• A rebate is a financial return from a supplier based on certain conditions being met - typically volume, loyalty, or performance thresholds. 
• Rebates are commonly built into supplier agreements and negotiations as an alternative avenue to drive PepsiCo benefit outside of year over year rate reductions. 

• Rebates are constructed & recognized in different ways in contracts, often through reaching ties in spend, volume or sometimes a lump sum. 
• Historically, productivity has been measured on a year over year improvement based on an absolute value received. 
• In some cases, due to reduction in spend - the rebate % may increase YoY and absolute $ received is lower YoY
• Procurement cannot control volume or rate of consumption or budgets. 

• Should productivity be measured on absolute dollars received?
• Should productivity be measured on increase on rebate rate instead?

• Rebates can be counted as Productivity if there is a reduction of effective Cost Per Unit vs PY. 

Governance

• It should be recurring in nature and calculated on YoY improvement basis. 
• Effective change in rebate rate is the key driver for calculation. 
• In case of a tiered structure tie to volume, weighted average decrease in rate should be calculated for both years to compare if productivity is generated. 
• Follow the TCO principle and not just upfront price. 
• If the rebate is a lump sum vs rate or percentage, then the productivity can be measured on the YoY improvement on the absolute $ received. The incremental portion of rebate vs PY should be recognized as productivity.