Geographic expansion and diversification bring greater balance to business portfolio

Our international operations are an increasingly important contributor to PepsiAmericas’ overall results. We have made significant progress in improving the profitability of our existing markets, as well as expanding our geographic footprint into emerging markets.

Just three years ago, PepsiAmericas’ Central Europe and Caribbean businesses generated their first combined profit. In 2006, international businesses, including the newly acquired Romanian market, contributed over $25 million in operating profit.

Increasing significance. International operating profits rose to $25.9 million in 2006, as existing markets doubled their profits from a year ago and we added Romania in July 2006.

Portfolio expansion was at the heart of these improved results. In Central Europe, we now have leading brands in the growing juice and tea categories driven by package and product innovation, as well as increased marketing activity. We also have a broader lineup in the important water category in Hungary, with the recent launch of a low mineral water. In the Caribbean, we continue to broaden our product portfolio, including recent additions of a local juice brand, beer and a non-alcoholic malt beverage. We have also partnered with Frito Lay in Trinidad, Hungary and the Czech Republic, increasing customer relevancy while leveraging our supply chain.

In 2006, we completed the purchase of Quadrant-Amroq’s bottling operations in Romania, with distribution rights in Moldova, extending our geographic footprint in a high-growth, emerging market. As Romania enters the European Union in 2007, we expect additional synergies and growth, even as we manage short-term challenges of higher raw material costs. We also entered into distribution agreements in Latvia, Lithuania and Estonia, further extending our reach with no capital investment as our Poland operations service these markets.

In the years ahead, we will continue to drive expansion in our product portfolio and geographic footprint to further strenghten our international businesses.