Company Name: PepsiCo, Inc.
Public Availability Date: March 3, 2006

Document Sections:

INQUIRY LETTER
INQUIRY LETTER
APPENDIX
INQUIRY LETTER
INQUIRY LETTER
INQUIRY LETTER
STAFF REPLY LETTER

[INQUIRY LETTER]

January 3, 2006

Securities and Exchange Commission
Division of Corporation Finance
Office of Chief Counsel
100 F Street, N.E.
Washington, D.C. 20549

Re: PepsiCo, Inc. Shareholder Proposal from National Legal and Policy Center

Ladies and Gentlemen:

Pursuant to Rule 14a-8(j) under the Securities Exchange Act of 1934, as amended (the "Exchange Act"), PepsiCo, Inc. (the "Company") hereby notifies the Securities and Exchange Commission (the "SEC") of its intention to omit from the Company's proxy materials (the "Proxy Materials") for its 2006 Annual Shareholders' Meeting, the proposal and supporting statement submitted by the National Legal and Policy Center (the "Proponent") dated November 21, 2005 (the "Proposal") attached as Exhibit A.

Pursuant to Rule 14a-8(j)(2), six (6) copies of the Proposal and six (6) copies of this letter are enclosed. By copy of this letter, the Company is also notifying the Proponent of the Company's intention to omit the Proposal from its 2006 Proxy Materials for the reasons stated below. The Company presently intends to file its Proxy Materials on or after March 24, 2006. Accordingly, pursuant to Rule 14a-8(j), this letter is being submitted not less than 80 calendar days before the Company files its Proxy Materials with the SEC.

The Proposal and Grounds for Omission

On November 21, 2005, the Company received a letter from the Proponent containing the following Proposal:

"RESOLVED: That the shareholders request that the Company provide a report updated semi-annually, omitting proprietary information and at reasonable cost, disclosing the Company's:

1. Policies and procedures for charitable contributions (both direct and indirect) made with corporate assets;

2. Monetary and non-monetary contributions made to non-profit organizations operating under Section 501(c)(3) and 501(c)(4) of the Internal Revenue Code, and any other public or private charitable organizations;

3. Business rationale for each of the charitable contributions;

4. Personnel who participated in making the decisions to contribute; and

5. To the extent reasonably possible, the actual or estimated benefits to the Company and beneficiaries produced by contributions.

It is the Company's belief that the Proposal may be omitted from its 2006 Proxy Materials on the following grounds. Pursuant to Rule 14a-8(i)(10), the Proposal deals with a matter that the Company has already substantially implemented and may properly be omitted. We also believe that the Proposal's underlying purpose is a matter relating to the Company's ordinary business operations (contributions to specific types of organizations), which may properly be omitted under Rule 14a-8(i)(7).

1. The Proposal may be omitted because it deals with a matter that the Company has substantially implemented.

Pursuant to Rule 14a-8(i)(10), a shareholder proposal may be omitted from a company's proxy materials if the "company has already substantially implemented the proposal." According to the Securities and Exchange Commission, the exclusion provided in Rule 14a-8(i)(10) "is designed to avoid the possibility of shareholders having to consider matters which have already been favorably acted upon by the management." See Exchange Act Release No. 34-12598 (July 7, 1976). The SEC 1998 Release notes that this rule merely reflects the interpretation adopted in Exchange Act Release No. 34-30091 (August 16, 1983) under former Rule 14a-8(c)(10). Pursuant to the 1983 interpretation, the Staff has stated that "a determination that the company has substantially implemented the proposal depends upon whether its particular policies, practices and procedures compare favorably with the guidelines of the proposal." Texaco, Inc. (March 28, 1991).

In a series of no-action letters, the Staff has specifically concluded that shareholder proposals may properly be omitted from a company's proxy materials under Rule 14a-8(i)(10) if the company has already substantially implemented the proposed policy. When a company can demonstrate that it already has adopted policies or taken actions to address each element of a shareholder proposal, the Staff has concurred that the proposal has been "substantially implemented" and may be excluded as moot. See Mattel, Inc. (March 16, 2004) (excluding proposal that Mattel report yearly on money spent on philanthropy since such information was provided on the Mattel corporate website). See Nordstrom Inc. (February 8, 1995) (proposal that company commit to a code of conduct for its overseas suppliers that was substantially covered by existing company guidelines was excludable as moot). The "substantially implemented" standard replaced the predecessor rule allowing omission of a proposal that was "moot," and reflects the Staff's interpretation of the predecessor rule that the proposal need not be "fully effected" by the company to meet the mootness test, so long as it was substantially implemented. See SEC Release No. 34-30091 (August 16, 1983).

It is well-established in Staff no-action letters that a company need not be compliant with every detail of a proposal to exclude it under Rule 14a-8(i)(10). Differences between a company's action and the proposal are permitted so long as a company's actions satisfactorily address the underlying concerns of the proposal. See Masco Corporation (March 29, 1999) (permitting the company to exclude a proposal seeking the independence of directors on "substantially implemented" grounds after the company adopted a version of the proposal that included some slight modifications and a clarification as to one of the terms). Proposals have been considered substantially implemented where the companies had implemented part, but not all, of a multi-pronged proposal. See Columbia/HCA Healthcare Corp. (February 18, 1998) (permitting the company to exclude a proposal on "substantially implemented" grounds after it took steps to implement, partly or fully, three of the four actions requested by the proposal).

The Proposal may be omitted because it deals with a matter that the Company has already substantially implemented. The Company has already taken actions to substantially address the elements of the Proposal by providing detailed disclosure on the Company's web site, www.pepsico.com, regarding charitable and philanthropic activities under the Citizenship/Contributions and Citizenship/Community Affairs sections (the "Charitable Giving Disclosure"). The Charitable Giving Disclosure, attached as Exhibit B hereto, is updated annually and provides grant details, a representative listing of organizations and detailed information on key donations. Specifically, the Charitable Giving Disclosure substantially addresses the elements of the Proposal as follows:

1. Information about policies and procedures for charitable contributions is available in the Charitable Giving Disclosure at "Support Request" and "Grant Guidelines."

2. Information about monetary and non-monetary contributions made to non-profit organizations and other pubic or private charitable organizations contributions is available in the Charitable Giving Disclosure under Citizenship at "Groups Supported," "Feature Programs," "Annual Programs," and "Health and Wellness" and under Community Affairs at "Support of Diversity," "Support Education," and "Support Employees."

3. Information about the business rationale for charitable contributions is provided in the stated focus areas described in the Charitable Giving Disclosure. These areas currently include Health and Wellness, Diversity, Education, Employees, as well as donations relating to disaster relief and other special programs.

4. Information regarding the actual or estimated benefits to the beneficiaries produced by contributions is provided in the Charitable Giving Disclosure discussion of the stated focus areas of Health and Wellness, Diversity, Education, Employees, as well as donations relating to disaster relief and other special programs. Under applicable tax rules, the Company is prohibited from deriving benefits from charitable contributions.

The Company's charitable activities are conducted primarily through the PepsiCo Foundation (the "Foundation"), a tax-exempt entity that focuses on youth, education, diversity, and health and wellness platforms. The Foundation is a separate legal entity and its trustees are senior officers of the Company. Corporate charitable giving is a well-recognized, important business activity engaged in on a regular business by most major public companies. The Company believes that day-to-day oversight of the Company's charitable programs is most efficiently and effectively left in the hands of the Foundation, which is in the best position to select worthy recipients for charitable contributions and to determine the size of particular contributions that will best help to achieve the Foundation's platforms.

As discussed in the Charitable Giving Disclosure, the Foundation, the Company and its divisions contributed approximately $21.9 million to nonprofit groups in 2004. The Foundation and the Company's operating divisions provide grants to more than 1,000 community organizations, of which a significant portion were organizations championing diversity efforts. Organizations are also supported through gifts in-kind, such as product, premiums, printing, meeting arrangements, equipment donations, support of events, conventions, journals and meetings

The Company believes it has already taken action to address the underlying concerns of the Proponent's Proposal and therefore has already "substantially implemented" the Proposal. However, the Company continues to be committed to transparency and is prepared to implement additional measures to reinforce transparency and to provide additional information regarding charitable contributions. Specifically, the Company informed the Proponent in a telephone conversation on December 22, 2005 that the Company intends to provide enhanced disclosure on charitable contributions in the Charitable Giving Disclosure in 2006 by:

a) providing additional information on the decision-making bodies involved in Foundation grants;

b) providing additional background on governance and the Foundation's grant application and approval process; and

c) implementing a new information technology system to record data on monetary and non-monetary contributions. This system will enable the Company to disclose monetary contribution levels for all direct Foundation grants and to include the focus category for each grant. This system will also enable the Company to provide enhanced reporting and disclosure of non-monetary (in-kind) donations. The Company will update the Charitable Giving Disclosure with information about significant new grants on an ongoing basis throughout the year.

The Company has already taken steps to substantially implement the Proposal and intends to provide further enhancement of its non-profit grant disclosure. The fact that the Company is in the process of making the additional disclosures referenced above will not bar the Staff from adopting a no-action position, as long as the Company files a supplementary letter indicating the nature and timing for the disclosures, if necessary. See Mattel Inc. (March 16, 2004) (based on supplemental disclosures of charitable contributions posted on the company's website); Masco Corporation (March 29, 1999) (based on board approval of resolutions that was anticipated to occur after the filing of the request for no-action relief). As long as the Company acts before the date of its annual shareholders' meeting, exclusion on this ground is consistent with the Commission's statement in the 1998 Release that the purpose of Rule 14a-8(i)(10) is to "avoid ... shareholders having to consider matters which have already been favorably acted upon by management."

For all of the foregoing reasons, the Proposal fits squarely within the substantially implemented exclusion articulated by the Staff's prior no-action letters. The Proposal may properly be omitted from the Company's Proxy Materials under Rule 14a-8(i)(10).

2. The Proposal may be omitted because its underlying purpose is a matter relating to the Company's ordinary business operations (contributions to specific types of organizations).

Pursuant to Rule 14a-8(i)(7), a shareholder proposal may be omitted from a company's proxy materials if the proposal "deals with a matter relating to the company's ordinary business operations." On November 16, 2004, the Company received a letter from the Proponents containing a proposal that the Board of Directors establish a policy precluding future financial support of Jesse Jackson, the Citizenship Education Fund, Rainbow/PUSH Coalition, and/or any other nonprofit organization founded, headed or primarily identified with Jesse Jackson. In response to the Company's request, the Staff previously stated that it would not recommend enforcement action to the SEC Commission if the Company omitted this proposal from the Proponent from its 2005 Proxy Materials in reliance on Rule 14a-8(i)(7). See PepsiCo, Inc. (January 25, 2005). The Company properly excluded the proposal from its 2005 Proxy Materials.

The Proposal this year does not specifically seek a policy to preclude future financial support of Jesse Jackson, the Citizenship Education Fund, Rainbow/PUSH Coalition, or any other nonprofit organization primarily identified with Jesse Jackson. However, the Supporting Statement for the Proposal names only one specific charitable organization - the Rainbow/PUSH coalition. The Supporting Statement further states that "[d]etails of contributions only sometimes become known when publicized by recipients." Rainbow Push is among organizations that have been listed as a grant recipient on the Company's Website in the Charitable Giving Disclosure, demonstrating that this information has been openly and historically disclosed by the Company. Despite the implication in the Supporting Statement, this information is not only available through publication by a recipient organization.

The sole reference to this specific charitable organization indicates that the underlying objective of the Proposal continues to concern contributions to specific types of organizations. In addition, in a further telephone conversation between Company representatives and the Proponent on December 30, 2005, the Proponent commented that the Company's contributions to these specific organizations would remain a block to the Proponent's withdrawal of the Proposal. The underlying purpose of the Proposal is a matter relating to the Company's ordinary business operations (contributions to specific types of organizations) and therefore may be omitted.

Conclusion

The Company believes that the Proposal may be omitted from the Company's 2006 Proxy Materials pursuant to (i) Rule 14a-8(i)(10) because the Proposal deals with a matter that the Company has substantially implemented and (ii) Rule 14a-8(i)(7) because the Proposal deals with the Company's ordinary business operations (contributions to specific types of organizations).

Based on the foregoing, the Company respectfully requests the Staff's concurrence with the Company's decision to omit the Proposal from its 2006 Proxy Materials, and further requests that we be notified of this concurrence. We would be happy to provide you with additional information and answer any questions that you may have regarding this subject. Should you disagree with the conclusions set forth in this letter, we respectfully request the opportunity to confer with you prior to the determination of the Staff's final position. If you have any questions about this matter, please contact the undersigned at 914-253-2000.

Please file-stamp and return one copy of this letter in the enclosed, self-addressed stamped envelope.

Very truly yours,

/s/

Robert E. Cox
Vice President, Deputy General
Counsel and Assistant Secretary

Enclosures

cc: (Via Certified Mail/Return Receipt Requested)

National Legal and Policy Center
107 Park Washington Court
Falls Church, VA 22046

[INQUIRY LETTER]

November 21, 2005

Mr. Larry D. Thompson
Secretary
PepsiCo
700 Anderson Hill Road
Purchase, NY 10577-1444

VIA FAX 914-253-3051

Dear Thompson:

I hereby submit the enclosed shareholder proposal ("Proposal") for inclusion in the PepsiCo ("Company") proxy statement to be circulated to Company shareholders in conjunction with the next annual meeting of shareholders. The Proposal is submitted under Rule 14(a)-8 (Proposals of Security Holders) of the U.S. Securities and Exchange Commission's proxy regulations.

National Legal and Policy Center (NLPC) is the beneficial owner of 54 shares of the Company's common stock, which shares have been held continuously for more than a year prior to this date of submission. NLPC intends to hold the shares through the date of the Company's next annual meeting of shareholders. The attached letter contains the record holder's appropriate verification of NLPC's beneficial ownership of the aforementioned Company stock.

The Proposal is submitted in order to promote shareholder value by requesting a report on the Company's charitable contributions.

I will present the Proposal for consideration at the annual meeting of shareholders.

If you have any questions or wish to discuss the Proposal, please contact me at the number below. Copies of correspondence or a request for a "no-action" letter should be forwarded to me at the address below.

Sincerely,

/s/

Peter Flaherty

President

Enclosures: Shareholder Resolution: Charitable Contributions Report Letter from SmithBarncy

[APPENDIX]

Charitable Contributions Report

Whereas:

PepsiCo's assets belong to its shareholders. The expenditure or distribution of corporate assets, including charitable contributions, should be made so as to advance shareholder interests. Company charitable contributions should have a stated business rationale.

Whereas:

Company executives exercise wide discretion over the use of corporate assets for charitable purposes.

Absent a system of accountability for charitable contributions, Company executives may use Company's assets for objectives that are not shared by and may be inimical to the interests of the Company and its shareholders, potentially harming long-term shareholder value. [See National Legal and Policy Center, http://www.nlpc.org/cip.asp and Free Enterprise Action Fund, http://www,FreeEnterpriseActionFund.com.]

Principles of transparency and accountability should apply to Company charitable contributions. Such disclosure is consistent with public policy in regard to disclosure by publicly-owned companies.

Whereas:

According to the 2004 PepsiCo Annual Report, "We give to nonprofit community groups and initiatives through the PepsiCo Foundation, PepsiCo Community Affairs and our various operating divisions. Additionally, we provide gifts-in-kind, support community and nonprofit events, conventions and journals and sponsor meetings." According to the same Annual Report, such gifts totaled $71.9 million in 2004.

Whereas:

Shareholders are entitled to know how their company is spending its funds for charitable purposes.

Resolved: The Shareholders request that the Company provide a report updated semi-annually, omitting proprietary information and at reasonable cost, disclosing the Company's:

1. Policies and procedures for charitable contributions (both direct and indirect) made with corporate assets;

2. Monetary and non-monetary contributions made to non-profit organizations operating under Section 501(c)(3) and 501 (c)(4) of the Internal Revenue Code, and any other public or private charitable organizations;

3. Business rationale for each of the charitable contributions;

4. Personnel who participated in making the decisions to contribute; and

5. To the extent reasonably possible, the actual or estimated benefits to the Company and beneficiaries produced by contributions.

To the extent reasonable and permissible, the report may include the type of information requested above for charities controlled or managed by the Company, including The PepsiCo Foundation.

This report may be posted on the company's website to reduce costs to shareholders.

Supporting Statement

Current disclosure is insufficient to allow the Company's Board and its shareholders to fully evaluate the charitable use of corporate assets.

There is currently no single source providing shareholders the information sought by this resolution.

Details of contributions only sometimes become known when publicized by recipients. Two Company contributions to the Rainbow/PUSH coalition were disclosed in Rainbow/PUSH conference programs in 2005.

[INQUIRY LETTER]

January 11, 2006

BY FEDEX OVERNIGHT DELIVERY

U.S. Securities and Exchange Commission
Division of Corporation Finance
Office of Chief Counsel
100 F Street, N.E.
Washington, D.C. 20549

Re: PepsiCo, Inc.; Shareowner Proposal of the National Legal and Policy Center

Dear Ladies and Gentleman,

This letter is on behalf of the National Legal and Policy Center ("NLPC" or the "Center") in response to the January 3, 2006 request by PepsiCo, Inc. ("PepsiCo" or the "Company") for a letter from the staff of the Division of Corporate Finance (the "Staff") concurring with PepsiCo's view that the above-referenced Shareowner Proposal (the "Proposal") is excludable pursuant to Rule 14a-8.

We believe the Proposal is not excludable for any of the reasons claimed by PepsiCo.

THE PROPOSAL

The Proposal states in its entirety:

Charitable Contributions Report

Whereas:

PepsiCo's assets belong to its shareholders. The expenditure or distribution of corporate assets, including charitable contributions, should be made so as to advance shareholder interests. Company charitable contributions should have a stated business rationale.

Whereas:

Company executives exercise wide discretion over the use of corporate assets for charitable purposes.

Absent a system of accountability for charitable contributions, Company executives may use Company's assets for objectives that are not shared by and may be inimical to the interests of the Company and its shareholders, potentially harming long-term shareholder value. [See National Legal and Policy Center, http://www.nlpc.org/cip.asp and Free Enterprise Action Fund, http://www.FreeEnterpriseActionFund.com.]

Principles of transparency and accountability should apply to Company charitable contributions. Such disclosure is consistent with public policy in regard to disclosure by publicly-owned companies.

Whereas:

According to the 2004 PepsiCo Annual Report, "We give to nonprofit community groups and initiatives through the PepsiCo Foundation, PepsiCo Community Affairs and our various operating divisions. Additionally, we provide gift-in-kind, support community and nonprofit events, conventions and journals and sponsor meetings." According to the same annual report, such gifts totaled $71.9 million in 2004.

Whereas:

Shareholders are entitled to know how their company is spending its funds for charitable purposes.

Resolved: That the Company provide a report updated semi-annually, omitting proprietary information and at reasonable cost, disclosing the Company's:

1. Policies and procedures for charitable contributions (both direct and indirect) made with corporate assets;

2. Monetary and non-monetary contributions made to non-profit organizations operating under Section 501 (c)(3) and 501(c)(4) of the Internal Revenue Code, and any other public or private charitable organizations;

3. Business rationale for each of the charitable contributions;

4. Personnel who participated in making the decisions to contribute; and

5. To the extent reasonably possible, the actual or estimated benefits to the Company and beneficiaries produced by contributions.

To the extent reasonable and permissible, the report may include the type of information requested above for charities controlled or managed by the Company, including The PepsiCo Foundation.

This report may be posted on the company's website to reduce costs to shareholders.

Supporting Statement:

Current disclosure is insufficient to allow the Company's Board and its shareholders to fully evaluate the charitable use of corporate assets.

There is currently no single source providing shareholders the information sought by this resolution.

Details of contributions only sometimes become known when publicized by recipients. Two Company contributions to the Rainbow/PUSH coalition were disclosed in Rainbow/PUSH conference programs in 2005.

RESPONSES TO PEPSICO's CLAIMS

I. The Proposal has not been substantially implemented.

Contrary to PepsiCo's assertion, the Proposal has not been substantially implemented by Pepsico so as to be excludable under Rule 14a-8(i)(10).

PepsiCo claims that its "Charitable Giving Disclosure" (the "CGD") substantially addresses the elements of the Proposal. We disagree.

The Proposal asserts that,

The expenditure or distribution of corporate assets, including charitable contributions, should be made so as to advance shareholder interests. Company charitable contributions should have a stated business purpose.

Accordingly, the Proposal requests a report that informs shareholders whether PepsiCo is making charitable contributions that have a business purpose. The CGD does not provide this information.

1. The CGD does not describe the policies and procedures used by PepsiCo staff to determine that charitable contributions have a business purpose.

2. The CGD is substantially incomplete. Not only does the CGD acknowledge that it "does not represent all projects," but it appears that the CGD fails to describe the vast majority of the $71.9 million in cash and in-kind contributions distributed by Pepsico in 2004.

3. The CGD does not explain the business rationale - that is, why the contribution is in the interest of shareholders - for the charitable contributions that it does list.

4. The Proposal is not expressly concerned with the benefits received by beneficiaries, only the benefits accruing to shareholders. If there are no benefits to shareholders from specific charitable contributions, then Pepsico could disclose that information to shareholders.

Taken in the best light, the CGD amounts to PepsiCo marketing material that provides little useful information to shareholders as to whether PepsiCo charitable contributions have business purposes that benefit shareholders and falls way short of the report requested by the Proposal.

II. The Proposal is not excludable as pertaining to ordinary business operations.

The Proposal does not seek to block charitable contributions by PepsiCo to any specific group. The Proposal simply requests PepsiCo to report to shareholders on the business rationales associated with all distributions of shareholder assets to charities. It does not request that Pepsico donate or not donate to any particular group or class of groups.

PepsiCo's remarks, views and conclusions about the Proponent's purpose in submitting the Proposal are inappropriate for consideration by the Staff. Not only can they not be substantiated, but negotiations between the parties in order to arrive at a mutually agreed upon disposition of the Proposal are in the nature of settlement and should not be disclosed without permission of both parties.

Such unilateral disclosure by PepsiCo of the content of the settlement negotiations between the parties raises troubling questions concerning the professional and ethical conduct of PepsiCo's legal counsel.

The Staff's no-action letter of January 25, 2005 is not relevant to the merits of the Proposal, particularly in that the Proposal does not request that Pepsico take any specific action concerning charitable contributions to any specific group. Under the Proposal, Pepsico would report to shareholders about all charitable contributions.

CONCLUSION

Based upon the forgoing analysis, we respectfully request the Staff to reject PepsiCo's request for the Staff to take no action if PepsiCo excludes the Proposal from its 2006 Proxy Materials. Pursuant to Rule 14a-8(j), enclosed herewith a six copies of this letter and its attachments. A copy of this correspondence has been timely provided to Pepsico and its counsel. In the interest of a fair and balanced process, we request that the Staff notify the undersigned if it receives any correspondence on the Proposal from Pepsico or other persons, unless that correspondence has specifically confirmed to the Staff that the Proponent or the undersigned have timely been provided with a copy of the correspondence. If we can provide additional correspondence to address any questions that the Staff may have with respect to this correspondence or PepsiCo's no-action request, please do not hesitate to call me at 301-258-2852.

Sincerely,

/s/

Steven J. Milloy

Cc: Robert E. Cox, PepsiCo, Inc.
Peter Flaherty, National Legal and Policy Center

[INQUIRY LETTER]

February 1, 2006

Securities and Exchange Commission
Division of Corporation Finance
Office of Chief Counsel
100 F Street, N.E.
Washington, D.C. 20549

Re: PepsiCo, Inc. Shareholder Proposal from National Legal and Policy Center

Ladies and Gentlemen:

Reference is made to the letter dated January 11, 2006 of Mr. Steven J. Milloy on behalf of the National Legal and Policy Center (the "Proponent") in response to PepsiCo, Inc.'s ("PepsiCo" or the "Company") No-Action request letter dated January 3, 2006, regarding the Proponent's proposal (the "Proposal"). The Proposal requests PepsiCo to produce a report on corporate charitable contributions that provides the "business rationale" and "benefits accruing to shareholders" for each charitable contribution. The Proponent has asked the Division of Corporate Finance (the "Staff") of the Securities and Exchange Commission (the "SEC") to deny PepsiCo's No-Action Request.

Proponent's letter of January 11, 2006 provides clarification of the scope of the Proposal, stating that the Proposal "requests a report that informs shareholders whether PepsiCo is making charitable contributions that have a business purpose." Corporate charitable giving is a well-recognized, important business activity engaged in regularly by most major public companies. Charitable contributions by nature do not have a specific business purpose. The Company believes that its charitable programs are most efficiently and effectively left in the hands of the PepsiCo Foundation and PepsiCo's corporate and divisional Community Affairs departments, which are in the best position to determine the most worthy recipients of contributions.

Proponent's letter also states that, contrary to the original language of the Proposal requesting a report of the "actual or estimated benefits to the Company and beneficiaries produced by contributions," the Proposal "is not expressly concerned with the benefits received by beneficiaries, only the benefits accruing to shareholders." Charitable contributions by nature do not necessarily benefit the Company's shareholders but are intended to benefit a broad range of communities according to the Foundation's platforms and PepsiCo's corporate citizenship goals. Tax rules regarding the deductibility of charitable contributions also prohibit contributions that "inure to the benefit of any private shareholder or individual."

A shareholder proposal may be omitted from a company's proxy materials pursuant to Rule 14a-8(i)(7) if the proposal "deals with a matter relating to the company's ordinary business operations." This policy rests on two central considerations. The first is the subject matter of the proposal as "certain tasks are so fundamental to management's ability to run a company on a day-to-day basis that they could not, as a practical matter, be subject to direct shareholder oversight." The second consideration is "the degree to which the proposal seeks to `micro-manage' the company by probing too deeply into the matters of a complex nature upon which shareholders, as a group, would not be in a position to make an informed judgment." See Securities Exchange Act of 1934, as amended Release No. 34-40018 (May 21, 1998).

By requiring the Company to make a determination of the "business purpose" and "benefit to shareholders" of each charitable contribution, the Proposal seeks to micro-manage the Company's decision-making process with respect to charitable contributions and to involve the shareholders in a fundamental aspect of management's handling of the Company's business operations. For this reason, the Company continues to believe that the Proposal deals with a matter, charitable contributions, that is within the Company's ordinary business operations and thus is properly excludable under Rule 14a-8(i)(7) (rationale for charitable contributions).

Further, the Company has substantially implemented the other aspects of the Proposal in its Charitable Giving Disclosure materials, which are posted on PepsiCo's website at www.pepsico.com and are described in greater detail in PepsiCo's January 3, 2006 letter. In keeping with the Company's commitment to transparency, the Company is further expanding the Charitable Giving Disclosure during the first quarter of 2006 to provide enhanced information regarding 2005 charitable contributions as well as additional description of policies and procedures.

The Proponent's letter of January 11, 2006 clarifies that the basic goal of the Proposal is to seek information on the business rationale and benefit to shareholders of PepsiCo's charitable contributions. This reinforces the Company's view that the Proposal may be omitted from 2006 Proxy Materials pursuant to Rule 14a-8(i)(7) on the grounds that the Proposal deals with a matter relating to the Company's ordinary business operations (rationale for charitable contributions). Further, the Company believes it has substantially implemented the other aspects of the Proposal and thus the Proposal may also be omitted pursuant to Rule 14a-8(i)(10).

The Company respectfully seeks the Staff's concurrence with the Company's decision to omit the Proposal on the grounds stated herein and in the Company's letter of January 3, 2006. We would be happy to provide you with additional information and answer any questions that you may have regarding this subject. Should you disagree with the conclusions set forth in this letter, we respectfully request the opportunity to confer with you prior to the determination of the Staff's final position. If you have any questions about this matter, please contact the undersigned at 914-253-2000.

Please file-stamp and return one copy of this letter in the enclosed, self-addressed stamped envelope.

Very truly yours,

/s/

Robert E. Cox
Vice President, Deputy General
Counsel and Assistant Secretary

cc: (Via Certified Mail/Return Receipt Requested)

[INQUIRY LETTER]

February 7, 2006

BY OVERNIGHT FEDEX DELIVERY

U.S. Securities and Exchange Commission
Division of Corporation Finance
Office of Chief Counsel
100 F Street, N.E.
Washington, D.C. 20549

Re: PepsiCo, Inc.; Shareowner Proposal of the National Legal and Policy Center

Dear Ladies and Gentleman,

This letter is on behalf of the National Legal and Policy Center ("NLPC" or the "Center") in response to the February 1, 2006 letter from PepsiCo concerning the above-referenced Shareowner Proposal.

The Proposal is not excludable for any of the reasons claimed by PepsiCo. PepsiCo's arguments presented in its Feb. 1 letter are self-contradictory, contrary to the fundamental intent of federal securities law and not true.

PepsiCo says on one hand that "Charitable contributions by nature do not have a specific business purpose." PepsiCo then says that the Proposal is excludable because it relates to the "company's ordinary business operations." But if charitable contributions have no specific business purpose, then they can hardly be considered as "ordinary business operations."

PepsiCo's assertion that corporate charitable contributions "by nature" do not have a specific business purpose is not supported by PepsiCo's statements or the law it cites. PepsiCo states, "Charitable contributions do not necessarily benefit the Company's shareholders ..." and "Tax rules regarding the deductibility of charitable contributions also prohibit contributions that `inure to the benefit of any private shareholder or individual.'"

By the former statement, PepsiCo, acknowledges that it may receive benefits from charitable contributions. In the latter statement, PepsiCo acknowledges that the applicable law does not bar the corporation from a benefit.

PepsiCo's charitable contributions may, in fact, have business purposes and PepsiCo and its shareholders may receive benefits from PepsiCo's charitable contributions.

PepsiCo's charitable contributions have the potential to be inimical to the interests of PepsiCo and its shareholders. The Proposal merely requests that PepsiCo report to shareholders about its charitable contributions, including their business rationales. The Proposal is in the nature of disclosure - a foundation of securities regulations.

The Proposal in no way seeks to micro-manage PepsiCo's decision-making process with respect to charitable contributions or involve shareholders in PepsiCo's business operations. PepsiCo may contribute to whatever charities it wants and the Proposal would have no impact on such giving. If implemented by PepsiCo, the Proposal would merely disclose information to shareholders about the use of a significant amount of corporate assets. Disclosures of such information is akin to sort of disclosure about company financial information required by securities laws and regulations.

Finally, PepsiCo has not already substantially complied with the Proposal for the reasons discussed in our letter of January 11, 2006, including that PepsiCo's Charitable Giving Disclosure report fails to describe the vast majority of the Company's $71.9 million cash and in-kind contributions of 2004.

CONCLUSION

Based upon the forgoing analysis, we respectfully request the Staff to reject PepsiCo's request for the Staff to take no action if PepsiCo excludes the Proposal from its 2006 Proxy Materials. Pursuant to Rule 14a-8(j), enclosed herewith a six copies of this letter and its attachments. A copy of this correspondence has been timely provided to PepsiCo and its counsel. In the interest of a fair and balanced process, we request that the Staff notify the undersigned if it receives any correspondence on the Proposal from PepsiCo or other persons, unless that correspondence has specifically confirmed to the Staff that the Proponent or the undersigned have timely been provided with a copy of the correspondence. If we can provide additional correspondence to address any questions that the Staff may have with respect to this correspondence or PepsiCo's no-action request, please do not hesitate to call me at 301-258-2852.

Sincerely,

/s/

Steven J. Milloy

Cc: Robert E. Cox, PepsiCo, Inc.
Peter Flaherty, National Legal and Policy Center

[STAFF REPLY LETTER]

March 3, 2006

Response of the Office of Chief Counsel Division of Corporation Finance

Re: PepsiCo, Inc. Incoming letter dated January 3, 2006

The proposal requires that the company provide a report disclosing the company's charitable contributions and related information.

We are unable to concur in your view that PepsiCo may exclude the proposal under rule 14a-8(i)(10). Accordingly, we do not believe that PepsiCo may omit the proposal from its proxy materials in reliance on rule 14a-8(i)(10).

We are unable to concur in your view that PepsiCo may exclude the proposal under rule 14a-8(i)(7). Accordingly, we do not believe that PepsiCo may omit the proposal from its proxy materials in reliance on rule 14a-8(i)(7).

Sincerely,

/s/

Ted Yu
Special Counsel