Good morning and welcome to PepsiCo's Fourth Quarter 2015 Earnings Conference Call. Your lines have been placed on listen-only until the question-and-answer session. Today's call is being recorded and will be archived at www.pepsico.com. It is now my pleasure to introduce Mr. Jamie Caulfield, Senior Vice President of Investor Relations. Mr. Caulfield, you may begin.

Thank you. Joining me on the call today are Indra Nooyi, PepsiCo's Chairman and CEO; and Hugh Johnston, PepsiCo's Vice Chairman and CFO. We'll lead off with prepared comments and then we'll turn to Q&A. And recognizing it's a busy earnings day, we'll end the call at about 8:45. As we begin the call, it's important to note the following. We will make forward-looking statements on this call. Any forward-looking statement inherently involves risks and uncertainties that could cause actual results to differ materially from the current predictions and expectations. Information on such risks can be found in today's earnings release and our most recent Form 10-K and subsequent SEC filings. In addition, we will discuss results using non-GAAP measures. You can find GAAP to non-GAAP reconciliations on our website in the Investors section under the Events and Presentations tab. As we discuss today's results, keep in mind that our fourth quarter comprises the 16 weeks ended December 26 for our North American operations and the months of September through December for most of our operations outside North America. And now, it's my pleasure to introduce Indra Nooyi. Indra K. Nooyi - Chairman & Chief Executive Officer: Thank you, Jamie, and good morning, everyone. And if I sound funny this morning, it's because I'm nursing a very bad cold. I'm pleased to announce that PepsiCo has delivered to shareholders a terrific year in 2015, with strong organic revenue growth and 10% core constant currency EPS growth. We simultaneously enhanced our competitiveness and prospects for future growth, while meeting or exceeding each of the 2015 financial goals that we shared with you this time last year. From a strategic perspective, we held or gained market share across most of our key markets. We built the strength of our brands, evidenced by…

Thank you. Our first question comes from the line of Dara Mohsenian of Morgan Stanley. Dara W. Mohsenian - Morgan Stanley & Co. LLC: Hey. Good morning. Indra K. Nooyi - Chairman & Chief Executive Officer: Morning, Dara. Dara W. Mohsenian - Morgan Stanley & Co. LLC: So first, can you give us your organic sales growth in emerging markets in Q4? And as we look out to 2016, Indra, it sounded like you were very cautious on the macro environment, so any impact in terms of macros on your business in emerging markets in Q4, if you could provide some more detail there and also, so far, what you're seeing in Q1, given we're well into the quarter, and any thoughts just in general on the level of risk and your visibility on the 4% organic sales growth guidance. And then also, on the macro side, can you just review trends in gas and convenience in the U.S. in both snacks and beverages and your thoughts on consumer spending in that channel for 2016? Thanks. Indra K. Nooyi - Chairman & Chief Executive Officer: So let me start with the macro numbers. Go ahead. Hugh F. Johnston - Vice Chairman & Chief Financial Officer: Yeah, Dara, this is Hugh. To answer your question on developing and emerging markets, the growth rate would've been about 6% for the quarter. Indra K. Nooyi - Chairman & Chief Executive Officer: So, Dara, let me talk about the world and what we're seeing around the world. And it's not just emerging markets. We travel around the world, and let me just take a quick walk around the world. As you look at Latin America, Brazil, Argentina, if you look at Colombia, between a combination of the economic issues in the country and the…

Your next question comes from the line of Ali Dibadj of Bernstein. Indra K. Nooyi - Chairman & Chief Executive Officer: Morning, Ali. Ali Dibadj - Sanford C. Bernstein & Co. LLC: How are you? Hopefully, you'll feel better soon. So I wanted to get a better sense of your 2015 to 2016 EPS bridge, because if you're still actually getting this $1 billion of cost savings, you're buying back kind of this $3 billion similar level of stock purchase, that, together, would be kind of 11% or 12% EPS growth. And ex-Venezuela, ex-currencies, you're only saying you're going to get something like 8%. And I'm having trouble figuring out what that gap is. It makes me feel that all else equal, so if you're not cutting costs, you're not doing anything, the core business is actually shrinking, which clearly can't be with a 4% top-line growth number organically for next year. So I'm just trying to figure out the bridge, if you can, more quantitatively between 2015 and 2016 than what you've already offered, particularly on the core piece, please. Indra K. Nooyi - Chairman & Chief Executive Officer: Absolutely, Ali. Let me toss this to Hugh, who'll give you a complete answer on this. Hugh F. Johnston - Vice Chairman & Chief Financial Officer: Sure, happy to. Good morning, Ali. If you add up the numbers, you're right. Revenue growth, as we've said, is to be about 4%. Productivity will be about a $1 billion benefit. Commodities, of course, are inflationary, low single digits. The other factors built into our numbers are number one, we will see operating expense inflation. Recall, our bucket of OpEx is about $28 billion. A little over half of that is labor, and labor will inflate somewhere around 4% for the year. In addition to that, you'll see continued investments in advertising and marketing, as you have over the last couple of years. And the reason we continue to invest in that is we continue to get good returns on it, hence the 4% to 5% revenue growth you've seen over the last couple of years. You will see higher investment in research and development as well, same answer on that. We're continuing to see good returns on that. And then, of course, with the revenue growth that we've seen over the last couple of years, we do need to invest in manufacturing lines. We need to invest in routes. We need to invest in racks to place the products on. So when you add all of those factors up and then add into that geographic mix, which is a slight drag, you wind up with a total of 8% on earnings per share growth.

Your next question comes from the line of John Faucher of JPMorgan. Indra K. Nooyi - Chairman & Chief Executive Officer: Morning, John.

Good morning, Indra. Wanted to talk a little bit about sort of the longer-term outlook for the pricing environment; and so it makes sense, given all the inflationary pressures that we're seeing in terms of pricing in emerging markets, I guess the question really becomes can you sustain pricing in developed markets, particularly given – I know your raw materials are up slightly, but there are some deflationary raw materials. And there seems to be some concern about downward pressure on pricing maybe in the U.S. So as we look at the 2015 results, low single-digit volume, a little bit more pricing, do you see that changing over time? And can you continue to get the pricing in developed markets that would allow you to sort of sustain that sort of, let's say, 3% to 4% pricing number going forward? Thanks. Indra K. Nooyi - Chairman & Chief Executive Officer: John, that's a great question because we talk about that and worry about that all the time. I think there are two or three things to think about. One is in categories which are not growing robustly, like carbonated soft drinks, there you should manage pricing very carefully because there's no point trying to drop the pricing, because it's not going to drive additional demand. So in that particular category, through a combination of revenue management, through a combination of intelligent price pack architecture, you just figure out how to get some pricing from the marketplace. So let's hold that on the side. Second, the area where we really look for pricing is through innovation. Because if there's one place where the consumer likes the news and is willing to pay up for, it's for innovation. And we've been really ramping up our innovation machine to be able to get price realization through innovation. The third is through channel mix. And if you sell more single-serve, if you sell to the channels where the consumer is willing to pay a little bit more, that clearly is a help. And lastly, even if you don't get the pricing in some places, we want to take our costs down. So we've been looking at how to reengineer our supply chain end-to-end, how to work with customers to re-think our supply chain. So there's a lot of work going on in our company in terms of rethinking our end-to-end costs to align our supply chains with customers, so we can mutually take out costs and then figure out a way to pass some of it to the consumer. So that's really our strategy on pricing.

Your next question comes from the line of Steve Powers of UBS Investment.

Hi. Thanks. Good morning. So, on the marketing step-up, which you obviously increased a lot this year and in the fourth quarter especially, can you talk a little bit more about where that investment is focused? Is it broad-based? Is it more food versus beverages, domestic versus international? Any skew would be helpful. And then more broadly, I'm just wondering if there's anything you're seeing out there that gives you more confidence on the margin in that spending, because I'm struck now by how many CPG companies that have emphasized a return to A&P investment in the last few weeks. But it's interesting against the backdrop – the macro backdrop, as you pointed out, is not getting easier. So is the increase that you're making, is it PepsiCo-specific against proactive opportunities? Is it against things that may be sort of deceptively encouraging for the broader industry? Or is any of your increase simply driven by a need to kind of keep pace and maintain share of voice versus peers that are also stepping up their investments? Any clarity there would be helpful. Thank you. Indra K. Nooyi - Chairman & Chief Executive Officer: Hugh, why don't you talk to the where we're putting the money and then I'll talk about the rest here. Hugh F. Johnston - Vice Chairman & Chief Financial Officer: Sure, happy to. A couple of comments on that, Steve, number one, it is broad-based. I wouldn't say it's targeted to any particular business or any particular geography. As we cut across snacks and beverages, numbers went up in both categories. As we cut across the geographies, all of our geographies saw an increase in advertising and marketing spend. Number two, in terms of where is the money going, I would say that more of it is…

Your next question comes from the line of Bill Schmitz with Deutsche Bank. Indra K. Nooyi - Chairman & Chief Executive Officer: Morning, Bill.

Hi. Good morning. Hey, can we just go back to North America a second and just talk about the impact on Frito from the pack down (34:00) changes and the go-to-market changes? So can you just quantify what you guys think that did to sales over the last year and when it gets lapped? And then maybe the sustainability of growth at Gatorade, which has been phenomenal, and a lot of it's been driven by category growth. So is that broadly just sort of like the fitness health and wellness trend in the U.S. or do you think it's driven by something more dynamic? Indra K. Nooyi - Chairman & Chief Executive Officer: I'll talk about Gatorade and then you can get your thoughts straight... Hugh F. Johnston - Vice Chairman & Chief Financial Officer: Sure. Indra K. Nooyi - Chairman & Chief Executive Officer: On what detail you can provide on Frito. I think Gatorade benefited in 2015 from three factors. One is, it was a hot year, and it was hotter for a longer period of time. And Gatorade does well when the temperature is above normal, especially for as long as it was during the year. So we shouldn't underestimate the impact of that. Second is, the Gatorade innovation has been very good. Fierce and Frost alone, I think, contributed significantly to sales growth. And all the new stuff that Gatorade is doing with the smart bottle, with the pods that are tailored for the athlete, the Gatorade Prime and Recover, all of that is giving more legitimacy to the brand. And I think that it's driving more of the Gatorade sales. And third, I think on a competitive basis, relatively speaking, the fact that so many athletes are choosing Gatorade now is allowing Gatorade to far…

Your next question comes from the line of Judy Hong of Goldman Sachs. Indra K. Nooyi - Chairman & Chief Executive Officer: Morning, Judy. Judy E. Hong - Goldman Sachs & Co.: Good morning, everyone. How are you? Indra K. Nooyi - Chairman & Chief Executive Officer: Good. Judy E. Hong - Goldman Sachs & Co.: So I guess I just wanted to go back to Frito-Lay and maybe just get your color on the broader kind of macro snacking environment in the U.S. The confectionery category has been a little bit soft. Salty snacks is more stable, but just in terms of the context of the U.S. consumers perhaps being a bit better off, seems like maybe the category could do a little bit better. So any color just in terms of where the consumers are going across the broader macro snacking category would be helpful. Indra K. Nooyi - Chairman & Chief Executive Officer: Let me step back. The overall macro snacking category probably growing somewhere in the 3% to 4%, and the reason Frito does as well as it does is because it takes occasions from all other macro snacking categories. And so Frito's able to go after crackers, able to go after sweet occasions, through interesting products that comes from a salty heritage. So we have a frying platform. We have a baking platform, different sort of baking platforms. And we leverage those platforms to go after all of those occasions. And I think that's what creates an advantaged model within Frito-Lay. We are not in a zero-sum game within macro snacks, where any growth that we get has to come at the expense of another category already participating. In the case of Frito, we are in one category and reach out of the core (38:56). Remember the old strategy of grow the core and add more? That's really what we're doing. We're looking at the demand of consumers and wondering how we can serve that demand with a Frito-Lay option. And whether it's Cheetos, Fritos or it's the chocolate-covered Lay's that we offered or all the new products on slate for next year, I think we're just going after other macro snacking occasions. And that's why other companies are hurting and Frito-Lay is doing so well. And you combine that with our DSD system, our Power of One advantage, we can really get a tremendous advantage with customers.

Your next question comes from the line of Mark Swartzberg of Stifel, Nicolaus. Mark Swartzberg - Stifel, Nicolaus & Co., Inc.: Thanks. Good morning, Indra. Good morning, Hugh. Indra K. Nooyi - Chairman & Chief Executive Officer: Morning, Mark. Mark Swartzberg - Stifel, Nicolaus & Co., Inc.: Two questions on Latin America, if I could, one is, any detail you can give us on the "strategic investments" in the quarter, to what extent they're brand and forward-facing and to what extent they were otherwise. And then secondly, it's kind of early days since you've integrated snacks and beverage in Latin America, but could you give us an update on how that's going and whether 2016 is a year where we should expect benefits from that to be more significant? Just how that's going and what your outlook from that is. Indra K. Nooyi - Chairman & Chief Executive Officer: Investments in Latin America. Hugh F. Johnston - Vice Chairman & Chief Financial Officer: Yeah, sure, happy to start with that. Good morning, Mark. When you look at Latin America, you really have to take a step back, because it's such a broad and diverse geography, both in terms of cultures and in terms of economic outlook for the near-term. Obviously, Brazil has got a significant number of challenges facing into 2016, as it has over the last couple of years. At the other end of the spectrum, Mexico is, as an economy, performing quite well. So if you think about what we're trying to accomplish, as you move south into Latin America, a lot of our focus has been around making our supply chain more efficient and making our management structures more efficient. And a number of the investments that we made in the fourth quarter there were geared towards…

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