March 13, 2014
Board of Directors
700 Anderson Hill Road
Purchase, NY 10577
Dear Members of the Board:
We were extremely disappointed by Mr. Cook’s February 27th response to our white paper. The dismissive tone of his letter suggests that you do not appreciate the degree to which PepsiCo’s shareholders, the owners of the company, are frustrated. Given the company’s prolonged underperformance, we believe the Board and management are obligated to provide shareholders substance and analytics – not just platitudes and rhetoric – to defend the alleged benefits of the “Power of One.”
We call on you to back up your assertion that “much of Trian’s data is selective and, in many instances, misused.” Please identify the specific data you are referring to. Our white paper is based on more than a year of exhaustive due diligence as well as decades of experience in the beverage industry as a former supplier and competitor. Our sources include publicly available information filed by the company, industry data and conversations with analysts, industry participants, customers, other knowledgeable sources and competitors from around the world. Among the sources we spoke with are some of the most respected people in the consumer products industry. We stand by our work product and insist that you furnish shareholders with information and transparency addressing the following “Trian data”:
- Warning! GuruFocus has detected 5 Warning Signs with PEP. Click here to check it out.
- PEP 15-Year Financial Data
- The intrinsic value of PEP
- Peter Lynch Chart of PEP
- Excessive overhead costs. Provide the amount and detail behind PepsiCo’s unallocated and, most importantly, allocated corporate expense.
- Advertising declines. Show direct consumer advertising as a percentage of sales for snacks and beverage by year since 2005 (the year before Indra Nooyi became CEO).
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