Illustration by: Craig & Karl, designers of one of the ...

Illustration by: Craig & Karl, designers of one of the first bottle labels for LIFEWTR, PepsiCo's new premium water brand. See Page 9.

2016 PepsiCo Annual Report | 02

Delivering Performance with Purpose

Our 2016 results demonstrate our continued ability to generate attractive shareholder returns while creating value for all of our stakeholders.

9%

core constant currency EPS growth1

3.7%

organic revenue growth1

cost savings since 2011 associated with environmental

sustainability initiatives

$600M

~25% net revenue from Everyday Nutrition2 products

>$7B

cash returned to shareholders through

dividends and share repurchases

>$1B annual savings enabled by our productivity agenda

1. Reported net revenue declined 0.4%, primarily due to foreign currency translation. Reported EPS increased 19%. Organic, core and constant currency results, free cash flow excluding certain items, as well as ROIC and core net ROIC, are non-GAAP financial measures. Please refer to "Reconciliation of GAAP and Non-GAAP Information" beginning on page 146 of this Annual Report for definitions and more information about these results, including a reconciliation to the most directly comparable financial measure in accordance with GAAP. 2. PepsiCo products with nutrients like grains, fruits and vegetables, or protein, plus those that are naturally nutritious like water and unsweetened tea.

2016 PepsiCo Annual Report | 03

Dear Fellow Shareholders,

Indra K. Nooyi PepsiCo Chairman of the Board of Directors and Chief Executive Officer

Table of Contents 03 Letter to Shareholders 12 Financial Highlights 13 PepsiCo Board of Directors 14 PepsiCo Leadership 15 PepsiCo Form 10-K 146 Reconciliation of GAAP

and Non-GAAP Information 147 Forward-Looking Statements 148 Common Stock and

Shareholder Information 149 Corporate Information

I'm so pleased to report that 2016 marked another exceptional year for PepsiCo. Across the company, we delivered top-tier financial performance, the kind of performance that's commensurate with the confidence you've placed in us to steward this iconic corporation.

Here is a snapshot of what we accomplished over the past year1:

? As a result of a number of factors--from the strong positions we've built in growing categories, to an expanding portfolio that includes 22 billion-dollar brands, to world- class go-to-market systems and strong retail and foodservice partnerships--we grew organic revenue 3.7%, in line with our goal of approximately 4%.

? Our core operating margins increased 80 basis points compared to 2015, enabled by our topline performance and productivity agenda, which has yielded approximately $1 billion in annual savings since 2012.

? Even as we're growing our organic topline and expanding our core operating margins, we're also investing in the future of our company, increasing advertising and marketing as a percent of sales by 145 basis points over the past five years--40 basis points over the past year alone. We've also increased our investment in research and development (R&D) by 45% since 2011, spending approximately $3.5 billion cumulatively on R&D over the past five years.

? Core constant currency earnings per share (EPS) grew 9% versus our initial goal of 6%. This growth includes the impact of deconsolidating Venezuela in 2015, which caused an approximately 2.5 percentage point drag on earnings. Excluding the impact of deconsolidating Venezuela, core constant currency EPS grew 12%.

2016 PepsiCo Annual Report | 04

Transforming our Portfolio

We continue to meet changing taste preferences by offering new products that appeal to health-conscious consumers and expanding our Everyday Nutrition business, unlocking new opportunities for topline growth.

Tropicana Essentials Probiotics

Tropicana Essentials Probiotics, a 100% juice with one billion live and active cultures per serving, earned an "Innovation of the Year" award from Beverage Industry magazine. The brand was the first to bring probiotics to the mainstream juice consumer.

Quaker "Bring Your Best Bowl"

Quaker set out to find its next oatmeal flavor by inviting Americans to participate in the first-ever "Bring Your Best Bowl" contest. Fans across the country helped celebrate the versatility of oats by submitting unique and creative recipe ideas. Quaker ran similar programs in China and India.

Sabra Spreads

Sabra launched Sabra Spreads, a line of wholesome, refrigerated sandwich spreads with 75% less fat than the leading mayonnaise brand. The launch continued the expansion of the Sabra brand into new categories, which now include guacamole, salsa and other dips.

Simply Snacks from Frito-Lay

Frito-Lay expanded its Simply lineup, offering great-tasting versions of classic snacks that appeal to changing consumer preferences. Simply Organic Tostitos chips are gluten free, non-GMO verified, made with sea salt, and have no artificial colors, flavors, or preservatives.

2016 PepsiCo Annual Report | 05

? Our disciplined capital allocation and prudent working capital management enabled us to improve core net return on invested capital 190 basis points to 21.5% and generate approximately $7.8 billion in free cash flow, excluding certain items, which substantially exceeds our goal of more than $7 billion.

? And we met our goal of returning approximately $7 billion in cash to shareholders through dividends and share repurchases. In fact, we increased our annualized dividend per share for the 45th consecutive year beginning with our June 2017 payment.

These are impressive accomplishments. And they build on the progress we've made over the 10 years I've had the honor of serving as Chairman and CEO of this great company. Looking back on the past decade, our annualized total shareholder return has been 8.2%, 130 basis points ahead of the S&P 500. And our compounded annual dividend growth has been roughly 10%. In fact, we've returned almost $70 billion to you in the form of dividends and buybacks.

By nearly any measure, that's a strong record of performance, especially during a period of time that witnessed the 2008 financial crisis and a number of other major challenges. And reflecting on the strength, the consistency, of that performance today, I'm reminded of how we achieved it. Part of the reason was our momentum when I took the helm. As a result of able stewardship by generations of associates--from the c-suite to the front line--we inherited a solid foundation, along with a proud legacy, that we could build on.

But from the beginning, it was also clear that if we wanted to make sure our future was as bright as our past, we needed to transform our company in a number of critical ways.

With changing consumer preferences, reflecting a growing shift toward a healthier lifestyle in the U.S. and around the world, we needed to transform our portfolio with more nutritious options.

We continued to expand our range of beverages, offering consumers a set of choices that are on-trend and well-positioned for future growth.

With increasing strains on natural resources, and the increasing importance governments were placing on protecting our planet, we needed to transform our operations to limit our environmental footprint.

And with Millennials entering the workforce in large numbers, we needed to transform our workplace and our culture to make sure we were meeting the evolving expectations of a new generation of associates.

The urgency of responding to all these shifts--the necessity of navigating a series of demographic, environmental and societal trends that were challenging us like never before--is what gave rise to the approach all of us have come to know as "Performance with Purpose." From the start, Performance with Purpose has been more than a slogan, more than a single program. It has been an overarching vision--a governing philosophy--guiding every aspect of our business.

At heart, it's about building a healthier future for all our stakeholders. And that starts with generating healthy financial returns for all of you, my fellow shareholders. But the truth is, that's just table stakes. Our challenge is to do more than simply deliver healthy returns. Our challenge is to deliver them consistently, sustainably, quarter after quarter, year after year. And the way we'll continue doing that is by doing the same thing we've been doing over the past ten years. And that means:

? Making healthier foods and beverages for our consumers;

? Generating healthy growth for our retail and foodservice partners;

? Contributing to a healthier planet while boosting our bottom line;

? Creating a healthy workplace and culture for our associates; and

? Promoting healthier communities wherever we operate.

Together, these steps form a virtuous cycle that is powering our ongoing transformation as a company, enabling us to do well by doing good, positioning us for success not only over the short run, but also over the long run, and securing our place as one of the defining corporations of the 21st century.

2016 PepsiCo Annual Report | 06

Driving Retail Sales

Cutting-edge consumer engagement programs once again made PepsiCo a powerful driver of food & beverage retail sales growth around the world.

Clockwise: We launched a global campaign behind our UEFA Champions League partnership, involving our iconic brands Pepsi and Lay's; Gatorade introduced the "Future of Sports Fuel," showcasing breakthrough innovation that promises to change the way athletes hydrate and fuel; Sabra launched its "Unofficial Meal" campaign, inviting consumers to enjoy wholesome food together; and our PepsiMoji campaign spread across more than 100 markets globally.

3. Source: IRI Total Store Advantage ILD, POS data ending 12/25/16, IRI Consulting analysis.

No.1

Contributor to U.S. Food & Beverage Retail Sales Growth3

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