Our acquisition of WBD contributed 12 percentage points to the reported operating profit growth and reflected net charges of $15 million included in items affecting comparability in the above table (see “Items Affecting Comparability”). Excluding the items affecting comparability in the above table, operating profit increased 8%. Favorable foreign currency increased operating profit performance by nearly 5 percentage points.

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Asia, Middle East & Africa

	12 Weeks Ended				%			24 Weeks Ended				%
	6/11/11		6/12/10		Change			6/11/11		6/12/10		Change
Net revenue	$	1,923	$	1,643		17		$	3,051	$	2,672		14
Impact of foreign currency						(2	)						(2	)
Net revenue growth, on a constant currency basis*						15							12
Operating profit	$	299	$	267		12		$	445	$	422		5
Impact of foreign currency translation						(2	)						(2.5	)
Operating profit growth, on a constant currency basis*						10							3	**

* See “Non-GAAP Measures”

** Does not sum due to rounding

12 Weeks

Snacks volume grew 15%, reflecting broad-based increases driven by double-digit growth in the Middle East, India and China, partially offset by a low-single-digit decline in Australia.

Beverage volume grew 6%, reflecting broad-based increases driven by double-digit growth in India and China, partially offset by a double-digit decline in Thailand. Additionally, the Middle East grew at a mid-single-digit rate.

Net revenue grew 17%, primarily reflecting the volume growth, as well as the accelerated timing of concentrate shipments in connection with our global SAP implementation, which contributed nearly 2 percentage points to net revenue growth. Foreign currency contributed over 2 percentage points to net revenue growth.

Operating profit grew 12%, reflecting the net revenue growth, as well as the accelerated concentrate shipments, which contributed 8 percentage points to operating profit growth, and the recovery of a previously written-off receivable, which contributed 3 percentage points to operating profit growth, partially offset by higher commodity costs. Favorable foreign currency contributed over 2 percentage points to operating profit growth.

24 Weeks

Snacks volume grew 14%, reflecting broad-based increases driven by double-digit growth in India, the Middle East and China, partially offset by a low-single-digit decline in Australia. Acquisitions had a nominal impact on snacks volume growth.

45

Beverage volume grew 6%, driven by double-digit growth in India and high-single-digit growth in China, partially offset by a high-single-digit decline in Thailand. Additionally, the Middle East grew at a mid-single-digit rate. Acquisitions had a nominal impact on beverage volume growth.

Net revenue grew 14%, primarily reflecting the volume growth and effective net pricing. Foreign currency contributed over 2 percentage points to net revenue growth. Acquisitions had a nominal impact on net revenue growth.

Operating profit grew 5%, reflecting the net revenue growth, as well as the accelerated concentrate shipments and the recovery of a previously written-off receivable, which each contributed 5 percentage points to the operating profit growth, partially offset by higher commodity costs. Favorable foreign currency contributed 2.5 percentage points to operating profit growth and acquisitions reduced operating profit growth by nearly 1 percentage point.

Our Liquidity and Capital Resources

We believe that our cash generating capability and financial condition, together with our revolving credit facilities and other available methods of debt financing (including long-term debt financing which, depending upon market conditions, we may use to replace a portion of our commercial paper borrowings), will be adequate to meet our operating, investing and financing needs. However, there can be no assurance that volatility in the global capital and credit markets will not impair our ability to access these markets on terms commercially acceptable to us or at all.

In addition, currency restrictions enacted by the government in Venezuela have impacted our ability to pay dividends outside of the country from our snack and beverage operations in Venezuela. As of June 11, 2011, our operations in Venezuela comprised 9% of our cash and cash equivalents balance.

Operating Activities

During the 24 weeks in 2011, net cash provided by operating activities was $2.4 billion, compared to net cash provided of $2.4 billion in the prior year period. The operating cash flow performance primarily reflects unfavorable working capital comparisons to the prior year, offset by the overlap of a $0.6 billion discretionary pension contribution in the prior year.

Investing Activities

During the 24 weeks, net cash used for investing activities was $3.9 billion, primarily reflecting $2.4 billion of cash paid, net of cash and cash equivalents acquired, in connection with our acquisition of WBD. Additionally, we used $1.2 billion for net capital spending in the current year.

Financing Activities

During the 24 weeks, net cash used for financing activities was $1.7 billion, primarily reflecting the return of operating cash flow to our shareholders through share repurchases and dividend payments of $2.3 billion and our purchase of an additional $1.3 billion of WBD ordinary shares (including shares underlying ADSs), partially offset by net proceeds from long-term debt of $1.5

46

billion and stock option proceeds of $0.7 billion. We anticipate share repurchases of approximately $2.5 billion in 2011.

Management Operating Cash Flow

We focus on management operating cash flow as a key element in achieving maximum shareholder value, and it is the primary measure we use to monitor cash flow performance. However, it is not a measure provided by accounting principles generally accepted in the U.S. Therefore, this measure is not, and should not be viewed as, a substitute for U.S. GAAP cash flow measures. 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. Additionally, we consider certain items (included in the table below), in evaluating management operating cash flow. We believe investors should consider these items in evaluating our management operating cash flow results.

The table below reconciles net cash provided by operating activities, as reflected in our cash flow statement, to our management operating cash flow excluding the impact of the items below.

	24 Weeks Ended
	6/11/11			6/12/10
Net cash provided by operating activities	$	2,353		$	2,442
Capital spending		(1,231	)		(968	)
Sales of property, plant and equipment		34			37
Management operating cash flow		1,156			1,511
Discretionary pension contribution (after-tax)		–			384
Payments related to 2009 restructuring charges		1			28
Merger and integration payments (after-tax)		158			184
Foundation contribution (after-tax)		–			64
Capital investments related to the PBG/PAS integration		50			–
Management operating cash flow excluding above items	$	1,365		$	2,171

We expect to continue to return management operating cash flow to our shareholders through dividends and share repurchases while maintaining short-term credit ratings that ensure appropriate financial flexibility and ready access to global and capital credit markets at favorable interest rates. However, see Item 1A. Risk Factors in our Annual Report on Form 10-K for the fiscal year ended December 25, 2010 and Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations – Our Business Risks in our Current Report on Form 8-K dated March 31, 2011 for certain factors that may impact our operating cash flows.

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Report of Independent Registered Public Accounting Firm

The Board of Directors and Shareholders

PepsiCo, Inc.:

We have reviewed the accompanying Condensed Consolidated Balance Sheet of PepsiCo, Inc. and Subsidiaries as of June 11, 2011, the related Condensed Consolidated Statements of Income and Comprehensive Income for the twelve and twenty-four weeks ended June 11, 2011 and June 12, 2010, and the Condensed Consolidated Statements of Cash Flows and Equity for the twenty-four weeks ended June 11, 2011 and June 12, 2010. These interim condensed consolidated financial statements are the responsibility of PepsiCo, Inc.’s management.

We conducted our review in accordance with the standards of the Public Company Accounting Oversight Board (United States). A review of interim financial information consists principally of applying analytical procedures and making inquiries of persons responsible for financial and accounting matters. It is substantially less in scope than an audit conducted in accordance with the standards of the Public Company Accounting Oversight Board (United States), the objective of which is the expression of an opinion regarding the financial statements taken as a whole. Accordingly, we do not express such an opinion.

Based on our review, we are not aware of any material modifications that should be made to the accompanying interim condensed consolidated financial statements referred to above for them to be in conformity with U.S. generally accepted accounting principles.

We have previously audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States), the Consolidated Balance Sheet of PepsiCo, Inc. and Subsidiaries as of December 25, 2010, and the related Consolidated Statements of Income, Cash Flows and Equity for the fiscal year then ended not presented herein; and in our report dated February 18, 2011, except for notes 1, 3 and 4, which are as of March 31, 2011, we expressed an unqualified opinion on those consolidated financial statements. In our opinion, the information set forth in the accompanying Condensed Consolidated Balance Sheet as of December 25, 2010, is fairly stated, in all material respects, in relation to the Consolidated Balance Sheet from which it has been derived.

/s/ KPMG LLP

New York, New York

July 21, 2011

48

ITEM 3. Quantitative and Qualitative Disclosures About Market Risk.

See “Management’s Discussion and Analysis of Financial Condition and Results of Operations – Our Business Risks” and Financial Instruments in the notes to the condensed consolidated financial statements. In addition, see Item 1A. Risk Factors in our Annual Report on Form 10-K for the fiscal year ended December 25, 2010 and Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations – Our Business Risks included in Exhibit 99.1 to our Current Report on Form 8-K dated March 31, 2011.

ITEM 4. Controls and Procedures.

As of the end of the period covered by this report, we carried out an evaluation, under the supervision and with the participation of our management, including our Chief Executive Officer and Chief Financial Officer, of the effectiveness of the design and operation of our disclosure controls and procedures, as such term is defined in Rules 13a-15(e) and 15d-15(e) of the Exchange Act. Based upon that evaluation, our Chief Executive Officer and Chief Financial Officer concluded that as of the end of the period covered by this report our disclosure controls and procedures were effective to ensure that information required to be disclosed by us in reports we file or submit under the Exchange Act is (1) recorded, processed, summarized and reported within the time periods specified in Securities and Exchange Commission rules and forms, and (2) accumulated and communicated to our management, including our Chief Executive Officer and Chief Financial Officer, to allow timely decisions regarding required disclosure.

During our second fiscal quarter of 2011, we continued migrating certain of our financial processing systems to an enterprise-wide systems solution. These systems implementations are part of our ongoing global business transformation initiative, and we plan to continue implementing such systems throughout other parts of our businesses over the course of the next few years. In connection with these implementations and resulting business process changes, we continue to enhance the design and documentation of our internal control processes to ensure suitable controls over our financial reporting.

Except as described above, there were no changes in our internal control over financial reporting during our second fiscal quarter of 2011 that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.

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PART II OTHER INFORMATION

ITEM 1. Legal Proceedings.

The following information supplements and amends the discussion set forth under Part I, Item 3 “Legal Proceedings” in our Annual Report on Form 10-K for the fiscal year ended December 25, 2010, as updated by our Quarterly Report on Form 10-Q for the quarter ended March 19, 2011.

On May 8, 2011, Kozep-Duna-Volgyi Kornyezetvedelmi, Termeszetvedelmi es Vizugyi Felugyeloseg (Budapest), the regional Hungarian governmental authority, notified our subsidiary, Fovarosi Asvanyviz- es Uditoipari Zrt., that it assessed monetary sanctions of approximately $220,000 for alleged violation of applicable wastewater discharge standards in 2010. Fovarosi Asvanyviz- es Uditoipari Zrt. appealed this decision, and the appeal is pending.

In addition, we and our subsidiaries are party to a variety of other legal proceedings arising in the normal course of business. While the results of these proceedings cannot be predicted with certainty, management believes that the final outcome of these proceedings will not have a material adverse effect on our consolidated financial statements, results of operations or cash flows.

ITEM 1A. Risk Factors.

There have been no material changes with respect to the risk factors disclosed in our Annual Report on Form 10-K for the fiscal year ended December 25, 2010.

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ITEM 2. Unregistered Sales of Equity Securities and Use of Proceeds.

A summary of our common stock repurchases (in millions, except average price per share) during the second quarter under the $15.0 billion repurchase program authorized by our Board of Directors and publicly announced on March 15, 2010, and expiring on June 30, 2013, is set forth in the following table. All such shares of common stock were repurchased pursuant to open market transactions, other than 68,900 shares of common stock which were repurchased pursuant to a privately negotiated block trade transaction.

Issuer Purchases of Common Stock

Period	Total Number of Shares Repurchased		Average Price Paid Per Share		Total Number of Shares Purchased as Part of Publicly Announced Plans or Programs		Maximum Number (or Approximate Dollar Value) of Shares that may Yet Be Purchased Under the Plans or Programs
3/19/11							$	13,123
3/20/10 – 4/16/11		2.1	$	65.18		2.1		(137	)
								12,986
4/17/11 – 5/14/11		1.0	$	67.66		1.0		(70	)
								12,916
5/15/11 – 6/11/11		2.8	$	69.53		2.8		(191	)
Total		5.9	$	67.65		5.9	$	12,725

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PepsiCo also repurchases shares of its convertible preferred stock from an employee stock ownership plan (ESOP) fund established by Quaker in connection with share redemptions by ESOP participants. The following table summarizes our convertible preferred share repurchases during the second quarter.

Issuer Purchases of Convertible Preferred Stock

Period	Total Number of Shares Repurchased		Average Price Paid per Share		Total Number of Shares Purchased as Part of Publicly Announced Plans or Programs	Maximum Number (or Approximate Dollar Value) of Shares that may Yet Be Purchased Under the Plans or Programs
3/19/11
3/20/11 – 4/16/11		2,600	$	330.87	N/A	N/A
4/17/11 – 5/14/11		1,800	$	347.52	N/A	N/A
5/14/11 – 6/11/11		2,300	$	342.71	N/A	N/A
Total		6,700	$	339.41	N/A	N/A

ITEM 4. (Removed and Reserved).

ITEM 6. Exhibits

See Index to Exhibits on page 54.

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SIGNATURES

Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.

	PepsiCo, Inc.
	(Registrant)
Date:    July 21, 2011	/s/ Marie T. Gallagher
	Marie T. Gallagher
	Senior Vice President and Controller
Date:    July 21, 2011	/s/ Thomas H. Tamoney, Jr.
	Thomas H. Tamoney, Jr. Senior Vice President, Deputy General Counsel and Assistant Secretary (Duly Authorized Officer)

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INDEX TO EXHIBITS

ITEM 6

EXHIBITS
Exhibit 2.1	Agreement and Plan of Merger dated as of August 3, 2009, among PepsiCo, Inc., The Pepsi Bottling Group, Inc. and Pepsi-Cola Metropolitan Bottling Company, Inc. (the schedules have been omitted pursuant to Item 601(b)(2) of Regulation S-K), which is incorporated herein by reference to Exhibit 2.1 to PepsiCo’s Current Report on Form 8-K dated August 3, 2009.
Exhibit 2.2	Agreement and Plan of Merger dated as of August 3, 2009, among PepsiCo, Inc., PepsiAmericas, Inc. and Pepsi-Cola Metropolitan Bottling Company, Inc. (the schedules have been omitted pursuant to Item 601(b)(2) of Regulation S-K), which is incorporated herein by reference to Exhibit 2.2 to PepsiCo’s Current Report on Form 8-K dated August 3, 2009.
Exhibit 2.3	Purchase Agreement dated as of December 1, 2010 among PepsiCo, Inc., Pepsi-Cola (Bermuda) Limited, Gavril A. Yushvaev, David Iakobachvili, Mikhail V. Dubinin, Sergei A. Plastinin, Alexander S. Orlov, Mikhail I. Vishnaykov, Aladaro Limited, Tony D. Maher, Dmitry Ivanov, Wimm Bill Dann Finance Cyprus Ltd. and Wimm-Bill-Dann Finance Co. Ltd. (the schedules have been omitted pursuant to Item 601(b)(2) of Regulation S-K), which is incorporated herein by reference to Exhibit 2.1 to PepsiCo’s Current Report on Form 8-K dated December 1, 2010.
Exhibit 3.1	Articles of Incorporation of PepsiCo, Inc., as amended and restated, effective as of May 9, 2011, which are incorporated herein by reference to Exhibit 3.1 to PepsiCo, Inc.’s Current Report on Form 8-K dated May 3, 2011.
Exhibit 3.2	By-laws of PepsiCo, Inc., as amended, effective as of July 14, 2011, which are incorporated herein by reference to Exhibit 3.2 to PepsiCo, Inc.’s Current Report on Form 8-K dated July 14, 2011.
Exhibit 4.1	Form of Floating Rate Note due 2013, which is incorporated herein by reference to Exhibit 4.1 to PepsiCo’s Current Report on Form 8-K dated May 3, 2011.
Exhibit 4.2	Form of 2.500% Senior Note due 2016, which is incorporated herein by reference to Exhibit 4.2 to PepsiCo’s Current Report on Form 8-K dated May 3, 2011.
Exhibit 4.3	Board of Directors Resolutions Authorizing PepsiCo’s Officers to Establish the Terms of the Floating Rate Notes due 2013 and the 2.500% Senior Notes due 2016, which is incorporated herein by reference to Exhibit 4.3 to PepsiCo’s Current Report on Form 8-K dated May 3, 2011.

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Exhibit 10.1	U.S. $2,875,000,000 Four-Year Credit Agreement, dated as of June 14, 2011, among PepsiCo, Inc., as Borrower, the lenders named therein, and Citibank, N.A., as Administrative Agent, which is incorporated by reference to Exhibit 10.1 to PepsiCo, Inc.’s Current Report on Form 8-K dated June 14, 2011.
Exhibit 12	Computation of Ratio of Earnings to Fixed Charges.
Exhibit 15	Letter re: Unaudited Interim Financial Information.
Exhibit 24	Power of Attorney executed by Indra K. Nooyi, Hugh F. Johnston, Peter A. Bridgman, Shona L. Brown, Ian M. Cook, Dina Dublon, Victor J. Dzau, Ray L. Hunt, Alberto Ibargüen, Arthur C. Martinez, Sharon Percy Rockefeller, James J. Schiro, Lloyd G. Trotter and Daniel Vasella, which is incorporated herein by reference to Exhibit 24 to PepsiCo’s Current Report on Form 8-K dated May 3, 2010.
Exhibit 31	Certifications of Chief Executive Officer and Chief Financial Officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.
Exhibit 32	Certifications of Chief Executive Officer and Chief Financial Officer pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.
Exhibit 101	The following materials from PepsiCo, Inc.’s Quarterly Report on Form 10-Q for the quarter ended June 11, 2011 formatted in XBRL (eXtensible Business Reporting Language): (i) the Condensed Consolidated Statement of Income, (ii) the Condensed Consolidated Statement of Cash Flows, (iii) the Condensed Consolidated Balance Sheet, (iv) the Condensed Consolidated Statement of Equity, (v) the Condensed Consolidated Statement of Comprehensive Income, and (vi) notes to the condensed consolidated financial statements.

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EX-12

EXHIBIT 12

PEPSICO, INC. AND SUBSIDIARIES

Computation of Ratio of Earnings to Fixed Charges

(in millions except ratio amounts, unaudited)

	24 Weeks Ended
	6/11/11			6/12/10
Earnings:
Income before income taxes	$	4,138		$	3,701
Unconsolidated affiliates interests, net		(35	)		22
Amortization of capitalized interest		1			2
Interest expense (a)		379			326
Interest portion of rent expense (b)		86			67
Earnings available for fixed charges	$	4,569		$	4,118
Fixed Charges:
Interest expense (a)	$	379		$	326
Capitalized interest		5			3
Interest portion of rent expense (b)		86			67
Total fixed charges	$	470		$	396
Ratio of Earnings to Fixed Charges (c)		9.73			10.41

^(a)  Excludes interest related to our reserves for income taxes as such interest is included in provision for income taxes.

^(b)  One-third of net rent expense is the portion deemed representative of the interest factor.

^(c)  Based on unrounded amounts.

EX-15

EXHIBIT 15

Accountant’s Acknowledgement

The Board of Directors and Shareholders

PepsiCo, Inc.:

We hereby acknowledge our awareness of the use of our report dated July 21, 2011 included within the Quarterly Report on Form 10-Q of PepsiCo, Inc. for the twelve and twenty-four weeks ended June 11, 2011, and incorporated by reference in the following Registration Statements and in the related Prospectuses:

Description, Registration Statement Number

Form S-3

- PepsiCo Automatic Shelf Registration Statement, 333-154314

- PepsiAmericas, Inc. 2000 Stock Incentive Plan, 333-165176

- PBG 2004 Long Term Incentive Plan, PBG 2002 Long Term Incentive Plan, PBG Long Term Incentive Plan, The Pepsi Bottling Group, Inc. 1999 Long Term Incentive Plan and PBG Stock Incentive Plan, 333-165177

Form S-8

- The PepsiCo 401(k) Plan for Hourly Employees, 333-150868

- The PepsiCo 401(k) Plan for Salaried Employees, 333-150867

- PepsiCo, Inc. 2007 Long-Term Incentive Plan, 333-142811, 333-166740

- PepsiCo, Inc. 2003 Long-Term Incentive Plan, 333-109509

- PepsiCo SharePower Stock Option Plan, 33-35602, 33-29037, 33-42058, 33-51496, 33-54731, 33-66150 and 333-109513

- Director Stock Plan, 33-22970 and 333-110030

- 1979 Incentive Plan and the 1987 Incentive Plan, 33-19539

- 1994 Long-Term Incentive Plan, 33-54733

- PepsiCo, Inc. 1995 Stock Option Incentive Plan, 33-61731, 333-09363 and 333-109514

- 1979 Incentive Plan, 2-65410

- PepsiCo, Inc. Long Term Savings Program, 2-82645, 33-51514 and 33-60965

- PepsiCo 401(k) Plan, 333-89265

- Retirement Savings and Investment Plan for Union Employees of Tropicana Products, Inc. and Affiliates and the Retirement Savings and Investment Plan for Union Employees of Tropicana Products, Inc. and Affiliates (Teamster Local Union #173), 333-65992

- The Quaker Long Term Incentive Plan of 1990, The Quaker Long Term Incentive Plan of 1999 and The Quaker Oats Company Stock Option Plan for Outside Directors, 333-66632

- The Quaker 401(k) Plan for Salaried Employees and The Quaker 401(k) Plan for Hourly Employees, 333-66634

- The PepsiCo 401(k) Plan for Salaried Employees, 333-76196

- The PepsiCo 401(k) Plan for Hourly Employees, 333-76204

- The PepsiCo Share Award Plan, 333-87526

- PBG 401(k) Savings Program, PBG 401(k) Program, PepsiAmericas, Inc. Salaried 401(k) Plan and PepsiAmericas, Inc. Hourly 401(k) Plan, 333-165106

- PBG 2004 Long Term Incentive Plan, PBG 2002 Long Term Incentive Plan, PBG Long Term Incentive Plan, The Pepsi Bottling Group, Inc. 1999 Long Term Incentive Plan, PBG Directors’ Stock Plan, PBG Stock Incentive Plan and PepsiAmericas, Inc. 2000 Stock Incentive Plan, 333-165107

Pursuant to Rule 436 (c) under the Securities Act of 1933 (the “Act”), such report is not considered part of a registration statement prepared or certified by an independent registered public accounting firm, or a report prepared or certified by an independent registered public accounting firm within the meaning of Sections 7 and 11 of the Act.

/s/ KPMG LLP

New York, New York

July 21, 2011

EX-31

EXHIBIT 31

CERTIFICATION

I, Indra K. Nooyi, certify that:

1. I have reviewed this quarterly report on Form 10-Q of PepsiCo, Inc.;

2. Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;

3. Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;

4. The registrant’s other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:

a) Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;

b) Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;

c) Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and

d) Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and

5. The registrant’s other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of the registrant’s board of directors (or persons performing the equivalent functions):

a) All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and

b) Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting.

Date: July 21, 2011	/s/ Indra K. Nooyi
	Indra K. Nooyi
	Chairman of the Board of Directors and Chief Executive Officer

CERTIFICATION

I, Hugh F. Johnston, certify that:

1. I have reviewed this quarterly report on Form 10-Q of PepsiCo, Inc.;

2. Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;

3. Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;

4. The registrant’s other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:

a) Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;

b) Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;

c) Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and

d) Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and

5. The registrant’s other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of the registrant’s board of directors (or persons performing the equivalent functions):

a) All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and

b) Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting.

Date: July 21, 2011	/s/ Hugh F. Johnston
	Hugh F. Johnston
	Chief Financial Officer

EX-32

EXHIBIT 32

CERTIFICATION PURSUANT TO

SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002

In connection with the Quarterly Report of PepsiCo, Inc. (the “Corporation”) on Form 10-Q for the quarterly period ended June 11, 2011 as filed with the Securities and Exchange Commission on the date hereof (the “Report”), I, Indra K. Nooyi, Chairman of the Board of Directors and Chief Executive Officer of the Corporation, certify to my knowledge, pursuant to Section 906 of the Sarbanes-Oxley Act of 2002 (18 U.S.C. Section 1350), that:

1. The Report fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934; and

2. The information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Corporation.

Date: July 21, 2011	/s/ Indra K. Nooyi
	Indra K. Nooyi
	Chairman of the Board of Directors and Chief Executive Officer

CERTIFICATION PURSUANT TO

SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002

In connection with the Quarterly Report of PepsiCo, Inc. (the “Corporation”) on Form 10-Q for the quarterly period ended June 11, 2011 as filed with the Securities and Exchange Commission on the date hereof (the “Report”), I, Hugh F. Johnston, Chief Financial Officer of the Corporation, certify to my knowledge, pursuant to Section 906 of the Sarbanes-Oxley Act of 2002 (18 U.S.C. Section 1350), that:

1. The Report fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934; and

2. The information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Corporation.

Date: July 21, 2011	/s/ Hugh F. Johnston
	Hugh F. Johnston
	Chief Financial Officer

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Document and Entity Information	6 Months Ended
	Jun. 11, 2011	Jul. 15, 2011
Document and Entity Information
Document Type	10-Q
Amendment Flag	false
Document Period End Date	Jun. 11, 2011
Document Fiscal Year Focus	2011
Document Fiscal Period Focus	Q2
Trading Symbol	PEP
Entity Registrant Name	PEPSICO INC
Entity Central Index Key	0000077476
Current Fiscal Year End Date	--12-31
Entity Filer Category	Large Accelerated Filer
Entity Common Stock, Shares Outstanding		1,582,605,338

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Acquisitions

6 Months Ended

Jun. 11, 2011

Acquisitions

Acquisitions

Acquisitions

PBG and PAS

On February 26, 2010, we acquired PBG and PAS to create a more fully integrated supply chain and go-to-market business model, improving the effectiveness and efficiency of the distribution of our brands and enhancing our revenue growth. The total purchase price was approximately $12.6 billion, which included $8.3 billion of cash and equity and the fair value of our previously held equity interests in PBG and PAS of $4.3 billion. The acquisitions were accounted for as business combinations, and, accordingly, the identifiable assets acquired and liabilities assumed were recorded at their estimated fair values at the date of acquisition. Our fair market valuations of the identifiable assets acquired and liabilities assumed have been completed and the final valuations did not materially differ from those fair values reported as of December 25, 2010.

The following table presents unaudited consolidated pro forma financial information as if the closing of our acquisitions of PBG and PAS had occurred on December 27, 2009 for purposes of the financial information presented for the 24 weeks ended June 12, 2010.

	(unaudited) 24 Weeks Ended
	6/12/10
Net Revenue	$	25,913
Net Income Attributable to PepsiCo	$	2,569
Net Income Attributable to PepsiCo per Common Share – Diluted	$	1.56

The unaudited consolidated pro forma financial information was prepared in accordance with the acquisition method of accounting under existing standards, and the regulations of the U.S. Securities and Exchange Commission, and is not necessarily indicative of the results of operations that would have occurred if our acquisitions of PBG and PAS had been completed on the date indicated, nor is it indicative of the future operating results of PepsiCo.

The historical unaudited consolidated financial information has been adjusted to give effect to pro forma events that are (1) directly attributable to the acquisitions, (2) factually supportable, and (3) expected to have a continuing impact on the combined results of PepsiCo, PBG and PAS.

The unaudited pro forma results have been adjusted with respect to certain aspects of our acquisitions of PBG and PAS to reflect:

• the consummation of the acquisitions;

• consolidation of PBG and PAS which are now owned 100% by PepsiCo and the corresponding gain resulting from the remeasurement of our previously held equity interests in PBG and PAS;

• the elimination of related party transactions between PepsiCo and PBG, and PepsiCo and PAS;

• changes in assets and liabilities to record their acquisition date fair values and changes in certain expenses resulting therefrom; and

• additional indebtedness, including, but not limited to, debt issuance costs and interest expense, incurred in connection with the acquisitions.

The unaudited pro forma results do not reflect future events that either have occurred or may occur after the acquisitions, including, but not limited to, the anticipated realization of ongoing savings from operating synergies in subsequent periods. They also do not give effect to certain one-time charges we expect to incur in connection with the acquisitions, including, but not limited to, charges that are expected to achieve ongoing cost savings and synergies.

WBD

On February 3, 2011, we acquired the ordinary shares, including shares underlying American Depositary Shares (ADSs) and Global Depositary Shares (GDSs), of WBD, a company incorporated in the Russian Federation, which represented in the aggregate approximately 66% of WBD's outstanding ordinary shares, pursuant to the purchase agreement dated December 1, 2010 between PepsiCo and certain selling shareholders of WBD for approximately $3.8 billion in cash. The acquisition of those shares increased our total ownership of WBD to approximately 77%. Under the guidance on accounting for business combinations, the total consideration transferred was approximately $5.8 billion, which included the $3.8 billion of cash (or $2.4 billion, net of cash and cash equivalents acquired), the fair value of our previously held equity interest in WBD of $0.7 billion and the fair value of the remaining noncontrolling interests in WBD of $1.3 billion. The preliminary estimates of the fair value of the identifiable assets acquired and liabilities assumed in WBD as of the acquisition date include goodwill and other intangible assets of $4.9 billion; property, plant and equipment of $1.3 billion; debt obligations of $1.1 billion; and other net assets of $0.7 billion, all of which are recorded in our Europe segment. The preliminary estimates of the fair value of identifiable assets acquired and liabilities assumed are subject to revisions, which may result in adjustments to the preliminary values discussed above as valuations are finalized. We expect to finalize these amounts as soon as possible but no later than by the end of 2011.

Under the guidance on accounting for business combinations, merger and integration costs are not included as components of consideration transferred but are accounted for as expenses in the period in which the costs are incurred. See Merger and Integration Charges for details on the expenses incurred during 2011.

On March 10, 2011, we commenced our tender offers in Russia and the U.S. for all remaining outstanding ordinary shares and ADSs of WBD for 3,883.70 Russian rubles per ordinary share and 970.925 Russian rubles per ADS, respectively. The Russian offer was made to all holders of ordinary shares and the U.S. offer was made to all holders of ADSs. We completed the Russian offer on May 19, 2011 and the U.S. offer on May 16, 2011. After completion of the offers, we paid approximately $1.3 billion for WBD's ordinary shares (including shares underlying ADSs) and increased our total ownership of WBD to approximately 98.6%.

On June 30, 2011, we elected to exercise our squeeze-out rights under Russian law with respect to all remaining WBD ordinary shares not already owned by us. Therefore, under Russian law, all remaining WBD shareholders will be required to sell their ordinary shares (including those underlying ADSs) to us at the same price that was offered to WBD shareholders in the Russian tender offer. Accordingly, all registered holders of ordinary shares on August 15, 2011 (including the ADS depository) will be entitled to receive 3,883.70 Russian rubles per ordinary share. The ADS depository will convert the Russian rubles paid to it with respect to the ordinary shares underlying the ADSs (970.925 Russian rubles per ADS) to U.S. dollars at the spot market conversion rates available to it during the period it takes to complete such conversion. The squeeze-out process is expected to be concluded by mid-September 2011, after which time we expect to own 100% of WBD.

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Intangible Assets

6 Months Ended

Jun. 11, 2011

Intangible Assets

Intangible Assets

Intangible Assets

	6/11/11			12/25/10
Amortizable intangible assets, net
Acquired franchise rights	$	974		$	949
Reacquired franchise rights		110			110
Brands		1,543			1,463
Other identifiable intangibles		1,170			747
		3,797			3,269
Accumulated amortization		(1,317	)		(1,244	)
	$	2,480		$	2,025

The change in the book value of nonamortizable intangible assets is as follows:

	Balance 12/25/10		Acquisitions		Translation and Other		Balance 6/11/11
FLNA
Goodwill	$	313	$	–	$	6	$	319
Brands		31		–		1		32
		344		–		7		351
QFNA
Goodwill		175		–		–		175
LAF
Goodwill		497		–		13		510
Brands		143		–		4		147
		640		–		17		657
PAB
Goodwill		9,946		26		22		9,994
Reacquired franchise rights		7,283		20		38		7,341
Acquired franchise rights		1,565		–		3		1,568
Brands		182		8		5		195
Other		10		–		1		11
		18,986		54		69		19,109
Europe(a)
Goodwill		3,040		1,228		314		4,582
Reacquired franchise rights		793		–		62		855
Acquired franchise rights		227		–		19		246
Brands		1,380		3,300		296		4,976
		5,440		4,528		691		10,659
AMEA
Goodwill		690		–		29		719
Brands		169		–		8		177
		859		–		37		896
Total goodwill		14,661		1,254		384		16,299
Total reacquired franchise rights		8,076		20		100		8,196
Total acquired franchise rights		1,792		–		22		1,814
Total brands		1,905		3,308		314		5,527
Total other		10		–		1		11
	$	26,444	$	4,582	$	821	$	31,847

^(a)  Net increases in 2011 relate primarily to our acquisition of WBD.

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Stock-Based Compensation

6 Months Ended

Jun. 11, 2011

Stock-Based Compensation

Stock-Based Compensation

Stock-Based Compensation

For the 12 weeks ended June 11, 2011, we recognized stock-based compensation expense of $76 million ($74 million recorded as stock-based compensation expense and $2 million included in merger and integration charges). For the 24 weeks ended June 11, 2011, we recognized stock-based compensation expense of $155 million ($146 million recorded as stock-based compensation expense and $9 million included in merger and integration charges). For the 12 weeks ended June 12, 2010, we recognized stock-based compensation expense of $85 million ($72 million recorded as stock-based compensation expense and $13 million included in merger and integration charges). For the 24 weeks ended June 12, 2010, we recognized stock-based compensation expense of $159 million ($119 million recorded as stock-based compensation expense and $40 million included in merger and integration charges).

For the 12 weeks ended June 11, 2011, our grants of stock options and restricted stock units (RSU) were nominal. For the 24 weeks ended June 11, 2011, we granted 6.4 million stock options at a weighted-average grant price of $63.78 and 5.2 million RSUs at a weighted-average grant price of $63.81, under the terms of our 2007 Long-Term Incentive Plan. For the 12 and 24 weeks ended June 12, 2010, we granted 12.0 million stock options and 4.6 million RSUs at weighted-average grant prices of $66.50 and $66.46, respectively, under the terms of our 2007 Long-Term Incentive Plan.

Our weighted-average Black-Scholes fair value assumptions are as follows:

	24 Weeks Ended
	6/11/11			6/12/10
Expected life		6 yrs.			5 yrs.
Risk free interest rate		2.6	%		2.3	%
Expected volatility(a)		16	%		17	%
Expected dividend yield		2.9	%		2.8	%

^(a)  Reflects movements in our stock price over the most recent historical period equivalent to the expected life.

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Pension and Retiree Medical Benefits

6 Months Ended

Jun. 11, 2011

Pension and Retiree Medical Benefits

Pension and Retiree Medical Benefits

Pension and Retiree Medical Benefits

The components of net periodic benefit cost for pension and retiree medical plans are as follows:

	12 Weeks Ended
	Pension												Retiree Medical
	6/11/11			6/12/10			6/11/11			6/12/10			6/11/11			6/12/10
	U.S.						International
Service cost	$	80		$	69		$	23		$	19		$	11		$	14
Interest cost		126			120			28			26			21			23
Expected return on plan assets		(162	)		(150	)		(33	)		(31	)		(4	)		–
Amortization of prior service cost/(benefit)		4			2			1			1			(6	)		(4	)
Amortization of experience loss		34			25			9			6			3			1
		82			66			28			21			25			34
Settlement/Curtailment gain		–			(2	)		–			–			–			–
Special termination benefits		–			15			–			–			–			1
Total expense	$	82		$	79		$	28		$	21		$	25		$	35
	24 Weeks Ended
	Pension												Retiree Medical
	6/11/11			6/12/10			6/11/11			6/12/10			6/11/11			6/12/10
	U.S.						International
Service cost	$	162		$	130		$	40		$	33		$	23		$	26
Interest cost		252			218			49			44			41			43
Expected return on plan assets		(324	)		(275	)		(57	)		(53	)		(7	)		–
Amortization of prior service cost/(benefit)		7			5			1			1			(13	)		(8	)
Amortization of experience loss		67			50			16			10			6			2
		164			128			49			35			50			63
Settlement/Curtailment gain		(9	)		(2	)		–			–			–			–
Special termination benefits		10			23			–			–			1			1
Total expense	$	165		$	149		$	49		$	35		$	51		$	64

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Income Taxes

6 Months Ended

Jun. 11, 2011

Income Taxes

Income Taxes

Income Taxes

A rollforward of our reserves for all federal, state and foreign tax jurisdictions, is as follows:

	6/11/11			12/25/10
Balance, beginning of year	$	2,022		$	1,731
Additions for tax positions related to the current year		85			204
Additions for tax positions from prior years		4			517
Reductions for tax positions from prior years		(54	)		(391	)
Settlement payments		(87	)		(30	)
Statute of limitations expiration		(5	)		(7	)
Translation and other		(2	)		(2	)
Balance, end of period	$	1,963		$	2,022

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Net Income Attributable to PepsiCo per Common Share

6 Months Ended

Jun. 11, 2011

Net Income Attributable to PepsiCo per Common Share

Net Income Attributable to PepsiCo per Common Share

Net Income Attributable to PepsiCo per Common Share

The computations of basic and diluted net income attributable to PepsiCo per common share are as follows:

	12 Weeks Ended
	6/11/11					6/12/10
	Income			Shares (a)		Income			Shares (a)
Net income attributable to PepsiCo	$	1,885				$	1,603
Preferred shares:
Dividends		(1	)				(1	)
Redemption premium		(1	)				(1	)
Net income available for PepsiCo common shareholders	$	1,883			1,583	$	1,601			1,608
Basic net income attributable to PepsiCo per common share	$	1.19				$	1.00
Net income available for PepsiCo common shareholders	$	1,883			1,583	$	1,601			1,608
Dilutive securities:
Stock options and RSUs(b)		–			21		–			25
ESOP convertible preferred stock		2			1		2			1
Diluted	$	1,885			1,605	$	1,603			1,634
Diluted net income attributable to PepsiCo per common share	$	1.17				$	0.98
	24 Weeks Ended
	6/11/11					6/12/10
	Income			Shares (a)		Income			Shares (a)
Net income attributable to PepsiCo	$	3,028				$	3,033
Preferred shares:
Dividends		(1	)				(1	)
Redemption premium		(3	)				(2	)
Net income available for PepsiCo common shareholders	$	3,024			1,583	$	3,030			1,595
Basic net income attributable to PepsiCo per common share	$	1.91				$	1.90
Net income available for PepsiCo common shareholders	$	3,024			1,583	$	3,030			1,595
Dilutive securities:
Stock options and RSUs(b)		–			21		–			24
ESOP convertible preferred stock		4			1		3			1
Diluted	$	3,028			1,605	$	3,033			1,620
Diluted net income attributable to PepsiCo per common share	$	1.89				$	1.87

^(a) Weighted-average common shares outstanding (in millions).

^(b) Options to purchase 10.1 million and 20.7 million shares, respectively, for the 12 and 24 weeks in 2011 were not included in the calculation of earnings per share because these options were out-of-the-money. These out-of-the-money options had average exercise prices of $68.88 and $67.35, respectively. Options to purchase 22.9 million and 21.8 million shares, respectively, for the 12 and 24 weeks in 2010 were not included in the calculation of earnings per share because these options were out-of-the-money. Out-of-the-money options for the 12 and 24 weeks in 2010 had average exercise prices of $67.60 and $67.33, respectively.

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Debt Obligations and Commitments

6 Months Ended

Jun. 11, 2011

Debt Obligations and Commitments

Debt Obligations and Commitments

Debt Obligations and Commitments

In the second quarter of 2011, we issued $750 million of floating rate notes maturing in 2013, which bear interest at a rate equal to the three-month London Inter-Bank Offered Rate (LIBOR) plus 8 basis points, and $1.0 billion of 2.50% senior notes maturing in 2016. The net proceeds from the issuance of these notes were used for general corporate purposes.

Subsequent to the end of the second quarter of 2011, we entered into a new four-year unsecured revolving credit agreement (Four-Year Credit Agreement) which enables us to borrow up to $2.875 billion, subject to customary terms and conditions, and expires in June 2015. We may request to increase the commitments under this agreement to up to $3.5 billion. Additionally, we may, once a year, request renewal of the agreement for an additional one-year period.

Also, subsequent to the end of the second quarter of 2011, we entered into a new 364-day unsecured revolving credit agreement (364-Day Credit Agreement) which enables us to borrow up to $2.875 billion, subject to customary terms and conditions, and expires in June 2012. We may request to increase the commitments under this agreement to up to $3.5 billion. We may request renewal of this facility for an additional 364-day period or convert any amounts outstanding into a term loan for a period of up to one year, which would mature no later than June 2013.

The Four-Year Credit Agreement and the 364-Day Credit Agreement, together replaced our $2 billion unsecured revolving credit agreement, our $2.575 billion 364-day unsecured revolving credit agreement and our $1.080 billion amended PBG credit facility. Funds borrowed under the Four-Year Credit Agreement and the 364-Day Credit Agreement may be used for general corporate purposes, including but not limited to repayment of outstanding commercial paper issued by us and our subsidiaries, working capital, capital investments and/or acquisitions.

Subsequent to the end of the second quarter of 2011, we paid $784 million in a cash tender offer to repurchase $766 million (aggregate principal amount) of certain WBD debt obligations. As a result of this debt repurchase, we will record a $16 million charge to interest expense in the third quarter, primarily representing the premium paid in the tender offer.

As of June 11, 2011, we had $2.2 billion of commercial paper outstanding.

Long-Term Contractual Commitments^(a)

Payments Due by Period
	Total		2011		2012 – 2013		2014 – 2015		2016 and beyond
Long-term debt obligations(b)	$	21,016	$	–	$	5,167	$	4,353	$	11,496
Interest on debt obligations(c)		7,556		467		1,574		1,125		4,390
Operating leases		1,901		253		678		406		564
Purchasing commitments		3,496		931		2,077		406		82
Marketing commitments		2,555		102		562		543		1,348
	$	36,524	$	1,753	$	10,058	$	6,833	$	17,880

^(a) Reflects non-cancelable commitments as of June 11, 2011 based on foreign exchange rates in effect on that date and excludes any reserves for uncertain tax positions as we are unable to reasonably predict the ultimate amount or timing of settlement.

^(b) Excludes $2.4 billion related to current maturities of long-term debt, as well as $591 million related to the fair value step-up of debt acquired in connection with our acquisitions of PBG and PAS.

^(c)  Interest payments on floating-rate debt are estimated using interest rates effective as of June 11, 2011.

Most long-term contractual commitments, except for our long-term debt obligations, are not recorded on our balance sheet. Non-cancelable operating leases primarily represent building leases. Non-cancelable purchasing commitments are primarily for packaging materials, sugar and other sweeteners, oranges and orange juice. Non-cancelable marketing commitments are primarily for sports marketing. Bottler funding to independent bottlers is not reflected in our long-term contractual commitments as it is negotiated on an annual basis. Accrued liabilities for pension and retiree medical plans are not reflected in our long-term contractual commitments because they do not represent expected future cash outflows. See Pension and Retiree Medical Benefits for additional information regarding our pension and retiree medical obligations.

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Merger and Integration Charges

6 Months Ended

Jun. 11, 2011

Merger and Integration Charges

Merger and Integration Charges

Merger and Integration Charges

In the 12 weeks ended June 11, 2011, we incurred merger and integration charges of $58 million ($45 million after-tax or $0.03 per share) related to our acquisitions of PBG, PAS and WBD, including $32 million recorded in the PAB segment, $14 million recorded in the Europe segment and $12 million recorded in corporate unallocated expenses. In the 24 weeks ended June 11, 2011, we incurred merger and integration charges of $113 million ($94 million after-tax or $0.06 per share) related to our acquisitions of PBG, PAS and WBD, including $53 million recorded in the PAB segment, $6 million recorded in the Europe segment and $54 million recorded in corporate unallocated expenses. All of these net charges were recorded in selling, general and administrative expenses. These charges also include closing costs and advisory fees related to our acquisition of WBD. Substantially all cash payments related to the above charges are expected to be paid by the end of 2011.

In the 12 weeks ended June 12, 2010, we incurred merger and integration charges of $155 million related to our acquisitions of PBG and PAS, including $103 million recorded in the PAB segment, $28 million recorded in the Europe segment and $24 million recorded in corporate unallocated expenses. In the 24 weeks ended June 12, 2010, we incurred merger and integration charges of $467 million related to our acquisitions of PBG and PAS, including $296 million recorded in the PAB segment, $29 million recorded in the Europe segment, $112 million recorded in corporate unallocated expenses and $30 million recorded in interest expense. All of these charges, other than the interest expense portion, were recorded in selling, general and administrative expenses. These charges also include closing costs, one-time financing costs and advisory fees related to our acquisitions of PBG and PAS. In addition, in the first quarter of 2010, we recorded $9 million of charges, representing our share of the respective merger costs of PBG and PAS, in bottling equity income. Substantially all cash payments related to the above charges are expected to be paid by the end of 2011. In total, these charges had an after-tax impact of $119 million ($0.07 per share) and $380 million ($0.23 per share) for the 12 and 24 weeks ended June 12, 2010, respectively.

A summary of our merger and integration activity in 2011 is as follows:

	Severance and Other Employee Costs			Other Costs			Total
Liability as of December 25, 2010	$	179		$	25		$	204
2011 merger and integration charges		36			77			113
Cash payments		(101	)		(106	)		(207	)
Non-cash charges		(35	)		14			(21	)
Liability as of June 11, 2011	$	79		$	10		$	89

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Financial Instruments

6 Months Ended

Jun. 11, 2011

Financial Instruments

Financial Instruments

Financial Instruments

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

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

• foreign exchange risks, and

• interest rates.

In the normal course of business, we manage these risks through a variety of strategies, including the use of derivatives. Certain derivatives are designated as either cash flow or fair value hedges and qualify for hedge accounting treatment, while others do not qualify and are marked to market through earnings. Ineffectiveness of our hedges is not material. We do not use derivative instruments for trading or speculative purposes. We perform assessments of our counterparty credit risk regularly, including a review of credit ratings, credit default swap rates and potential nonperformance of the counterparty. Based on our most recent assessment of our counterparty credit risk, we consider this risk to be low. In addition, we enter into derivative contracts with a variety of financial institutions that we believe are creditworthy in order to reduce our concentration of credit risk.

Commodity Prices

We are subject to commodity price risk because our ability to recover increased costs through higher pricing may be limited in the competitive environment in which we operate. This risk is managed through the use of fixed-price purchase orders, pricing agreements, geographic diversity and derivatives. We use derivatives, with terms of no more than three years, to economically hedge price fluctuations related to a portion of our anticipated commodity purchases, primarily for natural gas, diesel fuel and aluminum. For those derivatives that qualify for hedge accounting, any ineffectiveness is recorded immediately in corporate unallocated expenses. We classify both the earnings and cash flow impact from these derivatives consistent with the underlying hedged item. During the next 12 months, we expect to reclassify net gains of $30 million related to these hedges from accumulated other comprehensive loss into net income. Derivatives used to hedge commodity price risk that do not qualify for hedge accounting are marked to market each period and reflected in our income statement.

Our open commodity derivative contracts that qualify for hedge accounting had a face value of $590 million as of June 11, 2011 and $587 million as of June 12, 2010. These contracts resulted in net unrealized gains of $61 million as of June 11, 2011 and net unrealized losses of $15 million as of June 12, 2010.

Our open commodity derivative contracts that do not qualify for hedge accounting had a face value of $356 million as of June 11, 2011 and $246 million as of June 12, 2010. These contracts resulted in net gains of $45 million as of June 11, 2011 and net losses of $14 million as of June 12, 2010.

Foreign Exchange

Financial statements of foreign subsidiaries are translated into U.S. dollars using period-end exchange rates for assets and liabilities and weighted-average exchange rates for revenues and expenses. Adjustments resulting from translating net assets are reported as a separate component of accumulated other comprehensive loss within common shareholders' equity as currency translation adjustment.

We may enter into derivatives, primarily forward contracts with terms of no more than two years, to manage our exposure to foreign currency transaction risk. Exchange rate gains or losses related to foreign currency transactions are recognized as transaction gains or losses in our income statement as incurred.

Our foreign currency derivatives had a total face value of $2.3 billion as of June 11, 2011 and $1.3 billion as of June 12, 2010. The contracts that qualify for hedge accounting resulted in net unrealized losses of $29 million as of June 11, 2011 and net unrealized gains of $5 million as of June 12, 2010. During the next 12 months, we expect to reclassify net losses of $28 million related to these hedges from accumulated other comprehensive loss into net income. The contracts that do not qualify for hedge accounting resulted in net losses of $7 million as of June 11, 2011 and net gains of $6 million as of June 12, 2010. All losses and gains were offset by changes in the underlying hedged items, resulting in no net material impact on earnings.

Interest Rates

We centrally manage our debt and investment portfolios considering investment opportunities and risks, tax consequences and overall financing strategies. We use various interest rate derivative instruments including, but not limited to, interest rate swaps, cross currency interest rate swaps, Treasury locks and swap locks to manage our overall interest expense and foreign exchange risk. These instruments effectively change the interest rate and currency of specific debt issuances. Certain of our fixed rate indebtedness has been swapped to floating rates. The notional amount, interest payment and maturity date of the interest rate and cross-currency swaps match the principal, interest payment and maturity date of the related debt. Our Treasury locks and swap locks are entered into to protect against unfavorable interest rate changes relating to forecasted debt transactions.

The notional amounts of the interest rate derivative instruments outstanding as of June 11, 2011 and June 12, 2010 were $8.73 billion and $8.60 billion, respectively. For those interest rate derivative instruments that qualify for cash flow hedge accounting, any ineffectiveness is recorded immediately. We classify both the earnings and cash flow impact from these interest rate derivative instruments consistent with the underlying hedged item. During the next 12 months, we expect to reclassify net losses of $16 million related to these hedges from accumulated other comprehensive loss into net income.

As of June 11, 2011, approximately 42% of total debt, after the impact of the related interest rate derivative instruments, was exposed to variable rates, compared to 43% as of December 25, 2010.

Fair Value Measurements

The fair values of our financial assets and liabilities as of June 11, 2011 and June 12, 2010 are categorized as follows:

	2011				2010
	Assets(a)		Liabilities(a)		Assets(a)		Liabilities(a)
Available-for-sale securities(b)	$	85	$	–	$	79	$	–
Short-term investments – index funds(c)	$	176	$	–	$	144	$	–
Deferred compensation(d)	$	–	$	547	$	–	$	554
Derivatives designated as hedging instruments:
Forward exchange contracts(e)	$	7	$	36	$	24	$	19
Interest rate derivatives(f)		345		14		268		27
Commodity contracts – other(g)		73		3		37		27
Commodity contracts – futures(h)		1		10		–		26
	$	426	$	63	$	329	$	99
Derivatives not designated as hedging instruments:
Forward exchange contracts(e)	$	8	$	15	$	12	$	6
Interest rate derivatives(f)		44		81		7		48
Commodity contracts – other(g)		47		2		5		19
Commodity contracts – futures(h)		–		–		–		1
Prepaid forward contracts(i)		41		–		61		–
	$	140	$	98	$	85	$	74
Total derivatives at fair value	$	566	$	161	$	414	$	173
Total	$	827	$	708	$	637	$	727

^(a) Financial assets are classified on our balance sheet within other assets, with the exception of short-term investments. Financial liabilities are classified on our balance sheet within other current liabilities and other liabilities. Unless specifically indicated, all financial assets and liabilities are categorized as Level 2 assets or liabilities.

^(b) Based on the price of common stock. Categorized as a Level 1 asset.

^(c) Based on price changes in index funds used to manage a portion of market risk arising from our deferred compensation liability. Categorized as a Level 1 asset.

^(d) Based on the fair value of investments corresponding to employees' investment elections. As of June 11, 2011 and June 12, 2010, $46 million and $144 million, respectively, are categorized as Level 1 liabilities. The remaining balances are categorized as Level 2 liabilities.

^(e) Based on observable market transactions of spot and forward rates.

^(f) Based on LIBOR and recently reported transactions in the marketplace.

^(g) Based on recently reported transactions in the marketplace, primarily swap arrangements.

^(h) Based on average prices on futures exchanges. Categorized as a Level 1 asset or liability.

⁽ⁱ⁾ Based primarily on the price of our common stock.

 The fair value of our debt obligations as of June 11, 2011 was $29.2 billion, based upon prices of similar instruments in the marketplace.

The effective portion of the pre-tax losses/(gains) on our derivative instruments are categorized in the tables below.

	12 Weeks Ended
	Fair Value/Non- designated Hedges						Cash Flow Hedges
	Losses/(Gains) Recognized in Income Statement(a)						Losses/(Gains) Recognized in Accumulated Other Comprehensive Loss						Losses/(Gains) Reclassified from Accumulated Other Comprehensive Loss into Income Statement(b)
		6/11/11			6/12/10			6/11/11			6/12/10			6/11/11			6/12/10
Forward exchange contracts	$	2		$	(11	)	$	12		$	(21	)	$	16		$	11
Interest rate derivatives		(56	)		(70	)		35			23			3			–
Prepaid forward contracts		(4	)		3			–			–			–			–
Commodity contracts		(7	)		3			(15	)		70			(19	)		–
Total	$	(65	)	$	(75	)	$	32		$	72		$	–		$	11
	24 Weeks Ended
	Fair Value/Non- designated Hedges						Cash Flow Hedges
	Losses/(Gains) Recognized in Income Statement(a)						Losses/(Gains) Recognized in Accumulated Other Comprehensive Loss						Losses/(Gains) Reclassified from Accumulated Other Comprehensive Loss into Income Statement(b)
		6/11/11			6/12/10			6/11/11			6/12/10			6/11/11			6/12/10
Forward exchange contracts	$	1		$	(5	)	$	37		$	(8	)	$	21		$	22
Interest rate derivatives		(78	)		(60	)		29			36			6			–
Prepaid forward contracts		(2	)		(15	)		–			–			–			–
Commodity contracts		(46	)		(43	)		(55	)		58			(25	)		16
Total	$	(125	)	$	(123	)	$	11		$	86		$	2		$	38

^(a) Interest rate gains/losses are included in interest expense in our income statement. All other gains/losses are included in corporate unallocated expenses.

^(b) Interest rate losses are included in interest expense in our income statement. All other gains/losses are included in cost of sales in our income statement.

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Recent Accounting Pronouncements

6 Months Ended

Jun. 11, 2011

Recent Accounting Pronouncements

Recent Accounting Pronouncements

Recent Accounting Pronouncements

In June 2011, the Financial Accounting Standards Board (FASB) amended its guidance on the presentation of comprehensive income in financial statements to improve the comparability, consistency and transparency of financial reporting and to increase the prominence of items that are recorded in other comprehensive income. The new accounting guidance requires entities to report components of comprehensive income in either (1) a continuous statement of comprehensive income or (2) two separate but consecutive statements. The provisions of this new guidance are effective for fiscal years, and interim periods within those years, beginning after December 15, 2011. We are currently evaluating the impact of adopting this guidance on our financial statements.

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Condensed Consolidated Statement of Income (USD $) In Millions, except Per Share data	3 Months Ended		6 Months Ended
	Jun. 11, 2011	Jun. 12, 2010	Jun. 11, 2011	Jun. 12, 2010
Condensed Consolidated Statement of Income
Net Revenue	$ 16,827	$ 14,801	$ 28,764	$ 24,169
Cost of sales	7,963	6,745	13,410	11,208
Selling, general and administrative expenses	6,070	5,563	10,809	9,612
Amortization of intangible assets	40	32	65	48
Operating Profit	2,754	2,461	4,480	3,301
Bottling equity income		9		718
Interest expense	(199)	(172)	(379)	(326)
Interest income	20	2	37	8
Income before income taxes	2,575	2,300	4,138	3,701
Provision for income taxes	670	687	1,089	654
Net income	1,905	1,613	3,049	3,047
Less: Net income attributable to noncontrolling interests	20	10	21	14
Net Income Attributable to PepsiCo	$ 1,885	$ 1,603	$ 3,028	$ 3,033
Net Income Attributable to PepsiCo per Common Share
Basic	$ 1.19	$ 1.00	$ 1.91	$ 1.90
Diluted	$ 1.17	$ 0.98	$ 1.89	$ 1.87
Cash dividends declared per common share	$ 0.515	$ 0.48	$ 0.995	$ 0.93

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Basis of Presentation and Our Divisions (Policy)

6 Months Ended

Jun. 11, 2011

Basis of Presentation and Our Divisions

Revenue Recognition

Our significant interim accounting policies include the recognition of a pro rata share of certain estimated annual sales incentives, and certain advertising and marketing costs, generally in proportion to revenue,

Income Tax, Policy

and the recognition of income taxes using an estimated annual effective tax rate.

Cost of Sales, Policy

Raw materials, direct labor and plant overhead, as well as purchasing and receiving costs, costs directly related to production planning, inspection costs and raw material handling facilities, are included in cost of sales.

Selling, General and Administrative Expenses, Policy

The costs of moving, storing and delivering finished product are included in selling, general and administrative expenses.

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Basis of Presentation and Our Divisions (Tables)

6 Months Ended

Jun. 11, 2011

Net Revenue And Operating Profit [Member]

Schedule Of Segment Reporting Information, By Segment

	12 Weeks Ended						24 Weeks Ended
	6/11/11			6/12/10			6/11/11			6/12/10
Net Revenue
FLNA	$	3,090		$	2,992		$	5,994		$	5,856
QFNA		583			582			1,223			1,265
LAF		1,808			1,538			2,916			2,521
PAB		5,629			5,548			10,160			8,313
Europe(a)		3,794			2,498			5,420			3,542
AMEA		1,923			1,643			3,051			2,672
	$	16,827		$	14,801		$	28,764		$	24,169
	12 Weeks Ended						24 Weeks Ended
	6/11/11			6/12/10			6/11/11			6/12/10
Operating Profit
FLNA	$	853		$	800		$	1,627		$	1,528
QFNA		167			159			381			354
LAF		274			233			445			378
PAB		983			952			1,541			1,025
Europe		407			276			470			394
AMEA		299			267			445			422
Total division		2,983			2,687			4,909			4,101
Corporate Unallocated
Net impact of mark-to-market on commodity hedges		(9	)		(4	)		22			42
Merger and integration costs		(12	)		(24	)		(54	)		(112	)
Venezuela currency devaluation		–			–			–			(129	)
Asset write-off		–			–			–			(145	)
Foundation contribution		–			–			–			(100	)
Other		(208	)		(198	)		(397	)		(356	)
	$	2,754		$	2,461		$	4,480		$	3,301

^(a)  Change in 2011 relates primarily to our acquisition of WBD.

^(b)  Corporate assets consist principally of cash and cash equivalents, short-term investments, derivative instruments and property, plant and equipment.

Total Assets [Member]

Schedule Of Segment Reporting Information, By Segment

	Total Assets
	6/11/11		12/25/10
FLNA	$	6,217	$	6,027
QFNA		1,194		1,217
LAF		4,327		4,053
PAB		33,006		31,622
Europe(a)		21,637		13,032
AMEA		5,906		5,569
Total division		72,287		61,520
Corporate(b)		3,393		6,394
Investments in bottling affiliates		–		239
	$	75,680	$	68,153

^(a)  Change in 2011 relates primarily to our acquisition of WBD.

^(b)  Corporate assets consist principally of cash and cash equivalents, short-term investments, derivative instruments and property, plant and equipment.

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Acquisitions (Tables)

6 Months Ended

Jun. 11, 2011

Acquisitions

Pro Forma Financial Information

	(unaudited) 24 Weeks Ended
	6/12/10
Net Revenue	$	25,913
Net Income Attributable to PepsiCo	$	2,569
Net Income Attributable to PepsiCo per Common Share – Diluted	$	1.56

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Intangible Assets (Tables)

6 Months Ended

Jun. 11, 2011

Intangible Assets

Amortizable Intangible Assets, Net

	6/11/11			12/25/10
Amortizable intangible assets, net
Acquired franchise rights	$	974		$	949
Reacquired franchise rights		110			110
Brands		1,543			1,463
Other identifiable intangibles		1,170			747
		3,797			3,269
Accumulated amortization		(1,317	)		(1,244	)
	$	2,480		$	2,025

Change in Book Value of Nonamortizable Intangible Assets

	Balance 12/25/10		Acquisitions		Translation and Other		Balance 6/11/11
FLNA
Goodwill	$	313	$	–	$	6	$	319
Brands		31		–		1		32
		344		–		7		351
QFNA
Goodwill		175		–		–		175
LAF
Goodwill		497		–		13		510
Brands		143		–		4		147
		640		–		17		657
PAB
Goodwill		9,946		26		22		9,994
Reacquired franchise rights		7,283		20		38		7,341
Acquired franchise rights		1,565		–		3		1,568
Brands		182		8		5		195
Other		10		–		1		11
		18,986		54		69		19,109
Europe(a)
Goodwill		3,040		1,228		314		4,582
Reacquired franchise rights		793		–		62		855
Acquired franchise rights		227		–		19		246
Brands		1,380		3,300		296		4,976
		5,440		4,528		691		10,659
AMEA
Goodwill		690		–		29		719
Brands		169		–		8		177
		859		–		37		896
Total goodwill		14,661		1,254		384		16,299
Total reacquired franchise rights		8,076		20		100		8,196
Total acquired franchise rights		1,792		–		22		1,814
Total brands		1,905		3,308		314		5,527
Total other		10		–		1		11
	$	26,444	$	4,582	$	821	$	31,847

^(a)  Net increases in 2011 relate primarily to our acquisition of WBD.

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Stock-Based Compensation (Tables)

6 Months Ended

Jun. 11, 2011

Stock-Based Compensation

Table of Weighted-Average Black-Scholes Fair Value Assumptions

	24 Weeks Ended
	6/11/11			6/12/10
Expected life		6 yrs.			5 yrs.
Risk free interest rate		2.6	%		2.3	%
Expected volatility(a)		16	%		17	%
Expected dividend yield		2.9	%		2.8	%

^(a)  Reflects movements in our stock price over the most recent historical period equivalent to the expected life.

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Pension and Retiree Medical Benefits (Tables)

6 Months Ended

Jun. 11, 2011

Pension and Retiree Medical Benefits

Components of Benefit Expense

	12 Weeks Ended
	Pension												Retiree Medical
	6/11/11			6/12/10			6/11/11			6/12/10			6/11/11			6/12/10
	U.S.						International
Service cost	$	80		$	69		$	23		$	19		$	11		$	14
Interest cost		126			120			28			26			21			23
Expected return on plan assets		(162	)		(150	)		(33	)		(31	)		(4	)		–
Amortization of prior service cost/(benefit)		4			2			1			1			(6	)		(4	)
Amortization of experience loss		34			25			9			6			3			1
		82			66			28			21			25			34
Settlement/Curtailment gain		–			(2	)		–			–			–			–
Special termination benefits		–			15			–			–			–			1
Total expense	$	82		$	79		$	28		$	21		$	25		$	35
	24 Weeks Ended
	Pension												Retiree Medical
	6/11/11			6/12/10			6/11/11			6/12/10			6/11/11			6/12/10
	U.S.						International
Service cost	$	162		$	130		$	40		$	33		$	23		$	26
Interest cost		252			218			49			44			41			43
Expected return on plan assets		(324	)		(275	)		(57	)		(53	)		(7	)		–
Amortization of prior service cost/(benefit)		7			5			1			1			(13	)		(8	)
Amortization of experience loss		67			50			16			10			6			2
		164			128			49			35			50			63
Settlement/Curtailment gain		(9	)		(2	)		–			–			–			–
Special termination benefits		10			23			–			–			1			1
Total expense	$	165		$	149		$	49		$	35		$	51		$	64

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Income Taxes (Tables)

6 Months Ended

Jun. 11, 2011

Income Taxes

Reserves Rollforward

	6/11/11			12/25/10
Balance, beginning of year	$	2,022		$	1,731
Additions for tax positions related to the current year		85			204
Additions for tax positions from prior years		4			517
Reductions for tax positions from prior years		(54	)		(391	)
Settlement payments		(87	)		(30	)
Statute of limitations expiration		(5	)		(7	)
Translation and other		(2	)		(2	)
Balance, end of period	$	1,963		$	2,022

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Net Income Attributable to PepsiCo per Common Share (Tables)

6 Months Ended

Jun. 11, 2011

Net Income Attributable to PepsiCo per Common Share

Basic and Diluted Net Income Attributable to PepsiCo Per Common Share

	12 Weeks Ended
	6/11/11					6/12/10
	Income			Shares (a)		Income			Shares (a)
Net income attributable to PepsiCo	$	1,885				$	1,603
Preferred shares:
Dividends		(1	)				(1	)
Redemption premium		(1	)				(1	)
Net income available for PepsiCo common shareholders	$	1,883			1,583	$	1,601			1,608
Basic net income attributable to PepsiCo per common share	$	1.19				$	1.00
Net income available for PepsiCo common shareholders	$	1,883			1,583	$	1,601			1,608
Dilutive securities:
Stock options and RSUs(b)		–			21		–			25
ESOP convertible preferred stock		2			1		2			1
Diluted	$	1,885			1,605	$	1,603			1,634
Diluted net income attributable to PepsiCo per common share	$	1.17				$	0.98
	24 Weeks Ended
	6/11/11					6/12/10
	Income			Shares (a)		Income			Shares (a)
Net income attributable to PepsiCo	$	3,028				$	3,033
Preferred shares:
Dividends		(1	)				(1	)
Redemption premium		(3	)				(2	)
Net income available for PepsiCo common shareholders	$	3,024			1,583	$	3,030			1,595
Basic net income attributable to PepsiCo per common share	$	1.91				$	1.90
Net income available for PepsiCo common shareholders	$	3,024			1,583	$	3,030			1,595
Dilutive securities:
Stock options and RSUs(b)		–			21		–			24
ESOP convertible preferred stock		4			1		3			1
Diluted	$	3,028			1,605	$	3,033			1,620
Diluted net income attributable to PepsiCo per common share	$	1.89				$	1.87

^(a) Weighted-average common shares outstanding (in millions).

^(b) Options to purchase 10.1 million and 20.7 million shares, respectively, for the 12 and 24 weeks in 2011 were not included in the calculation of earnings per share because these options were out-of-the-money. These out-of-the-money options had average exercise prices of $68.88 and $67.35, respectively. Options to purchase 22.9 million and 21.8 million shares, respectively, for the 12 and 24 weeks in 2010 were not included in the calculation of earnings per share because these options were out-of-the-money. Out-of-the-money options for the 12 and 24 weeks in 2010 had average exercise prices of $67.60 and $67.33, respectively.

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Debt Obligations and Commitments (Tables)

6 Months Ended

Jun. 11, 2011

Debt Obligations and Commitments

Long-term Contractual Commitments

Payments Due by Period
	Total		2011		2012 – 2013		2014 – 2015		2016 and beyond
Long-term debt obligations(b)	$	21,016	$	–	$	5,167	$	4,353	$	11,496
Interest on debt obligations(c)		7,556		467		1,574		1,125		4,390
Operating leases		1,901		253		678		406		564
Purchasing commitments		3,496		931		2,077		406		82
Marketing commitments		2,555		102		562		543		1,348
	$	36,524	$	1,753	$	10,058	$	6,833	$	17,880

^(a) Reflects non-cancelable commitments as of June 11, 2011 based on foreign exchange rates in effect on that date and excludes any reserves for uncertain tax positions as we are unable to reasonably predict the ultimate amount or timing of settlement.

^(b) Excludes $2.4 billion related to current maturities of long-term debt, as well as $591 million related to the fair value step-up of debt acquired in connection with our acquisitions of PBG and PAS.

^(c)  Interest payments on floating-rate debt are estimated using interest rates effective as of June 11, 2011.

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Merger and Integration Charges (Tables)

6 Months Ended

Jun. 11, 2011

Merger and Integration Charges

Merger and Integration Activity

	Severance and Other Employee Costs			Other Costs			Total
Liability as of December 25, 2010	$	179		$	25		$	204
2011 merger and integration charges		36			77			113
Cash payments		(101	)		(106	)		(207	)
Non-cash charges		(35	)		14			(21	)
Liability as of June 11, 2011	$	79		$	10		$	89

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Condensed Consolidated Statement of Cash Flows (USD $) In Millions	6 Months Ended
	Jun. 11, 2011	Jun. 12, 2010
Operating Activities
Net income	$ 3,049	$ 3,047
Depreciation and amortization	1,187	969
Stock-based compensation expense	146	119
Cash payments for restructuring charges	(1)	(28)
Merger and integration costs	113	476
Cash payments for merger and integration costs	(207)	(209)
Gain on previously held equity interests in The Pepsi Bottling Group, Inc. (PBG) and PepsiAmericas, Inc. (PAS)		(958)
Asset write-off		145
Non-cash foreign exchange loss related to Venezuela devaluation		120
Excess tax benefits from share-based payment arrangements	(52)	(47)
Pension and retiree medical plan contributions	(116)	(694)
Pension and retiree medical plan expenses	254	248
Bottling equity income, net of dividends		42
Deferred income taxes and other tax charges and credits	(146)	186
Change in accounts and notes receivable	(1,491)	(994)
Change in inventories	(742)	40
Change in prepaid expenses and other current assets	(144)	(139)
Change in accounts payable and other current liabilities	(65)	(55)
Change in income taxes payable	849	337
Other, net	(281)	(163)
Net Cash Provided by Operating Activities	2,353	2,442
Investing Activities
Capital spending	(1,231)	(968)
Sales of property, plant and equipment	34	37
Acquisition of manufacturing and distribution rights from Dr Pepper Snapple Group, Inc. (DPSG)		(900)
Investment in WBD	(164)
Other acquisitions and investments in noncontrolled affiliates	(61)	(34)
Short-term investments, by original maturity
More than three months - purchases		(6)
More than three months - maturities	10	15
Three months or less, net	(10)	(46)
Other investing, net	(2)	(10)
Net Cash Used For Investing Activities	(3,852)	(4,745)
Financing Activities
Proceeds from issuances of long-term debt	1,754	4,216
Payments of long-term debt	(285)	(26)
Short-term borrowings, by original maturity
More than three months - proceeds	180	31
More than three months - payments	(152)	(19)
Three months or less, net	(290)	3,329
Cash dividends paid	(1,530)	(1,451)
Share repurchases - common	(746)	(3,308)
Share repurchases - preferred	(4)	(2)
Proceeds from exercises of stock options	652	464
Excess tax benefits from share-based payment arrangements	52	47
Acquisition of noncontrolling interests	(1,327)	(159)
Other financing	(3)	(6)
Net Cash (Used for)/Provided by Financing Activities	(1,699)	3,116
Effect of exchange rate changes on cash and cash equivalents	168	(227)
Net (Decrease)/Increase in Cash and Cash Equivalents	(3,030)	586
Cash and Cash Equivalents, Beginning of Year	5,943	3,943
Cash and Cash Equivalents, End of Period	2,913	4,529
Non-cash activity:
Issuance of common stock and equity awards in connection with our acquisitions of PBG and PAS, as reflected in investing and financing activities		4,451
PBG and PAS Acquisition [Member]
Operating Activities
Merger and integration costs		467
Investing Activities
Acquisitions, net of cash and cash equivalents acquired		(2,833)
Wimm-Bill-Dann [Member]
Investing Activities
Acquisitions, net of cash and cash equivalents acquired	$ (2,428)

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Financial Instruments (Tables)

6 Months Ended

Jun. 11, 2011

Financial Instruments

Fair Values of Financial Assets and Liabilities

	2011				2010
	Assets(a)		Liabilities(a)		Assets(a)		Liabilities(a)
Available-for-sale securities(b)	$	85	$	–	$	79	$	–
Short-term investments – index funds(c)	$	176	$	–	$	144	$	–
Deferred compensation(d)	$	–	$	547	$	–	$	554
Derivatives designated as hedging instruments:
Forward exchange contracts(e)	$	7	$	36	$	24	$	19
Interest rate derivatives(f)		345		14		268		27
Commodity contracts – other(g)		73		3		37		27
Commodity contracts – futures(h)		1		10		–		26
	$	426	$	63	$	329	$	99
Derivatives not designated as hedging instruments:
Forward exchange contracts(e)	$	8	$	15	$	12	$	6
Interest rate derivatives(f)		44		81		7		48
Commodity contracts – other(g)		47		2		5		19
Commodity contracts – futures(h)		–		–		–		1
Prepaid forward contracts(i)		41		–		61		–
	$	140	$	98	$	85	$	74
Total derivatives at fair value	$	566	$	161	$	414	$	173
Total	$	827	$	708	$	637	$	727

^(a) Financial assets are classified on our balance sheet within other assets, with the exception of short-term investments. Financial liabilities are classified on our balance sheet within other current liabilities and other liabilities. Unless specifically indicated, all financial assets and liabilities are categorized as Level 2 assets or liabilities.

^(b) Based on the price of common stock. Categorized as a Level 1 asset.

^(c) Based on price changes in index funds used to manage a portion of market risk arising from our deferred compensation liability. Categorized as a Level 1 asset.

^(d) Based on the fair value of investments corresponding to employees' investment elections. As of June 11, 2011 and June 12, 2010, $46 million and $144 million, respectively, are categorized as Level 1 liabilities. The remaining balances are categorized as Level 2 liabilities.

^(e) Based on observable market transactions of spot and forward rates.

^(f) Based on LIBOR and recently reported transactions in the marketplace.

^(g) Based on recently reported transactions in the marketplace, primarily swap arrangements.

^(h) Based on average prices on futures exchanges. Categorized as a Level 1 asset or liability.

⁽ⁱ⁾ Based primarily on the price of our common stock.

Effective Portion of Pre-tax (Gains)/Losses on Derivative Instruments

	12 Weeks Ended
	Fair Value/Non- designated Hedges						Cash Flow Hedges
	Losses/(Gains) Recognized in Income Statement(a)						Losses/(Gains) Recognized in Accumulated Other Comprehensive Loss						Losses/(Gains) Reclassified from Accumulated Other Comprehensive Loss into Income Statement(b)
		6/11/11			6/12/10			6/11/11			6/12/10			6/11/11			6/12/10
Forward exchange contracts	$	2		$	(11	)	$	12		$	(21	)	$	16		$	11
Interest rate derivatives		(56	)		(70	)		35			23			3			–
Prepaid forward contracts		(4	)		3			–			–			–			–
Commodity contracts		(7	)		3			(15	)		70			(19	)		–
Total	$	(65	)	$	(75	)	$	32		$	72		$	–		$	11
	24 Weeks Ended
	Fair Value/Non- designated Hedges						Cash Flow Hedges
	Losses/(Gains) Recognized  in Income Statement(a)						Losses/(Gains) Recognized in Accumulated Other Comprehensive Loss						Losses/(Gains) Reclassified from Accumulated Other Comprehensive Loss into Income Statement(b)
		6/11/11			6/12/10			6/11/11			6/12/10			6/11/11			6/12/10
Forward exchange contracts	$	1		$	(5	)	$	37		$	(8	)	$	21		$	22
Interest rate derivatives		(78	)		(60	)		29			36			6			–
Prepaid forward contracts		(2	)		(15	)		–			–			–			–
Commodity contracts		(46	)		(43	)		(55	)		58			(25	)		16
Total	$	(125	)	$	(123	)	$	11		$	86		$	2		$	38

^(a)  Interest rate gains/losses are included in interest expense in our income statement. All other gains/losses are included in corporate unallocated expenses.

^(b)  Interest rate losses are included in interest expense in our income statement. All other gains/losses are included in cost of sales in our income statement.

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Basis of Presentation and Our Divisions (Narrative) (Details) (USD $) In Millions, unless otherwise specified	3 Months Ended		6 Months Ended
	Mar. 19, 2011	Mar. 20, 2010	Jun. 12, 2010
Basis of Presentation and Our Divisions
Gain on previously held equity interests in PBG and PAS		$ 958	$ 958
Non-taxable portion of gain on previously held equity investments bottling equity income		735
Reversal of deferred tax liability associated with previously held equity interests		223
Change in accounting method (LIFO to average cost) effect on net income	$ 9
Number of business units	4
Number of divisions	6

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Basis of Presentation and Our Divisions (Net Revenue and Operating Profit by Division) (Details) (USD $) In Millions	3 Months Ended				6 Months Ended
	Jun. 11, 2011		Jun. 12, 2010		Jun. 11, 2011		Jun. 12, 2010
Net Revenue	$ 16,827		$ 14,801		$ 28,764		$ 24,169
Operating Profit	2,754		2,461		4,480		3,301
FLNA [Member]
Net Revenue	3,090		2,992		5,994		5,856
Operating Profit	853		800		1,627		1,528
QFNA [Member]
Net Revenue	583		582		1,223		1,265
Operating Profit	167		159		381		354
LAF [Member]
Net Revenue	1,808		1,538		2,916		2,521
Operating Profit	274		233		445		378
PAB [Member]
Net Revenue	5,629		5,548		10,160		8,313
Operating Profit	983		952		1,541		1,025
Europe [Member]
Net Revenue	3,794	[1]	2,498	[1]	5,420	[1]	3,542	[1]
Operating Profit	407		276		470		394
AMEA [Member]
Net Revenue	1,923		1,643		3,051		2,672
Operating Profit	299		267		445		422
Total Division [Member]
Operating Profit	2,983		2,687		4,909		4,101
Corporate Unallocated Net Impact Of Mark-To-Market On Commodity Hedges [Member]
Operating Profit	(9)		(4)		22		42
Corporate Unallocated Merger and Integration Costs [Member]
Operating Profit	(12)		(24)		(54)		(112)
Corporate Unallocated Venezuela Currency Devaluation [Member]
Operating Profit							(129)
Corporate Unallocated Asset Write-Off [Member]
Operating Profit							(145)
Corporate Unallocated Foundation Contribution [Member]
Operating Profit							(100)
Corporate Unallocated Other [Member]
Operating Profit	$ (208)		$ (198)		$ (397)		$ (356)

[1] Change in 2011 relates primarily to our acquisition of WBD.

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Basis of Presentation and Our Divisions (Total Assets by Division) (Details) (USD $) In Millions	Jun. 11, 2011		Dec. 25, 2010
Total Assets	$ 75,680		$ 68,153
FLNA [Member]
Total Assets	6,217		6,027
QFNA [Member]
Total Assets	1,194		1,217
LAF [Member]
Total Assets	4,327		4,053
PAB [Member]
Total Assets	33,006		31,622
Europe [Member]
Total Assets	21,637	[1]	13,032	[1]
AMEA [Member]
Total Assets	5,906		5,569
Total Division [Member]
Total Assets	72,287		61,520
Corporate [Member]
Total Assets	3,393	[2]	6,394	[2]
Investments In Bottling Affiliates [Member]
Total Assets			$ 239

[1] Change in 2011 relates primarily to our acquisition of WBD.

[2] Corporate assets consist principally of cash and cash equivalents, short-term investments, derivative instruments and property, plant and equipment.

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Acquisitions (Narrative) (Details) In Billions, except Per Share data, unless otherwise specified			0 Months Ended			6 Months Ended
	Jun. 11, 2011	Feb. 26, 2010 PBG and PAS Acquisition [Member] USD ($)	Mar. 10, 2011 Wimm-Bill-Dann [Member] USD ($)	Mar. 10, 2011 Wimm-Bill-Dann [Member] RUB	Feb. 03, 2011 Wimm-Bill-Dann [Member] USD ($)	Jun. 11, 2011 Wimm-Bill-Dann [Member]	Jul. 01, 2011 Wimm-Bill-Dann [Member] RUB
Total purchase price		$ 12.6			$ 5.8
Cash and equity paid		8.3
Cash paid for entity			1.3		3.8
Cash paid, net of cash acquired					2.4
Fair value of previously held equity interests		4.3			0.7
Fair value of remaining noncontrolling interests					1.3
Fair value of goodwill and other intangible assets acquired					4.9
Fair value of property plant and equipment acquired					1.3
Fair value of other net assets					0.7
Fair value of debt obligations acquired					1.1
Ownership in PBG and PAS after acquisition	100.00%
Acquisition to obtain a controlling interest					66.00%
Ownership in WBD after acquisition			98.60%	98.60%	77.00%
Tender offer for all outstanding ordinary shares in Russian Rubles				3,883.70			3,883.70
Tender offer for all outstanding American Depositary Share in Russian Rubles				970.925			970.925
Cash paid for WBD's ordinary shares			$ 1.3		$ 3.8
Cash payment per ordinary share				3,883.70			3,883.70
Cash entitled to receive per ADS				970.925			970.925
Expected ownership percentage after squeeze out process						100.00%

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Acquisitions (Pro Forma Financial Information) (Details) (USD $) In Millions, except Per Share data	6 Months Ended
	Jun. 12, 2010
Acquisitions
Net Revenue	$ 25,913
Net Income Attributable to PepsiCo	$ 2,569
Net Income Attributable to PepsiCo per Common Share - Diluted	$ 1.56

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Intangible Assets (Amortizable Intangible Assets, Net) (Details) (USD $) In Millions	Jun. 11, 2011	Dec. 25, 2010
Amortizable intangible assets, gross	$ 3,797	$ 3,269
Accumulated amortization	(1,317)	(1,244)
Amortizable of intangible assets, net	2,480	2,025
Acquired Franchise Rights [Member]
Amortizable intangible assets, gross	974	949
Reacquired Franchise Rights [Member]
Amortizable intangible assets, gross	110	110
Brands [Member]
Amortizable intangible assets, gross	1,543	1,463
Other Identifiable Intangibles [Member]
Amortizable intangible assets, gross	$ 1,170	$ 747

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Intangible Assets (Change in Book Value of Nonamortizable Intangible Assets) (Details) (USD $) In Millions	6 Months Ended
	Jun. 11, 2011
Balance Beginning	$ 26,444
Acquisitions	4,582
Translation and Other	821
Balance End	31,847
FLNA [Member] | Goodwill [Member]
Balance Beginning	313
Acquisitions
Translation and Other	6
Balance End	319
QFNA [Member] | Goodwill [Member]
Balance Beginning	175
Acquisitions
Translation and Other
Balance End	175
LAF [Member] | Goodwill [Member]
Balance Beginning	497
Acquisitions
Translation and Other	13
Balance End	510
PAB [Member] | Goodwill [Member]
Balance Beginning	9,946
Acquisitions	26
Translation and Other	22
Balance End	9,994
Europe [Member] | Goodwill [Member]
Balance Beginning	3,040	[1]
Acquisitions	1,228	[1]
Translation and Other	314	[1]
Balance End	4,582	[1]
AMEA [Member] | Goodwill [Member]
Balance Beginning	690
Acquisitions
Translation and Other	29
Balance End	719
Goodwill [Member]
Balance Beginning	14,661
Acquisitions	1,254
Translation and Other	384
Balance End	16,299
FLNA [Member] | Brands [Member]
Balance Beginning	31
Acquisitions
Translation and Other	1
Balance End	32
LAF [Member] | Brands [Member]
Balance Beginning	143
Acquisitions
Translation and Other	4
Balance End	147
PAB [Member] | Brands [Member]
Balance Beginning	182
Acquisitions	8
Translation and Other	5
Balance End	195
Europe [Member] | Brands [Member]
Balance Beginning	1,380	[1]
Acquisitions	3,300	[1]
Translation and Other	296	[1]
Balance End	4,976	[1]
AMEA [Member] | Brands [Member]
Balance Beginning	169
Acquisitions
Translation and Other	8
Balance End	177
Brands [Member]
Balance Beginning	1,905
Acquisitions	3,308
Translation and Other	314
Balance End	5,527
PAB [Member] | Reacquired Franchise Rights [Member]
Balance Beginning	7,283
Acquisitions	20
Translation and Other	38
Balance End	7,341
Europe [Member] | Reacquired Franchise Rights [Member]
Balance Beginning	793	[1]
Acquisitions		[1]
Translation and Other	62	[1]
Balance End	855	[1]
Reacquired Franchise Rights [Member]
Balance Beginning	8,076
Acquisitions	20
Translation and Other	100
Balance End	8,196
PAB [Member] | Acquired Franchise Rights [Member]
Balance Beginning	1,565
Acquisitions
Translation and Other	3
Balance End	1,568
Europe [Member] | Acquired Franchise Rights [Member]
Balance Beginning	227	[1]
Acquisitions		[1]
Translation and Other	19	[1]
Balance End	246	[1]
Acquired Franchise Rights [Member]
Balance Beginning	1,792
Acquisitions
Translation and Other	22
Balance End	1,814
PAB [Member] | Other Intangible Assets [Member]
Balance Beginning	10
Acquisitions
Translation and Other	1
Balance End	11
Other Intangible Assets [Member]
Balance Beginning	10
Acquisitions
Translation and Other	1
Balance End	11
FLNA [Member]
Balance Beginning	344
Acquisitions
Translation and Other	7
Balance End	351
LAF [Member]
Balance Beginning	640
Acquisitions
Translation and Other	17
Balance End	657
PAB [Member]
Balance Beginning	18,986
Acquisitions	54
Translation and Other	69
Balance End	19,109
Europe [Member]
Balance Beginning	5,440	[1]
Acquisitions	4,528	[1]
Translation and Other	691	[1]
Balance End	10,659	[1]
AMEA [Member]
Balance Beginning	859
Acquisitions
Translation and Other	37
Balance End	$ 896

[1] Net increases in 2011 relate primarily to our acquisition of WBD.

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Stock-Based Compensation (Narrative) (Details) (USD $) In Millions, except Per Share data	3 Months Ended		6 Months Ended
	Jun. 11, 2011	Jun. 12, 2010	Jun. 11, 2011	Jun. 12, 2010
Stock-Based Compensation
Stock-based compensation expense	$ 74	$ 72	$ 146	$ 119
Merger and Integration Costs included in Stock-Based Compensation	2	13	9	40
Weighted-average grant price, stock options		$ 66.50	$ 63.78
Weighted-average grant price, RSUs			$ 63.81	$ 66.46
Stock options granted		12.0	6.4
RSUs issued			5.2	4.6
Total stock-based compensation expense	$ 76	$ 85	$ 155	$ 159

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Stock-Based Compensation (Table of Weighted-Average Black-Scholes Fair Value Assumptions) (Details)	6 Months Ended
	Jun. 11, 2011 years		Jun. 12, 2010 years
Stock-Based Compensation
Expected life, in years	6		5
Risk free interest rate	2.60%		2.30%
Expected volatility	16.00%	[1]	17.00%	[1]
Expected dividend yield	2.90%		2.80%

[1] Reflects movements in our stock price over the most recent historical period equivalent to the expected life.

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Condensed Consolidated Balance Sheet (USD $) In Millions	6 Months Ended	12 Months Ended
	Jun. 11, 2011	Dec. 25, 2010
Assets
Cash and cash equivalents	$ 2,913	$ 5,943
Short-term investments	431	426
Accounts and notes receivable, less allowance: 6/11 - $154, 12/10 - $144	8,283	6,323
Inventories
Raw materials	2,296	1,654
Work-in-process	283	128
Finished goods	1,960	1,590
Inventories, Net, Total	4,539	3,372
Prepaid expenses and other current assets	1,751	1,505
Total Current Assets	17,917	17,569
Property, Plant and Equipment	35,979	33,041
Accumulated Depreciation	(15,125)	(13,983)
Property, Plant and Equipment, Net	20,854	19,058
Amortizable Intangible Assets, net	2,480	2,025
Goodwill	16,299	14,661
Other Nonamortizable Intangible Assets	15,548	11,783
Nonamortizable Intangible Assets	31,847	26,444
Investments in Noncontrolled Affiliates	1,449	1,368
Other Assets	1,133	1,689
Total Assets	75,680	68,153
Liabilities and Equity
Short-term obligations	5,715	4,898
Accounts payable and other current liabilities	11,433	10,923
Income taxes payable	909	71
Total Current Liabilities	18,057	15,892
Long-term Debt Obligations	21,607	19,999
Other Liabilities	6,669	6,729
Deferred Income Taxes	4,977	4,057
Total Liabilities	51,310	46,677
Commitments and Contingencies
Preferred Stock, no par value	41	41
Repurchased Preferred Stock	(154)	(150)
PepsiCo Common Shareholders' Equity
Common stock, par value 1 2/3 cents per share: Authorized 3,600 shares, issued 6/11 and 12/10 - 1,865 shares	31	31
Capital in excess of par value	4,358	4,527
Retained earnings	38,527	37,090
Accumulated other comprehensive loss	(2,254)	(3,630)
Less: repurchased common stock, at cost: 6/11 - 281 shares, 12/10 - 284 shares	(16,597)	(16,745)
Total PepsiCo Common Shareholders' Equity	24,065	21,273
Noncontrolling interests	418	312
Total Equity	24,370	21,476
Total Liabilities and Equity	$ 75,680	$ 68,153

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Pension and Retiree Medical Benefits (Components of Benefit Expense) (Details) (USD $) In Millions	3 Months Ended		6 Months Ended
	Jun. 11, 2011	Jun. 12, 2010	Jun. 11, 2011	Jun. 12, 2010
U.S. [Member]
Service cost	$ 80	$ 69	$ 162	$ 130
Interest cost	126	120	252	218
Expected return on plan assets	(162)	(150)	(324)	(275)
Amortization of prior service cost/(benefit)	4	2	7	5
Amortization of experience loss	34	25	67	50
Gross total	82	66	164	128
Settlement/Curtailment gain		(2)	(9)	(2)
Special termination benefits		15	10	23
Total expense	82	79	165	149
International [Member]
Service cost	23	19	40	33
Interest cost	28	26	49	44
Expected return on plan assets	(33)	(31)	(57)	(53)
Amortization of prior service cost/(benefit)	1	1	1	1
Amortization of experience loss	9	6	16	10
Gross total	28	21	49	35
Settlement/Curtailment gain
Special termination benefits
Total expense	28	21	49	35
Retiree Medical [Member]
Service cost	11	14	23	26
Interest cost	21	23	41	43
Expected return on plan assets	(4)		(7)
Amortization of prior service cost/(benefit)	(6)	(4)	(13)	(8)
Amortization of experience loss	3	1	6	2
Gross total	25	34	50	63
Settlement/Curtailment gain
Special termination benefits		1	1	1
Total expense	$ 25	$ 35	$ 51	$ 64

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Income Taxes (Reserves Rollforward) (Details) (USD $) In Millions	6 Months Ended	12 Months Ended
	Jun. 11, 2011	Dec. 25, 2010
Income Taxes
Balance, beginning of year	$ 2,022	$ 1,731
Additions for tax positions related to the current year	85	204
Additions for tax positions from prior years	4	517
Reductions for tax positions from prior years	(54)	(391)
Settlement payments	(87)	(30)
Statute of limitations expiration	(5)	(7)
Translation and other	(2)	(2)
Balance, end of period	$ 1,963	$ 2,022

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Net Income Attributable to PepsiCo per Common Share (Basic and Diluted Net Income Attributable to PepsiCo Per Common Share) (Details) (USD $) In Millions, except Per Share data	3 Months Ended				6 Months Ended
	Jun. 11, 2011		Jun. 12, 2010		Jun. 11, 2011		Jun. 12, 2010
Net Income Attributable to PepsiCo per Common Share
Net income attributable to PepsiCo	$ 1,885		$ 1,603		$ 3,028		$ 3,033
Dividends, Preferred	(1)		(1)		(1)		(1)
Redemption premium	(1)		(1)		(3)		(2)
Net income available for PepsiCo common shareholders	1,883		1,601		3,024		3,030
Net income available for PepsiCo common stockholders-shares	1,583	[1]	1,608	[1]	1,583	[1]	1,595	[1]
Basic net income attributable to PepsiCo per common share	$ 1.19		$ 1.00		$ 1.91		$ 1.90
Stock options and RSUs-shares	21	[1],[2]	25	[1],[2]	21	[1],[2]	24	[1],[2]
ESOP convertible preferred stock-value	2		2		4		3
ESOP convertible preferred stock-shares	1	[1]	1	[1]	1	[1]	1	[1]
Diluted shares-value	$ 1,885		$ 1,603		$ 3,028		$ 3,033
Diluted-shares	1,605	[1]	1,634	[1]	1,605	[1]	1,620	[1]
Diluted net income attributable to PepsiCo per common share	$ 1.17		$ 0.98		$ 1.89		$ 1.87
Out-of-the money options excluded from earnings per share	10.1		22.9		20.7		21.8
Out-of-the money options average exercise price	$ 68.88		$ 67.60		$ 67.35		$ 67.33

[1] Weighted-average common shares outstanding (in millions).

[2] Options to purchase 10.1 million and 20.7 million shares, respectively, for the 12 and 24 weeks in 2011 were not included in the calculation of earnings per share because these options were out-of-the-money. These out-of-the-money options had average exercise prices of $68.88 and $67.35, respectively. Options to purchase 22.9 million and 21.8 million shares, respectively, for the 12 and 24 weeks in 2010 were not included in the calculation of earnings per share because these options were out-of-the-money. Out-of-the-money options for the 12 and 24 weeks in 2010 had average exercise prices of $67.60 and $67.33, respectively.

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Debt Obligations and Commitments (Narrative) (Details) (USD $)	6 Months Ended
	Jun. 11, 2011
Derivative, description of variable rate basis	three-month London Inter-Bank Offered Rate (LIBOR) plus 8 basis points
Interest expense incurred related to debt repurchase	$ 16,000,000
Line of credit facility, maximum borrowing capacity	2,575,000,000
Commercial paper outstanding	2,200,000,000
LIBOR Plus 8 Basis Points [Member]
Fixed and floating rate notes issued	750,000,000
Two Point Five Percent Senior Notes [Member]
Fixed and floating rate notes issued	1,000,000,000
Interest rate on debt	2.50%
Unsecured Revolving Credit Facility 2015 [Member]
Line of credit facility, maximum borrowing capacity	2,875,000,000
Line of credit facility, expiration date	June 2015
Line of credit facility increase additional borrowing capacity	3,500,000,000
364 Day Unsecured Revolving Credit Facility 2012 [Member]
Line of credit facility, maximum borrowing capacity	2,875,000,000
Line of credit facility, expiration date	June 2012
Line of credit facility increase additional borrowing capacity	3,500,000,000
Unsecured Revolving Credit Facility 2012 [Member]
Line of credit facility, maximum borrowing capacity	2,000,000,000
Unsecured Revolving Credit Facility 2012 [Member] | Bottling Group [Member]
Line of credit facility, maximum borrowing capacity	1,080,000,000
Seven Point Nine Zero Percent Senior Unsecured Notes [Member]
Payment of tender offer	784,000,000
Aggregate principal amount of debt repurchased	$ 766,000,000

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Debt Obligations and Commitments (Long-term Contractual Commitments) (Details) (USD $)	6 Months Ended
	Jun. 11, 2011
Total long term contractual commitments	$ 36,524,000,000
Payments Due By Period 2011 [Member]
Total long term contractual commitments	1,753,000,000
Payments Due By Period 2011 [Member] | Long-Term Debt Obligations [Member]
Long-term debt obligations, current
Payments Due By Period 2011 [Member] | Interest On Debt Obligations [Member]
Interest on debt obligations	467,000,000
Payments Due By Period 2011 [Member] | Operating Leases [Member]
Operating leases	253,000,000
Payments Due By Period 2011 [Member] | Purchasing Commitments [Member]
Purchasing commitments	931,000,000
Payments Due By Period 2011 [Member] | Marketing Commitments [Member]
Marketing commitments	102,000,000
Payments Due By Period 2012-2013 [Member]
Total long term contractual commitments	10,058,000,000
Payments Due By Period 2012-2013 [Member] | Long-Term Debt Obligations [Member]
Long-term debt obligations, 2012-2013	5,167,000,000
Payments Due By Period 2012-2013 [Member] | Interest On Debt Obligations [Member]
Interest on debt obligations	1,574,000,000
Payments Due By Period 2012-2013 [Member] | Operating Leases [Member]
Operating leases	678,000,000
Payments Due By Period 2012-2013 [Member] | Purchasing Commitments [Member]
Purchasing commitments	2,077,000,000
Payments Due By Period 2012-2013 [Member] | Marketing Commitments [Member]
Marketing commitments	562,000,000
Payments Due By Period 2014-2015 [Member]
Total long term contractual commitments	6,833,000,000
Payments Due By Period 2014-2015 [Member] | Long-Term Debt Obligations [Member]
Long-term debt obligations, 2014-2015	4,353,000,000
Payments Due By Period 2014-2015 [Member] | Interest On Debt Obligations [Member]
Interest on debt obligations	1,125,000,000
Payments Due By Period 2014-2015 [Member] | Operating Leases [Member]
Operating leases	406,000,000
Payments Due By Period 2014-2015 [Member] | Purchasing Commitments [Member]
Purchasing commitments	406,000,000
Payments Due By Period 2014-2015 [Member] | Marketing Commitments [Member]
Marketing commitments	543,000,000
Payments Due By Period 2016 And Beyond [Member]
Total long term contractual commitments	17,880,000,000
Payments Due By Period 2016 And Beyond [Member] | Long-Term Debt Obligations [Member]
Long-term debt obligations, 2016 and beyond	11,496,000,000
Payments Due By Period 2016 And Beyond [Member] | Interest On Debt Obligations [Member]
Interest on debt obligations	4,390,000,000
Payments Due By Period 2016 And Beyond [Member] | Operating Leases [Member]
Operating leases	564,000,000
Payments Due By Period 2016 And Beyond [Member] | Purchasing Commitments [Member]
Purchasing commitments	82,000,000
Payments Due By Period 2016 And Beyond [Member] | Marketing Commitments [Member]
Marketing commitments	1,348,000,000
Long-Term Debt Obligations [Member]
Long-term debt obligations, total	21,016,000,000
Interest On Debt Obligations [Member]
Interest on debt obligations	7,556,000,000
Operating Leases [Member]
Operating leases	1,901,000,000
Purchasing Commitments [Member]
Purchasing commitments	3,496,000,000
Marketing Commitments [Member]
Marketing commitments	2,555,000,000
PBG and PAS Acquisition [Member]
Long-term debt obligations, current	2,400,000,000
Fair value step up of Debt acquired in connection with our acquisitions of PBG and PAS	$ 591,000,000

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Merger and Integration Charges (Narrative) (Details) (USD $) In Millions, except Per Share data	3 Months Ended		6 Months Ended		3 Months Ended		6 Months Ended		3 Months Ended		6 Months Ended	3 Months Ended	6 Months Ended	3 Months Ended		6 Months Ended		3 Months Ended		6 Months Ended
	Jun. 11, 2011	Jun. 12, 2010	Jun. 11, 2011	Jun. 12, 2010	Jun. 11, 2011 Corporate Unallocated Expenses [Member]	Jun. 12, 2010 Corporate Unallocated Expenses [Member]	Jun. 11, 2011 Corporate Unallocated Expenses [Member]	Jun. 12, 2010 Corporate Unallocated Expenses [Member]	Mar. 20, 2010 Bottling Equity Income [Member]	Jun. 12, 2010 PBG and PAS Acquisition [Member]	Jun. 12, 2010 PBG and PAS Acquisition [Member]	Jun. 11, 2011 PBG PAS and WBD Acquisitions [Member]	Jun. 11, 2011 PBG PAS and WBD Acquisitions [Member]	Jun. 11, 2011 PAB [Member]	Jun. 12, 2010 PAB [Member]	Jun. 11, 2011 PAB [Member]	Jun. 12, 2010 PAB [Member]	Jun. 11, 2011 Europe [Member]	Jun. 12, 2010 Europe [Member]	Jun. 11, 2011 Europe [Member]	Jun. 12, 2010 Europe [Member]
Merger and integration costs (credit)			$ 113	$ 476	$ 12	$ 24	$ 54	$ 112	$ 9	$ 155	$ 467	$ 58	$ 113	$ 32	$ 103	$ 53	$ 296	$ 14	$ 28	$ 6	$ 29
Merger and integration charges, after-tax impact										119	380	45	94
Merger and integration charges, after-tax impact per share										$ 0.07	$ 0.23	$ 0.03	$ 0.06
Interest expense	$ 199	$ 172	$ 379	$ 326							$ 30

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Merger and Integration Charges (Merger and Integration Activity) (Details) (USD $) In Millions	6 Months Ended			12 Months Ended	6 Months Ended	12 Months Ended	6 Months Ended	12 Months Ended
	Jun. 11, 2011	Jun. 12, 2010	Jun. 11, 2011 Severance and Other Employee Costs [Member]	Dec. 25, 2010 Severance and Other Employee Costs [Member]	Jun. 11, 2011 Other Costs [Member]	Dec. 25, 2010 Other Costs [Member]	Jun. 11, 2011 Total [Member]	Dec. 25, 2010 Total [Member]
2011 merger and integration charges			$ 36		$ 77		$ 113
Cash payments for merger and integration costs	(207)	(209)	(101)		(106)		(207)
Non-cash charges	(113)	(476)	(35)		14		(21)
Liability			$ 79	$ 179	$ 10	$ 25	$ 89	$ 204

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Financial Instruments (Narrative) (Details) (USD $)	6 Months Ended
	Jun. 11, 2011	Jun. 12, 2010
Debt instrument, fair value	$ 29,200,000,000
Interest Rate Contract [Member]
Expected reclassification of net gain (loss) related to hedge from accumulated OCI into net income	(16,000,000)
Notional amount of interest rate derivatives	8,730,000,000	8,600,000,000
Percentage of total debt, net of related interest rate derivatives, exposed to variable interest rates	42.00%	43.00%
Foreign Exchange Contract [Member]
Expected reclassification of net gain (loss) related to hedge from accumulated OCI into net income	(28,000,000)
Unrealized gain (loss) on derivatives and commodity contracts	(29,000,000)	5,000,000
Derivative instruments not designated as hedging instruments inception to date gain		6,000,000
Derivative instruments not designated as hedging instruments, inception to date loss	7,000,000
Foreign currency derivatives at face value, net	2,300,000,000	1,300,000,000
Commodity Contract [Member]
Expected reclassification of net gain (loss) related to hedge from accumulated OCI into net income	30,000,000
Face value of open commodity derivative contracts qualifying for hedging	590,000,000	587,000,000
Unrealized gain (loss) on derivatives and commodity contracts	61,000,000	(15,000,000)
Derivative asset not designated as hedging instrument, face value	356,000,000	246,000,000
Derivative instruments not designated as hedging instruments inception to date gain	45,000,000
Derivative instruments not designated as hedging instruments, inception to date loss		$ 14,000,000

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Financial Instruments (Fair Values of Financial Assets and Liabilities) (Details) (USD $) In Millions	Jun. 11, 2011		Jun. 12, 2010
Available-for-sale securities	$ 85	[1],[2]	$ 79	[1],[2]
Short-term investments - index funds, at fair value	176	[2],[3]	144	[2],[3]
Derivatives designated as hedging instruments, Assets, Total	426	[2]	329	[2]
Derivatives not designated as hedging instruments, Assets, Total	140	[2]	85	[2]
Total asset derivatives at fair value	566	[2]	414	[2]
Total Financial Assets at Fair Value	827	[2]	637	[2]
Deferred compensation	547	[2],[4]	554	[2],[4]
Derivatives designated as hedging instruments, Liabilities, Total	63	[2]	99	[2]
Derivatives not designated as hedging instruments, Liabilities, Total	98	[2]	74	[2]
Total liability derivatives at fair value	161	[2]	173	[2]
Total Financial Liabilities at Fair Value	708	[2]	727	[2]
Level 1 Fair Values Of Assets And Liabilities [Member]
Deferred compensation	46		144
Derivatives Not Designated As Hedging Instruments Liabilities [Member]
Interest rate derivatives	81	[2],[5]	48	[2],[5]
Commodity contracts - other	2	[2],[6]	19	[2],[6]
Forward exchange contracts	15	[2],[7]	6	[2],[7]
Commodity contracts - futures			1	[2],[8]
Derivatives Designated As Hedging Instruments Liabilities [Member]
Forward exchange contracts	36	[2],[7]	19	[2],[7]
Commodity contracts - other	3	[2],[6]	27	[2],[6]
Interest rate derivatives	14	[2],[5]	27	[2],[5]
Commodity contracts - futures	10	[2],[8]	26	[2],[8]
Derivatives Not Designated As Hedging Instruments Assets [Member]
Prepaid forward contracts	41	[2],[9]	61	[2],[9]
Forward exchange contracts	8	[2],[7]	12	[2],[7]
Interest rate derivatives	44	[2],[5]	7	[2],[5]
Commodity contracts - other	47	[2],[6]	5	[2],[6]
Derivatives Designated As Hedging Instruments Assets [Member]
Forward exchange contracts	7	[2],[7]	24	[2],[7]
Interest rate derivatives	345	[2],[5]	268	[2],[5]
Commodity contracts - other	73	[2],[6]	37	[2],[6]
Commodity contracts - futures	$ 1	[2],[8]

[1] Based on the price of common stock. Categorized as a Level 1 asset.

[2] Financial assets are classified on our balance sheet within other assets, with the exception of short-term investments. Financial liabilities are classified on our balance sheet within other current liabilities and other liabilities. Unless specifically indicated, all financial assets and liabilities are categorized as Level 2 assets or liabilities.

[3] Based on price changes in index funds used to manage a portion of market risk arising from our deferred compensation liability. Categorized as a Level 1 asset.

[4] Based on the fair value of investments corresponding to employees' investment elections. As of June 11, 2011 and June 12, 2010, $46 million and $144 million, respectively, are categorized as Level 1 liabilities. The remaining balances are categorized as Level 2 liabilities.

[5] Based on LIBOR and recently reported transactions in the marketplace.

[6] Based on recently reported transactions in the marketplace, primarily swap arrangements.

[7] Based on observable market transactions of spot and forward rates.

[8] Based on average prices on futures exchanges. Categorized as a Level 1 asset or liability.

[9] Based primarily on the price of our common stock.

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Financial Instruments (Effective Portion of Pre-Tax (Gains)/Losses on Derivative Instruments) (Details) (USD $) In Millions	3 Months Ended				6 Months Ended
	Jun. 11, 2011		Jun. 12, 2010		Jun. 11, 2011		Jun. 12, 2010
Forward Exchange Contracts [Member] | Fair Value/Non-designated Hedges [Member]
Losses/(Gains) Recognized in Income Statement	$ 2	[1]	$ (11)	[1]	$ 1	[1]	$ (5)	[1]
Forward Exchange Contracts [Member] | Cash Flow Hedging [Member]
Losses/(Gains) Recognized in Accumulated Other Comprehensive Loss	12		(21)		37		(8)
Losses/(Gains) Reclassified from Accumulated Other Comprehensive Loss into Income Statement	16	[2]	11	[2]	21	[2]	22	[2]
Interest Rate Contract [Member] | Fair Value/Non-designated Hedges [Member]
Losses/(Gains) Recognized in Income Statement	(56)	[1]	(70)	[1]	(78)	[1]	(60)	[1]
Interest Rate Contract [Member] | Cash Flow Hedging [Member]
Losses/(Gains) Recognized in Accumulated Other Comprehensive Loss	35		23		29		36
Losses/(Gains) Reclassified from Accumulated Other Comprehensive Loss into Income Statement	3	[2]		[2]	6	[2]		[2]
Prepaid Forward Contracts [Member] | Fair Value/Non-designated Hedges [Member]
Losses/(Gains) Recognized in Income Statement	(4)	[1]	3	[1]	(2)	[1]	(15)	[1]
Prepaid Forward Contracts [Member] | Cash Flow Hedging [Member]
Losses/(Gains) Recognized in Accumulated Other Comprehensive Loss
Losses/(Gains) Reclassified from Accumulated Other Comprehensive Loss into Income Statement		[2]		[2]		[2]		[2]
Commodity Contract [Member] | Fair Value/Non-designated Hedges [Member]
Losses/(Gains) Recognized in Income Statement	(7)	[1]	3	[1]	(46)	[1]	(43)	[1]
Commodity Contract [Member] | Cash Flow Hedging [Member]
Losses/(Gains) Recognized in Accumulated Other Comprehensive Loss	(15)		70		(55)		58
Losses/(Gains) Reclassified from Accumulated Other Comprehensive Loss into Income Statement	(19)	[2]		[2]	(25)	[2]	16	[2]
Fair Value/Non-designated Hedges [Member]
Losses/(Gains) Recognized in Income Statement	(65)	[1]	(75)	[1]	(125)	[1]	(123)	[1]
Cash Flow Hedging [Member]
Losses/(Gains) Recognized in Accumulated Other Comprehensive Loss	32		72		11		86
Losses/(Gains) Reclassified from Accumulated Other Comprehensive Loss into Income Statement		[2]	$ 11	[2]	$ 2	[2]	$ 38	[2]

[1] Interest rate gains/losses are included in interest expense in our income statement. All other gains/losses are included in corporate unallocated expenses.

[2] Interest rate losses are included in interest expense in our income statement. All other gains/losses are included in cost of sales in our income statement.

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Condensed Consolidated Balance Sheet (Parenthetical) (USD $) In Millions, except Per Share data	Jun. 11, 2011	Dec. 25, 2010
Condensed Consolidated Balance Sheet
Accounts and notes receivable, allowance	$ 154	$ 144
Preferred Stock, par value
Common stock, par value	$ 0.0167	$ 0.0167
Common stock, authorized	3,600	3,600
Common stock, issued	1,865	1,865
Repurchased common stock, shares	281	284

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Condensed Consolidated Statement of Equity (USD $) In Millions		Preferred Stock [Member]	Repurchased Preferred Stock [Member]	Common Stock [Member]	Capital in Excess of Par Value [Member]	Retained Earnings [Member]	Accumulated Other Comprehensive Loss [Member]	Repurchased Common Stock [Member]	Total Common Shareholders' Equity [Member]	Noncontrolling Interests [Member]	Total
Balance, beginning of year at Dec. 26, 2009			$ (145)	$ 30	$ 250	$ 33,805	$ (3,794)	$ (13,383)		$ 638
Balance, beginning of year (in shares) at Dec. 26, 2009			(0.6)	1,782.0				(217.0)
Redemptions (in shares)
Redemptions			(2)
Share repurchases (in shares)								(52)
Share repurchases								(3,370)
Equity issued in connection with our acquisitions of PBG and PAS, in shares				83
Equity issued in connection with our acquisitions of PBG and PAS				1	4,451
Stock-based compensation expense					119
Stock option exercises (in shares)								11
Stock option exercises								696
Stock option exercises/RSUs converted	[1]				(321)
Withholding tax on RSUs converted					(55)
Other (in shares)								(14)
Other					95	7		117
Net income attributable to PepsiCo						3,033					3,047
Cash dividends declared - common						(1,510)
Dividends, Preferred						(1)					(1)
Cash dividends declared - RSUs						(6)
Net income attributable to noncontrolling interests										14	14
Contributions from/(distributions to) noncontrolling interests, net										(350)
Currency translation adjustment							(581)			(14)
Cash flow hedges, net of tax:
Net derivative losses							(86)				(86)
Reclassification of net losses to net income							23				23
Pension and retiree medical, net of tax:
Reclassification of pension and retiree medical losses to net income, net of tax							211				211
Unrealized gains/(losses) on securities, net of tax							1				1
Balance, end of period at Jun. 12, 2010		41	(147)	31	4,539	35,328	(4,226)	(15,940)	19,732	288	19,914
Balance, end of period (in shares) at Jun. 12, 2010		0.8	(0.6)	1,865.0				(272.0)
Balance, beginning of year at Dec. 25, 2010			(150)	31	4,527	37,090	(3,630)	(16,745)		312	21,476
Balance, beginning of year (in shares) at Dec. 25, 2010			(0.6)	1,865.0				(284.0)
Redemptions (in shares)
Redemptions			(4)
Share repurchases (in shares)								(12)
Share repurchases								(811)
Equity issued in connection with our acquisitions of PBG and PAS, in shares
Equity issued in connection with our acquisitions of PBG and PAS
Stock-based compensation expense					146
Stock option exercises (in shares)								14
Stock option exercises								858
Stock option exercises/RSUs converted	[1]				(281)
Withholding tax on RSUs converted					(50)
Other (in shares)								1
Other					16		(17)	101
Net income attributable to PepsiCo						3,028					3,049
Cash dividends declared - common						(1,580)
Dividends, Preferred						(1)					(1)
Cash dividends declared - RSUs						(10)
Net income attributable to noncontrolling interests										21	21
Contributions from/(distributions to) noncontrolling interests, net										13
Currency translation adjustment							1,382			72
Cash flow hedges, net of tax:
Net derivative losses							(17)				(17)
Reclassification of net losses to net income							7				7
Pension and retiree medical, net of tax:
Reclassification of pension and retiree medical losses to net income, net of tax							23				23
Unrealized gains/(losses) on securities, net of tax							(2)				(2)
Balance, end of period at Jun. 11, 2011		$ 41	$ (154)	$ 31	$ 4,358	$ 38,527	$ (2,254)	$ (16,597)	$ 24,065	$ 418	$ 24,370
Balance, end of period (in shares) at Jun. 11, 2011		0.8	(0.6)	1,865.0				(281.0)

[1] Includes total tax benefits of $33 million in 2011 and $30 million in 2010.

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Condensed Consolidated Statement of Equity (Parenthetical) (USD $) In Millions	6 Months Ended
	Jun. 11, 2011	Jun. 12, 2010
Condensed Consolidated Statement of Equity
Stock option exercises/RSUs converted, tax benefit	$ 33	$ 30

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Condensed Consolidated Statement of Comprehensive Income (USD $) In Millions	3 Months Ended		6 Months Ended
	Jun. 11, 2011	Jun. 12, 2010	Jun. 11, 2011	Jun. 12, 2010
Condensed Consolidated Statement of Comprehensive Income
Net income	$ 1,905	$ 1,613	$ 3,049	$ 3,047
Other Comprehensive Income
Currency translation adjustment	809	(700)	1,454	(595)
Cash flow hedges, net of tax:
Net derivative losses	(25)	(38)	(17)	(86)
Reclassification of net losses to net income	3	5	7	23
Reclassification of pension and retiree medical losses to net income, net of tax	26	75	23	211
Unrealized gains/(losses) on securities, net of tax	11	2	(2)	1
Other	1		(17)
Other Comprehensive Income Subtotal	825	(656)	1,448	(446)
Comprehensive Income	2,730	957	4,497	2,601
Comprehensive income attributable to noncontrolling interests	(64)	(11)	(93)
Comprehensive Income Attributable to PepsiCo	$ 2,666	$ 946	$ 4,404	$ 2,601

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Basis of Presentation and Our Divisions

6 Months Ended

Jun. 11, 2011

Basis of Presentation and Our Divisions

Basis of Presentation and Our Divisions

Basis of Presentation and Our Divisions

Basis of Presentation

Our Condensed Consolidated Balance Sheet as of June 11, 2011 and the Condensed Consolidated Statements of Income and Comprehensive Income for the 12 and 24 weeks ended June 11, 2011 and June 12, 2010, and the Condensed Consolidated Statements of Cash Flows and Equity for the 24 weeks ended June 11, 2011 and June 12, 2010 have not been audited. These statements have been prepared on a basis that is substantially consistent with the accounting principles applied in our Annual Report on Form 10-K for the fiscal year ended December 25, 2010 and in our Current Report on Form 8-K dated March 31, 2011. In our opinion, these financial statements include all normal and recurring adjustments necessary for a fair presentation. The results for the 12 and 24 weeks are not necessarily indicative of the results expected for the full year.

While the majority of our results are reported on a period basis, most of our international operations report on a monthly calendar basis for which the months of March, April and May are reflected in our second quarter results.

On February 26, 2010, we completed our acquisitions of PBG and PAS. The results of the acquired companies in the U.S. and Canada are reflected in our condensed consolidated results as of the acquisition date, and the international results of the acquired companies have been reported as of the beginning of our second quarter of 2010, consistent with our monthly international reporting calendar. Prior to our acquisitions of PBG and PAS, we recorded our share of equity income or loss from the acquired companies in bottling equity income in our income statement. Additionally, in the first quarter of 2010, in connection with our acquisitions of PBG and PAS, we recorded a gain on our previously held equity interests of $958 million, comprising $735 million which was non-taxable and recorded in bottling equity income and $223 million related to the reversal of deferred tax liabilities associated with these previously held equity interests. Our share of income or loss from noncontrolled affiliates is reflected as a component of selling, general and administrative expenses. See also Acquisitions and "Items Affecting Comparability" in Management's Discussion and Analysis of Financial Condition and Results of Operations.

In the first quarter of 2011, Quaker Foods North America (QFNA) changed its method of accounting for certain U.S. inventories from the last-in, first-out (LIFO) method to the average cost method. This change is considered preferable by management as we believe that the average cost method of accounting for all U.S. foods inventories will improve our financial reporting by better matching revenues and expenses and better reflecting the current value of inventory. In addition, the change from the LIFO method to the average cost method will enhance the comparability of QFNA's financial results with our other food businesses, as well as with peer companies where the average cost method is widely used. The impact of this change on consolidated net income in the first quarter of 2011 was approximately $9 million (or less than a penny per share). Prior periods were not restated as the impact of the change on previously issued financial statements was not considered material.

Our significant interim accounting policies include the recognition of a pro rata share of certain estimated annual sales incentives, and certain advertising and marketing costs, generally in proportion to revenue,and the recognition of income taxes using an estimated annual effective tax rate. Raw materials, direct labor and plant overhead, as well as purchasing and receiving costs, costs directly related to production planning, inspection costs and raw material handling facilities, are included in cost of sales. The costs of moving, storing and delivering finished product are included in selling, general and administrative expenses.

The following information is unaudited. Tabular dollars are in millions, except per share amounts. All per share amounts reflect common per share amounts, assume dilution unless otherwise noted, and are based on unrounded amounts. Certain reclassifications were made to the prior year's amounts to conform to the 2011 presentation. This report should be read in conjunction with our Annual Report on Form 10-K for the fiscal year ended December 25, 2010 and our Current Report on Form 8-K dated March 31, 2011, in which we reclassified historical segment information on a basis consistent with our current segment reporting structure.

Our Divisions

We are organized into four business units, as follows:

1. PepsiCo Americas Foods (PAF), which includes Frito-Lay North America (FLNA), Quaker Foods North America (QFNA) and all of our Latin American food and snack businesses (LAF);

2. PepsiCo Americas Beverages (PAB), which includes PepsiCo Beverages Americas and Pepsi Beverages Company;

3. PepsiCo Europe, which includes all beverage, food and snack businesses in Europe; and

4. PepsiCo Asia, Middle East and Africa (AMEA), which includes all beverage, food and snack businesses in AMEA.

Our four business units comprise six reportable segments (also referred to as divisions), as follows:

• FLNA,

• QFNA,

• LAF,

• PAB,

• Europe, and

• AMEA.

	12 Weeks Ended						24 Weeks Ended
	6/11/11			6/12/10			6/11/11			6/12/10
Net Revenue
FLNA	$	3,090		$	2,992		$	5,994		$	5,856
QFNA		583			582			1,223			1,265
LAF		1,808			1,538			2,916			2,521
PAB		5,629			5,548			10,160			8,313
Europe(a)		3,794			2,498			5,420			3,542
AMEA		1,923			1,643			3,051			2,672
	$	16,827		$	14,801		$	28,764		$	24,169
	12 Weeks Ended						24 Weeks Ended
	6/11/11			6/12/10			6/11/11			6/12/10
Operating Profit
FLNA	$	853		$	800		$	1,627		$	1,528
QFNA		167			159			381			354
LAF		274			233			445			378
PAB		983			952			1,541			1,025
Europe		407			276			470			394
AMEA		299			267			445			422
Total division		2,983			2,687			4,909			4,101
Corporate Unallocated
Net impact of mark-to-market on commodity hedges		(9	)		(4	)		22			42
Merger and integration costs		(12	)		(24	)		(54	)		(112	)
Venezuela currency devaluation		–			–			–			(129	)
Asset write-off		–			–			–			(145	)
Foundation contribution		–			–			–			(100	)
Other		(208	)		(198	)		(397	)		(356	)
	$	2,754		$	2,461		$	4,480		$	3,301

	Total Assets
	6/11/11		12/25/10
FLNA	$	6,217	$	6,027
QFNA		1,194		1,217
LAF		4,327		4,053
PAB		33,006		31,622
Europe(a)		21,637		13,032
AMEA		5,906		5,569
Total division		72,287		61,520
Corporate(b)		3,393		6,394
Investments in bottling affiliates		–		239
	$	75,680	$	68,153

^(a)  Change in 2011 relates primarily to our acquisition of WBD.

^(b)  Corporate assets consist principally of cash and cash equivalents, short-term investments, derivative instruments and property, plant and equipment.