Directs | Pepsi Productivity

Materials and ingredients purchased that contribute to the inventory valuation of our products such as Aluminum, Corn, Energy, Oats, Resin, Sweeteners, Veg Oil and Wheat. Two levers impacting Directs:

Value Engineering: Projects that result in tangible cost reductions through ingredient and/or packaging optimization. Impacts Raw Material
Conversion: Costs associated with converting or processing. Non-market & exchange-basis freight costs

Commodity Productivity

Value Engineering

Driven by formula / recipe change that leads to less quantity or lower cost materials (ingredient or packaging optimization).
All savings are net of inflation (i.e., supply reengineering) & identifiable incremental costs that relate to the initiative and have been aligned with operations.

Commodity Compressible

Reduction in raw materials procurement landed costs
Reduction in conversion cost
Optimization of inward freight cost
Commodity compressible productivity is adjusted for compressible inflation

FG/Co-Pack

FG Purchases of 3rd Party brands
3rd Party Brand Concentrate
Commodity costs associated with Co-Packing under the full case cost model (PEP does not own the material inventory) and the tolling method (PEP owns the material inventory) is included in net commodities.

DIRECTS OVERVIEW – Value Engineering vs. Conversion

DIRECTS PRODUCTIVITY VS. INDIRECTS PRODUCTIVITY: DELINEATING THE DIFFERENCE

DIRECTS PRODUCTIVITY VS. INDIRECTS PRODUCTIVITY: DELINEATING THE DIFFERENCE

DIRECTS PRODUCTIVITY LEVERS: VOLUME & PRICING INITIATIVES Description, Treatment, and Examples

Note: If a Price Initiative or Task has not been built into the prices being used to calculate inflation, those projects should not be included in calculating gross inflation. They will be “netted off” the inflation to obtain a Net Impact to the P&L.

Commodity Productivity​

Value Engineering​

Commodity Compressible​

FG/Co-Pack​