PepsiCo, Inc. (PEP) Q3 2011 Earnings Report, Transcript and Summary

Good morning, and welcome to PepsiCo's Third Quarter 2011 Earnings Conference Call. [Operator Instructions] 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, operator. With me today are Indra Nooyi, PepsiCo's Chairman and CEO; Hugh Johnston, PepsiCo's CFO; John Compton, PepsiCo Americas Foods CEO; and Zein Abdalla, CEO of PepsiCo Europe. Indra will lead off today's call with a review of our overall performance. Hugh will cover the financials and our balance of year outlook, and then we'll move on to Q&A. Before we begin, please take note of our cautionary statement. This conference call includes forward-looking statements, including statements regarding 2011 guidance based on currently available information, and our actual results could differ materially from those predicted in such forward-looking statements. Statements made on this conference call should be considered together with the cautionary statements and other information contained in today's earnings release and in our most recent periodic reports filed with the SEC. To find disclosures and reconciliations of non-GAAP measures that we may use when discussing PepsiCo's financial results, please refer to the Investors section of PepsiCo's website under the Investor Presentations tab. Now it's my pleasure to introduce Indra Nooyi.

Thank you, Jamie, and good morning, everyone. This morning, I'd like to give you my perspective on our third quarter performance and share with you my thoughts on our progress against our key priorities. So let me start with our performance in the quarter. We grew global volume in both snacks and beverages, which, combined with strong pricing, drove net revenue growth of 9%, excluding Wimm-Bill-Dann. Our global nutrition portfolio, which is a subset of our snacks and beverage business, grew revenues 8%, excluding acquisitions. Core division profit was up 6%, and core EPS was up 7%. We are encouraged by these volume and revenue gains. We implemented incremental pricing actions in the quarter as planned, and the net pricing and volumes were in line with our expectations. As a company, we remain committed to our 5 strategic imperatives. So let me review our performance against each of them, starting with snacks. Global snacks volume rose 8%, and excluding Wimm-Bill-Dann, revenue increased 12% with steady growth coming from our larger, more developed markets and even faster growth in emerging markets. In our largest snack business, Frito-Lay North America, we delivered 4% revenue growth and 6% operating profit growth on a 1% volume gain. We achieved positive price realization, largely as a result of the pricing actions we implemented, and we are pleased with the consumer response. It's a testament to the strength of Frito-Lay's brands and product portfolio and to the organization's ability to execute. In fact, we delivered top line growth in most of our largest snack brands. Lay's, Doritos, Cheetos and Ruffles each posted solid revenue growth, driven by strong core innovation. And our growth in our potato chips business, in particular, is worth a comment. This segment grew net revenue mid-single digits on the strength of our…

Great. Thanks, Indra, and good morning, everyone. Let me comment on our financials for the quarter and our outlook. Core EPS was up 7% in the quarter, reflecting 6% core division operating profit growth, and approximately 1 point of corporate leverage. Core division operating profit growth was driven by strong top line growth. We had good net price realization in the quarter across our businesses, as we took incremental pricing on top of this year's earlier pricing actions to partially offset commodity inflation. As you know, commodity inflation has ramped up as we moved in the second half of the year as we expected, so some of the incremental pricing is simply offsetting the incremental inflation. In addition, we experienced the reversal of the concentrate shipment timing benefits that we experienced in the second quarter. These items negatively impacted Europe's and EMEA's operating profit by about 4 and 9 percentage points in the quarter, respectively. As a consequence, operating margins compressed somewhat in the third quarter as we anticipated. Below the core division operating profit line, we had some deleverage from corporate unallocated costs, where we were lapping a gain in the prior year of approximately $60 million related to our post-retirement benefits program. The tax rate in the quarter was lower year-on-year based on an adjustment to our estimate of geographic profit mix, and our fully diluted share count for the quarter was approximately 1% lower year-on-year, reflecting the impact of our share repurchases. Net, the impact below the division operating profit line of lapping the gain in corporate costs, the lower tax rate and the reduced share count provided approximately 1 point of core EPS leverage. Now let me comment briefly on pricing. Our third quarter pricing actions were implemented as planned, and the elasticities we've observed so…

[Operator Instructions] Your first question comes from the line of Kaumil Gajrawala with UBS.

Can we just talk about Russia a bit? I think you mentioned it was up 70% over the last 2 years. Can you maybe comment on how Russia's done a bit more recently? And then also with how much you've invested in that market over the last few years, it sounds like you may have withdrawn some television advertising through the end of the year. So if you could just talk about some of the context on that decision.

Yes, we have Zein Abdalla here, Kaumil, and he stands ready to answer your questions. Go ahead, Zein.

Kaumil, look, it's always an absolute pleasure to talk about Russia. As you know, it's one of our largest businesses globally and a market that we really believe has an enormous long-term potential. The fundamentals in Russia are very strong. It's one of the countries that has got, I think, a very robust set of economic indicators, low debt ratios, good foreign exchange reserves and strong and, obviously, continuous leadership. Now, nonetheless, it has gone through some short-term challenges, as we've seen how commodity inflation and disposable incomes have challenged some of the consumer markets. And also, Russia has experienced some of its own local inflation. If you'll all recollect in 2010, they experienced a very hot summer that had a detrimental impact on their agricultural programs, and certainly, things like wheat and potato cost, and basic commodities went up quite radically in terms of price. But against that backdrop, I have to say we're delighted with the performance of our business, competitively, very strong. We've continued to manage our pricing carefully to protect gross margins and to continue to drive revenue growth. And that's across all of the diverse categories in which we operate. Now, clearly, there will be a few more challenging months still ahead in Russia, and this is where scale of your operating business and the strength of your operating businesses really, really counts. At more than 2x the scale of our nearest competitor, with this very diverse operating model across a diverse set of categories and really just a tremendous Power of One model, both in terms of the supply chain that we operate across that geography, the strength of our go-to-market systems, both in traditional trade and organized trade. So yes, a very strong performance competitively in Russia. Now let me just turn to the comment you made about advertising. I mean, clearly, in these type of volatile conditions and in a developing market, one of the key things is stay agile with where you make your investments. We've continued to make investments in Russia, but we have emphasized in our investments in go-to-market systems and our selling capability. We've expanded significantly the number of routes in 2011. We’ve put more than 250 new routes to support that very broad-based business. We've continued to invest very strongly in coolers and racks because driving our single-serve business, driving our traditional-trade business and having a platform to leverage all of those categories across is critical to our long-term future. So we're pleased both with the short-term performance. We are maintaining investment, but a slightly different emphasis in the shape of that investment.

Your next question comes from the line of Dara Mohsenian with Morgan Stanley.

Hugh, I know you're not giving specific guidance on 2012, but can you at least talk conceptually about some of the puts and takes as you look out to 2012 in terms of consumer demand and commodities?

Dara, I appreciate the question. And of course, there's desire to hear it right now. But I think to get into any level of specificity that would be helpful to you in 2012 is just simply premature. With the commodities markets as volatile as they are, with the economies as volatile as they are, to start getting into where we might go, I think, would probably just -- it's too early as we sit in mid-October. The things I would say are -- and as we think about not just 2012 but Q4 as well, the things we clearly need to do are, number one, we clearly need to ensure that our brands are sharply defined and well supported; we need to make sure that our pricing is competitive; we need to make sure that our innovation is well supportive; and to fund all of that, we need to be sure that we absolutely max out on productivity. So when you talk about what are the things that we're working on, it's truly working on those things. And if we do those things successfully, I'm confident we'll win in the marketplace, and we'll win financially, and investors will be well-rewarded for it.

Okay. That's helpful. And then you talked about potentially taking some additional pricing in Q4. Can you give us some more detail there? Is that focused more in beverages or snacks or both areas? And from a geographic standpoint, would it be more focused on the U.S. or potentially also international too?

Yes, it's really the things that we've talked about up to now. So the Gatorade pricing, of course, is going in, in Q4. The single-serve pricing in Frito-Lay is going in, in Q4. And then there are some select areas internationally where we're pricing. But by and large, even by now, it's in the marketplace pretty much.

Your next question comes from the line of John Faucher with JPMorgan. John A. Faucher - JP Morgan Chase & Co, Research Division: Was wondering if you could sort of go through by the divisions and talk about the elasticities. It sounded like when you presented at the Barclay's Back-to-School Conference back in September that you were more concerned about the elasticities, and that didn't show up as much as I think maybe I had feared in the volumes. So can you talk a little bit about what you're seeing in your different divisions, particularly in North America?

Sure, John, I'd be happy to. Up at Barclays, John Compton and I were both there and what we had talked about in the snack world was we thought at the time that the elasticities were a little bit -- were shallow or that consumer response was a little bit stronger than we had expected on large bag. And we've sharpened some of our price points and some of our promotional strategies in order to address that. Single-serve, on the other hand, which has gone into the market more recently, and we hadn't talked about that up at Barclays, we've actually -- and it's early days, but we've actually seen that pricing stick well. In fact, if anything, the elasticities have been a little bit more favorable to us than we'd expected. Beverages, as you know, and particularly, in North America is a complex evaluation because there's category elasticity as well as cross-competitive elasticity. I think we're, at this point, seeing that as we've gotten through kind of the initial period of pricing, I think we've seen the elasticity settle in about where we expected. From an international perspective, I don't think there have been any particular surprises. The comments that we made up at Barclays were probably more North America oriented. So I think we've gotten to a point now where the pricing is reasonably settled in. Of course, in beverages, it's a competitive marketplace, and we'll always have to address that as a part of managing the business.

John, I just want to add one more thing. I think the level of pricing we’re taking in the marketplace puts us in uncharted territory. We haven't had this amount of pricing in a long time, and so I think pricing actions require courage. You've got to stick with the pricing actions and let it stick and not let any short-term share changes disrupt your long-term direction. And so our experience is that when you put in place significant pricing actions, it takes several periods before it takes root. And as leaders in many of the categories, we just have to have the courage to stick it out. And that interim period may be uncertain, but where we’ve stuck it out, we've actually seen positive benefits that accrue to us from the pricing actions. John A. Faucher - JP Morgan Chase & Co, Research Division: Great. And so as we look out, you talked about taking even more pricing as we look out into the fourth quarter. So should we expect another tick down into the volume? Any sort of -- any thoughts as we look out sequentially there? Or do you feel like okay, the pricing’s going through pretty well, and there's not big impacts incrementally from the next round?

Well, it's always tough to project where competition is going on that. Obviously, that has an impact as well. But I feel like we've gotten the pricing reasonably burned in. I think what we're doing right now with Gatorade and with single-serve on Frito-Lay is working pretty well. So I think we feel pretty comfortable with what we have.

Your next question comes from the line of Carlos LaBoy with Crédit Suisse. Carlos A. LaBoy - Crédit Suisse AG, Research Division: Indra, you have Gatorade and juice marketers that surely want more funding, and you have newly hired soft drink marketers that need funding to close competitive gaps and to win. Do you have enough efficiency and cost reductions identified to fund the step-ups that are necessary for these marketers to win and still hit the long-term guidance? And similarly, do you also have enough funding sources identified to step up the U.S. marketing programs that you like internationally?

Carlos, I think Hugh touched on this when he answered one of the earlier questions. One of the things we do is we focus a lot on productivity, and we look at every aspect of the cost structure of the company. We look to see where we can take out layers or inefficiencies, make the company more agile, more flexible. And in making the company more productive, we take these productivity savings and then we use some of it to cover commodity costs, and the rest of it goes into investments. But the priority is investments in the brands and driving innovation and making sure our businesses are well supported first, and then it is on covering commodities. And that's the game that -- Hugh outlined that we want to play going forward, and that's what we're focused on right now. As you look at our North American beverage brands, Gatorade needed immediate attention about 3, 3.5 years ago, and that's where we started. We put the money, we put the effort behind it with enormous success. Then we went to work on Tropicana, again, success. We went to work on Pepsi Max. We went to work on Sierra Mist. We bolstered Mountain Dew. And every one of these, deliberately invested behind in a very difficult environment, is yielding results. Our next effort is to focus on brand Pepsi and to keep all of the other initiatives we're doing going. So I think we are focused on the right things. And as a company, we are focused on unleashing enough productivity to put back into the brand.

Your next question comes from the line of Bill Pecoriello with Consumer Edge.

Indra, I'm just trying to -- so you've been talking about -- when you think about the consumer environment, competitive environment, retail environment, both in snack and beverages, you're talking about -- elasticities have been in line and some sharpening of the price points. But also the need to properly fund the brands, remain price competitive. So when you assess the spending behind the brands, both to snacks and beverages, are you talking about here kind of tweaking and sharpening versus really, say, there needs to be a step-up and we need to both really step up the productivity and really step up the support, given the difficult consumer competitive retail landscape that's out there? Just trying to get a feel of the magnitude. Is this tweaking and sharpening or more of a step-up that's needed on both fronts, given that difficult environment?

Bill, as Hugh mentioned in his opening comments, we're going to be back to you in early December to give you a fuller picture of what we intend to do in 2012 and going forward. It's too early because we're still trying to see where commodity costs are going to settle down, what the economic environment is going to look like, how much of the pricing is going to stick, how much more we can take. So as we sort all of that out, and that in large part drives the room left for investments, what our productivity programs are. Just hang tight for the next 6 to 8 weeks. We’re going to be back in the first week in December, and we'll give you a full picture based on much better information in the environment because our actions are in large part dictated by what happens in the environment also. We cannot operate independent of that. So first week in December, I look forward -- we all look forward to a robust conversation with all of you.

Great. And just one follow-up. In terms of the fourth quarter, you had mentioned on the last conference call, the pricing was going in, uncertain how much had to be spent back, your reiteration of guidance. You feel that with the elasticities, the level of spend back and promotion between now and year end is within your expectations, or is it being offset elsewhere in the portfolio, or largely, the promotional spend back has been in line?

Yes, Bill. Obviously, we feel comfortable when we reiterate that we’ve got it captured. As I mentioned earlier, we've certainly sharpened some of our promotional strategies within Frito. But when we add up the aggregate of pricing, productivity, consumer response to the pricing, we feel comfortable overall that the equation hangs together.

Your next question comes from the line of Mark Swartzberg with Stifel, Nicolaus. Mark Swartzberg - Stifel, Nicolaus & Co., Inc., Research Division: Indra, a question on North America as we think of the strategy in beverages looking forward. Could you give us an update about how you think the business stands in terms of the price/pack positioning today versus what it might be in light of consumer needs? And then, secondly, as you think about Power of One, how is that in any way preventing or aiding even your ability to work with other suppliers beyond snacks to promote your beverage brands?

Let me start with the second one then come to the first one. I think on Power of One, beverage into snacks works very well together now with John Compton leading the Power of One Council and with Al Carey running beverages. Al Carey was the father of Power of One, which started 12 years ago. And now with Al Carey running Pepsi Americas beverages, I think you're going to see a level of cooperation and idea generation that's going to be quite impressive. So I remain very, very optimistic about Power of One now beginning to start driving the top line even more than it used to before. Doesn't stop us from working with other people. I'm going to have John talk about that because with a lot of our customers, we do Power of One programs, which cover multiple categories. So John, do you want to touch on Power of One with other categories and whether our beverages and snacks prevents you from working with anybody else?

Yes, Indra and Mark, within consumer packaged goods, I think we're best suited to work with ourselves in terms of food and beverage product because we haven't fully tapped that potential out. Clearly, there are other related categories that make these holidays stronger for the retailer that we can bundle with. And to your point, Indra, having Al running the beverage business and now Tom Greco, who also worked in the Power of One center in the past, working together across North America, where you'll see us beginning in Q1 begin to unleash, I think, some new benefits behind Power of One. Customer, channel, consumer promotion and looking at ideas that can grow horizontally, paying off a consumer benefit from snacks to beverages.

But you've also worked with many other retailer products. Game Time included multiple products...

Multiple products.

So again, it's retailer specific. You don't do it on a blanket basis. But there are multiple retailer specific programs we do, which cover multiple categories. And so -- and they've all been very successful. So Power of One, I think, is the unique differentiator for PepsiCo. We are an integrated snack and beverage company, and so that's what we are. Let me talk a bit about North America. The North American beverage business is a terrific business and a tough business, the 2 Ts. And I'd say that it's a business, which is large. We are the largest liquid refreshment beverage player. We have 23, 24 share of this LRB market, and we have leadership brands in this business. This business has also, for many, many years, been one where it's very profitable, but the profit pool has not grown. Between the bottlers and the franchise company, the profit pool has not grown as much as it needs to, and that's been the challenge for this business because it's a repertoire category. There's no clear demarcation between each business. It's a repertoire category, and how you play this business between the 2 or 3 big players and with the pure plays determines how you perform quarter in and quarter out. From PepsiCo's perspective, I think that especially in the period about 2004 to 2006, I think we hit the volume pedal a little too much when we perhaps could have invested more in the brands. And then we went into this tremendous economic downturn, and now, what we are looking at since about 2007, how do we take each of our brands and make sure they're supported correctly and we are driving them to remain the leaders in their categories? We started with Gatorade, tremendous success; Tropicana, success. We…

Again, I think every time you put a package -- and remember, the 20-ounce single serve package is a fantastic package in convenience stores. It's a great value. We sell a lot of it, and we are -- convenience stores is a channel that we love. In fact, I think, John, you were showing a number we'd said in year-to-date...

11 out of the 15.

11 out of the 15 top products in convenience stores are PepsiCo products. So this is a very -- it's a wonderful channel. It's still growing. Even in this economic situation, it's growing because the up-and-down-the-street consumer is still using soft drinks and snacks as their moment of pleasure. So we like this business a lot. We have to make sure that we don't trade down volume, or we don't trade down packages, which make consumers go to a different package size without getting the appropriate value benefit from that. So we are looking through what's the right package to give consumers enough beverage to drink at a price that delivers unbeatable value to the consumer. And we're doing it in beverages. But more importantly, we're looking at doing it in a bundled way between snacks and beverages, so the consumer can go into the store and get a phenomenal PepsiCo beverage and a Frito-Lay snack at a combined price that generates enormous value to the consumer rather than just go head-to-head on beverage.

Mark, I'll add one point to the -- it's nice to have 11 out of the 15 top new items in the C&G channel, but that led PepsiCo to be the largest dollar growth contributor to the channel. So we are very important to the C&G store business, and they're pleased with our growth year-to-date.

Your next question comes from the line of Judy Hong with Goldman Sachs.

Just wanted to ask about Frito-Lay North America. It sounds like the unmeasured channel performance is much stronger than what we're seeing in the measured channel data, so maybe a little bit more color around sort of the unmeasured channel performance. And John, maybe just talk a little bit about the competitive dynamics that you're seeing in the marketplace. You've talked about sharpening the promotional price points. But in the measured channel data, at least you're starting to see the gap widening again versus some of the smaller players. Is that a concern? Is there more work to do just in terms of just tackling the competitive dynamics?

Judy, thank you for the question. Let me start with the bigger picture first around what Frito-Lay does so well is we go where the consumer is shopping, and we've talked about low, medium and high-income consumers. And as you saw in our release, more than our -- more than normal of our growth came out of channels that are unmeasured. So the C-store channel, the club channel, the dollar channel. Those disproportionally drove growth for us this quarter. Within the "traditional measured channels," it is true that our share was down roughly about 1 point on dollar share. Most of that went to private label. And in this down economy, we chose not to price down to cover private label, okay? There is some growth in sort of higher income products that we are going to address in Q4 going forward. And you'll see that when I do the Back-to-School Conference coming up in later this fall. So I'm pleased overall with the volume growth. I'm pleased that we're able to get the pricing through, and we remain as competitive as we've always been in terms of addressing market share.

And Judy, I'd tell you, I've had the privilege of seeing Frito's innovation for next year, and it's phenomenal. So we feel good.

Okay. And then, Hugh, just fourth quarter, obviously, you're sticking to the 27% tax rate for the full year. So sounds like the tax rate will ramp up in the fourth quarter, and then the corporate expenses, maybe it's not going to be up as much as what we saw in the third quarter. And then I'm just wondering about the impact of the 53rd week. I know your earnings guidance is really on a core 52-week basis, but is there some element of the -- having the 53rd week actually beneficial to looking at a 52-week numbers, because on the 53rd week, it's not as profitable?

Yes. So, Judy, 3 questions there. Let me take them one at a time. From the standpoint of the tax rate, you're right. We've said that we'll be approximately 27%, so that implies a higher tax rate in the fourth quarter. That's correct. Number two, you asked about the corporate expenses. From a growth standpoint, the numbers won't be as high because we're overlapping a big credit last year. From a run rate perspective, you can probably expect them to be reasonably consistent with what you've seen in the first 3 quarters. And then number three, in terms of the 53rd week, anything -- you're right. We talk on a 52-week basis, and anything that we would think about doing with the 53rd week, if we were going to do anything with that, we'd probably get back to you on the December call. So no news there to talk about on the 53rd week.

Your next question comes from the line of Ali Dibadj with Sanford Bernstein. Ali Dibadj - Sanford C. Bernstein & Co., LLC., Research Division: Just wanted to ask a little bit more about investments and elasticities because it looks like if you back out Latin America for this quarter at least, U.S. beverages was down something like 2%, and CSD is probably higher than that, given Gatorade, which has, longer term, been somewhat of a trend. So what do you really need to do longer term, and maybe your peers too, to see this trend abate? And you said in an earlier question that when you do focus on a business, when you do apply resources, then you show success, and I think that's been clear. But how many of those holes are there still to plug, particularly, given your drop in asset sales over the past several years at the company? And again, it's kind of a question of what's the right level of add to sales and price growth that, longer term, you need to deliver to show what you want from a volume perspective? And again, I'm not asking a 2012 question. So, hopefully, you don't use that as an excuse. I’m asking a broader strategic question about the category and your positioning in it.

Yes, Ali, this is Hugh. That was certainly an impressive question. Let me try to parse it and address some of the pieces. You talked about CSDs, and obviously, CSDs are an important part of our portfolio. But keep in mind, we do play an LRB game, and that's -- we've been doing that for more than a decade. We were certainly the first to go and do that. But undeniably, CSDs are an important category. So what do we need to do in CSDs? Obviously, we've got a price to be competitive. And in doing that, we've got to balance commodity costs, we've got to balance consumer, and we've got to balance input -- commodity cost, consumer and competitor. Those are the 3 pieces that we balance in dealing with that. In doing that, we also need to make sure that our brands are sharply defined, and we need to make sure that our innovation is very strong. The category, obviously, it's a challenging category. Clearly, anyone that looks at the numbers can see that, and that's true for the broad category. I'm not just speaking of PepsiCo's business. Now what are the things that we've tried to do for the long run? The long run in consumer categories always comes back to innovation, and the thing that we've obviously done is we've innovated from a flavors perspective to drive some level of incremental growth. We've innovated from a branding perspective in order to create interesting positioning for consumers. And then as we've discussed in the past, we're innovating from a sweetener perspective, which we do think is a meaningful unlock in the category, and we've gone down a couple of paths with that. First, around the newer sweeteners, such as stevia. And then, obviously, we got some relationships with flavor-enhancer companies, which have enabled us to try products like Pepsi Max and to be able to do those things successfully. So I think in terms of CSDs and, for that matter, the broader LRB category, the key to being successful here is going to be making sure our pricing is competitive, making sure that our brands are very sharply defined and innovating on product over time to ensure that we actually can differentiate ourself clearly from competition. That's the strategy we're following, as Indra referenced on the script that we read earlier. We think we're successful in moving that agenda forward, but we also fully acknowledge that we've got more work to do on that, and that's what we'll -- we're going to continue to work at. We view it as a terrific business, and we view it as one that generates a lot of cash for shareholders that we feel very, very good about. So it's certainly one that we're going to continue to compete vigorously in. Ali Dibadj - Sanford C. Bernstein & Co., LLC., Research Division: So how much did that cost you?

Sorry? Ali Dibadj - Sanford C. Bernstein & Co., LLC., Research Division: How much does that cost?

How much does it cost to do what? Ali Dibadj - Sanford C. Bernstein & Co., LLC., Research Division: To do all of that. So does margin compression kind of have to be an outcome of this? I mean, you've clearly increased investment pretty significantly again with successes, but you've increased the investment. So as you go forward for the categories you operate in and maybe disproportionally CSDs, is the investment return kind of getting worse as you go forward here and forever will be, I guess?

Yes, I don't think so. I think what we're trying to do right now -- and obviously, we're thinking about 2012. We're certainly assessing all of those things. One of the questions that was asked earlier on the call was around marketers looking for more money, and we feel very good about the marketing team we have. And listen, it's been my experience over 25 years that good marketers always ask for more money. It's tradition in effect. I think as we go through our planning process, we'll determine what we think are the right investments in order to generate competitive success, as well as to generate financial success. And to talk about 2012 and beyond at this point, it would probably just be a bit premature.

Yes, Ali, I think the other thing too is I wouldn't separate out any costs and talk about what does it cost in North America, because investments we make in technology, Hugh talked about sweeteners, enhancers. I can talk about processing technologies that we're investing in to take down the cost of processing in all these products, apply across our global beverage portfolio. So some of these investments we are making are not just for North America. We've got to think of it as how can we drive the overall beverage business. So I think in the context of all of that, given the size and the profitability and the cash flow generation that we get from our North American beverage business and global beverages, we feel pretty good about where we're headed. And all that it takes is a couple of breakthroughs which, as I said in one of our earlier interactions, we are very, very close to these breakthroughs. It's always the last 5% or 10% that you've got to sweat the details on, which is what we are doing now. But when these do -- these breakthroughs do get commercialized, it's quite a breakthrough. And so we feel quite optimistic about the prospects for this business. Ali Dibadj - Sanford C. Bernstein & Co., LLC., Research Division: Okay. Just one quick one. It sounds also that you're a lot more optimistic, at least, versus what we've heard on pricing rationality in North America versus kind of the language that was in Q2. Is that a fair read, again, pricing rationality in the U.S. in particular versus your competitor?

Ali, pricing is sort of a week-by-week, period-by-period thing in this business and particularly in the beverage business. So I think what we're saying is we feel comfortable that we're getting pricing in place, but we'll see what happens.

Let me just summarize this call. We're encouraged by the balance of top line and bottom line performance in the quarter across snacks and beverages, and we are totally focused on and committed to our 5 key planks, and we're encouraged by the progress we're making on each of them. And as we said on our earlier comments, we'll come back to you in early December to provide our outlook for 2012. Thank you very much for your interest in our company and for your time this morning. Thank you.

Thank you. This concludes today's conference call. You may now disconnect.