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These excerpts taken from the PBG 10-K filed Feb 20, 2009. Governmental
Regulation Applicable to PBG
Our operations and properties are subject to regulation by
various federal, state and local governmental entities and
agencies in the United States as well as foreign governmental
entities and agencies in Canada, Spain, Greece, Russia, Turkey
and Mexico. As a producer of food products, we are subject to
production, packaging, quality, labeling and distribution
standards in each of the countries where we have operations,
including, in the United States, those of the Federal Food, Drug
and Cosmetic Act and the Public Health Security and Bioterrorism
Preparedness and Response Act. The operations of our production
and distribution facilities are subject to laws and regulations
relating to the protection of our employees’ health and
safety and the environment in the countries in which we do
business. In the United States, we are subject to the laws and
regulations of various governmental entities, including the
Department of Labor, the Environmental Protection Agency and the
Department of Transportation, and various federal, state and
local occupational, labor and employment and environmental laws.
These laws and regulations include the Occupational Safety and
Health Act, the Clean Air Act, the Clean Water Act, the Resource
Conservation and Recovery Act, the Comprehensive Environmental
Response, Compensation and Liability Act, the Superfund
Amendments and Reauthorization Act, the Federal Motor Carrier
Safety Act and the Fair Labor Standards Act.
We believe that our current legal, operational and environmental
compliance programs are adequate and that we are in substantial
compliance with applicable laws and regulations of the countries
in which we do business. We do not anticipate making any
material expenditures in connection with environmental
remediation and compliance. However, compliance with, or any
violation of, future laws or regulations could require material
expenditures by us or otherwise have a material adverse effect
on our business, financial condition or results of operations.
Bottle and Can
Legislation. Legislation has been enacted in certain
U.S. states and Canadian provinces where we operate that
generally prohibits the sale of certain beverages in
non-refillable containers unless a deposit or levy is charged
for the container. These include California, Connecticut,
Delaware, Hawaii, Iowa, Maine, Massachusetts, Michigan, New York,
Oregon, West Virginia, British Columbia, Alberta, Saskatchewan,
Manitoba, New Brunswick, Nova Scotia and Quebec. Legislation
prohibited the sale of carbonated beverages in non-refillable
containers in Prince Edwards Islands in 2007, but this law was
repealed in May 2008.
Massachusetts and Michigan have statutes that require us to pay
all or a portion of unclaimed container deposits to the state
and Connecticut has
6
Table of Contents
enacted a similar statute effective in 2009. Hawaii and
California impose a levy on beverage containers to fund a waste
recovery system.
In addition to the Canadian deposit legislation described above,
Ontario, Canada currently has a regulation requiring that at
least 30% of all soft drinks sold in Ontario be bottled in
refillable containers.
The European Commission issued a packaging and packing waste
directive that was incorporated into the national legislation of
most member states. This has resulted in targets being set for
the recovery and recycling of household, commercial and
industrial packaging waste and imposes substantial
responsibilities upon bottlers and retailers for implementation.
Similar legislation has been enacted in Turkey.
Mexico adopted legislation regulating the disposal of solid
waste products. In response to this legislation, PBG Mexico
maintains agreements with local and federal Mexican governmental
authorities as well as with civil associations, which require
PBG Mexico, and other participating bottlers, to provide for
collection and recycling of certain minimum amounts of plastic
bottles.
We are not aware of similar material legislation being enacted
in any other areas served by us. The recent economic downturn
has resulted in reduced tax revenue for many states and has
increased the need for some states to identify new revenue
sources. Some states may pursue additional revenue through new
or amended bottle and can legislation. We are unable to predict,
however, whether such legislation will be enacted or what impact
its enactment would have on our business, financial condition or
results of operations.
Soft Drink Excise Tax
Legislation. Specific soft drink excise taxes have
been in place in certain states for several years. The states in
which we operate that currently impose such a tax are West
Virginia and Arkansas and, with respect to fountain syrup only,
Washington.
Value-added taxes on soft drinks vary in our territories located
in Canada, Spain, Greece, Russia, Turkey and Mexico, but are
consistent with the value-added tax rate for other consumer
products. In addition, there is a special consumption tax
applicable to cola products in Turkey. In Mexico, bottled water
in containers over 10.1 liters are exempt from value-added tax,
and we obtained a tax exemption for containers holding less than
10.1 liters of water. The tax exemption currently also applies
to non-carbonated soft drinks.
We are not aware of any material soft drink taxes that have been
enacted in any other market served by us. The recent economic
downturn has resulted in reduced tax revenue for many states and
has increased the need for some states to identify new revenue
sources. Some states may pursue additional revenue through new
or amended soft drink or similar excise tax legislation. We are
unable to predict, however, whether such legislation will be
enacted or what impact its enactment would have on our business,
financial condition or results of operations.
Trade Regulation. As
a manufacturer, seller and distributor of bottled and canned
soft drink products of PepsiCo and other soft drink
manufacturers in exclusive territories in the United States and
internationally, we are subject to antitrust and competition
laws. Under the Soft Drink Interbrand Competition Act, soft
drink bottlers operating in the United States, such as us, may
have an exclusive right to manufacture, distribute and sell a
soft drink product in a geographic territory if the soft drink
product is in substantial and effective competition with other
products of the same class in the same market or markets. We
believe that there is such substantial and effective competition
in each of the exclusive geographic territories in which we
operate.
School Sales Legislation;
Industry Guidelines. In 2004, the U.S. Congress
passed the Child Nutrition Act, which required school districts
to implement a school wellness policy by July 2006. In May 2006,
members of the American Beverage Association, the Alliance for a
Healthier Generation, the American Heart Association and The
William J. Clinton Foundation entered into a memorandum of
understanding that sets forth standards for what beverages can
be sold in elementary, middle and high schools in the United
States (the “ABA Policy”). Also, the beverage
associations in the European Union and Canada have recently
issued guidelines relating to the sale of beverages in schools.
We intend to comply fully with the ABA Policy and these
guidelines. In addition, legislation has been proposed in Mexico
that would restrict the sale of certain high-calorie products,
including soft drinks, in schools and that would require these
products to include a label that warns consumers that
consumption abuse may lead to obesity.
California Carcinogen and
Reproductive Toxin Legislation. A California law
requires that any person who exposes another to a carcinogen or
a reproductive toxin must provide a warning to that effect.
Because the law does not define quantitative thresholds below
which a warning is not required, virtually all manufacturers of
food products are confronted with the possibility of having to
provide warnings due to the presence of trace amounts of defined
substances. Regulations implementing the law exempt
manufacturers from providing the required warning if it can be
demonstrated that the defined substances occur naturally in the
product or are present in municipal water used to manufacture
the product. We have assessed the impact of the law and its
implementing regulations on our beverage products and have
concluded that none of our products currently requires a warning
under the law. We cannot predict whether or to what extent food
industry efforts to minimize the law’s impact on food
products will succeed. We also cannot predict what impact,
either in terms of direct costs or diminished sales, imposition
of the law may have.
Mexican Water Regulation.
In Mexico, we pump water from our own wells and we purchase
water directly from municipal water companies pursuant to
concessions obtained from the Mexican government on a
plant-by-plant
basis. The concessions are generally for ten-year terms and can
generally be renewed by us prior to expiration with minimal cost
and effort. Our concessions may be terminated if, among other
things, (a) we use materially more water than permitted by
the concession, (b) we use materially less water than
required by the concession, (c) we fail to pay for the
rights for water usage or (d) we carry out, without
governmental authorization, any material construction on or
improvement to, our wells. Our concessions generally satisfy our
current water requirements and we believe that we are generally
in compliance in all material respects with the terms of our
existing concessions.
7
Table of Contents
Governmental Regulation Applicable to PBG Our operations and properties are subject to regulation by various federal, state and local governmental entities and agencies in the United States as well as foreign governmental entities and agencies in Canada, Spain, Greece, Russia, Turkey and Mexico. As a producer of food products, we are subject to production, packaging, quality, labeling and distribution standards in each of the countries where we have operations, including, in the United States, those of the Federal Food, Drug and Cosmetic Act and the Public Health Security and Bioterrorism Preparedness and Response Act. The operations of our production and distribution facilities are subject to laws and regulations relating to the protection of our employees’ health and safety and the environment in the countries in which we do business. In the United States, we are subject to the laws and regulations of various governmental entities, including the Department of Labor, the Environmental Protection Agency and the Department of Transportation, and various federal, state and local occupational, labor and employment and environmental laws. These laws and regulations include the Occupational Safety and Health Act, the Clean Air Act, the Clean Water Act, the Resource Conservation and Recovery Act, the Comprehensive Environmental Response, Compensation and Liability Act, the Superfund Amendments and Reauthorization Act, the Federal Motor Carrier Safety Act and the Fair Labor Standards Act. We believe that our current legal, operational and environmental compliance programs are adequate and that we are in substantial compliance with applicable laws and regulations of the countries in which we do business. We do not anticipate making any material expenditures in connection with environmental remediation and compliance. However, compliance with, or any violation of, future laws or regulations could require material expenditures by us or otherwise have a material adverse effect on our business, financial condition or results of operations. Bottle and Can Legislation. Legislation has been enacted in certain U.S. states and Canadian provinces where we operate that generally prohibits the sale of certain beverages in non-refillable containers unless a deposit or levy is charged for the container. These include California, Connecticut, Delaware, Hawaii, Iowa, Maine, Massachusetts, Michigan, New York, Oregon, West Virginia, British Columbia, Alberta, Saskatchewan, Manitoba, New Brunswick, Nova Scotia and Quebec. Legislation prohibited the sale of carbonated beverages in non-refillable containers in Prince Edwards Islands in 2007, but this law was repealed in May 2008. Massachusetts and Michigan have statutes that require us to pay all or a portion of unclaimed container deposits to the state and Connecticut has 6 Table of Contentsenacted a similar statute effective in 2009. Hawaii and California impose a levy on beverage containers to fund a waste recovery system. In addition to the Canadian deposit legislation described above, Ontario, Canada currently has a regulation requiring that at least 30% of all soft drinks sold in Ontario be bottled in refillable containers. The European Commission issued a packaging and packing waste directive that was incorporated into the national legislation of most member states. This has resulted in targets being set for the recovery and recycling of household, commercial and industrial packaging waste and imposes substantial responsibilities upon bottlers and retailers for implementation. Similar legislation has been enacted in Turkey. Mexico adopted legislation regulating the disposal of solid waste products. In response to this legislation, PBG Mexico maintains agreements with local and federal Mexican governmental authorities as well as with civil associations, which require PBG Mexico, and other participating bottlers, to provide for collection and recycling of certain minimum amounts of plastic bottles. We are not aware of similar material legislation being enacted in any other areas served by us. The recent economic downturn has resulted in reduced tax revenue for many states and has increased the need for some states to identify new revenue sources. Some states may pursue additional revenue through new or amended bottle and can legislation. We are unable to predict, however, whether such legislation will be enacted or what impact its enactment would have on our business, financial condition or results of operations. Soft Drink Excise Tax Legislation. Specific soft drink excise taxes have been in place in certain states for several years. The states in which we operate that currently impose such a tax are West Virginia and Arkansas and, with respect to fountain syrup only, Washington. Value-added taxes on soft drinks vary in our territories located in Canada, Spain, Greece, Russia, Turkey and Mexico, but are consistent with the value-added tax rate for other consumer products. In addition, there is a special consumption tax applicable to cola products in Turkey. In Mexico, bottled water in containers over 10.1 liters are exempt from value-added tax, and we obtained a tax exemption for containers holding less than 10.1 liters of water. The tax exemption currently also applies to non-carbonated soft drinks. We are not aware of any material soft drink taxes that have been enacted in any other market served by us. The recent economic downturn has resulted in reduced tax revenue for many states and has increased the need for some states to identify new revenue sources. Some states may pursue additional revenue through new or amended soft drink or similar excise tax legislation. We are unable to predict, however, whether such legislation will be enacted or what impact its enactment would have on our business, financial condition or results of operations. Trade Regulation. As a manufacturer, seller and distributor of bottled and canned soft drink products of PepsiCo and other soft drink manufacturers in exclusive territories in the United States and internationally, we are subject to antitrust and competition laws. Under the Soft Drink Interbrand Competition Act, soft drink bottlers operating in the United States, such as us, may have an exclusive right to manufacture, distribute and sell a soft drink product in a geographic territory if the soft drink product is in substantial and effective competition with other products of the same class in the same market or markets. We believe that there is such substantial and effective competition in each of the exclusive geographic territories in which we operate. School Sales Legislation; Industry Guidelines. In 2004, the U.S. Congress passed the Child Nutrition Act, which required school districts to implement a school wellness policy by July 2006. In May 2006, members of the American Beverage Association, the Alliance for a Healthier Generation, the American Heart Association and The William J. Clinton Foundation entered into a memorandum of understanding that sets forth standards for what beverages can be sold in elementary, middle and high schools in the United States (the “ABA Policy”). Also, the beverage associations in the European Union and Canada have recently issued guidelines relating to the sale of beverages in schools. We intend to comply fully with the ABA Policy and these guidelines. In addition, legislation has been proposed in Mexico that would restrict the sale of certain high-calorie products, including soft drinks, in schools and that would require these products to include a label that warns consumers that consumption abuse may lead to obesity. California Carcinogen and Reproductive Toxin Legislation. A California law requires that any person who exposes another to a carcinogen or a reproductive toxin must provide a warning to that effect. Because the law does not define quantitative thresholds below which a warning is not required, virtually all manufacturers of food products are confronted with the possibility of having to provide warnings due to the presence of trace amounts of defined substances. Regulations implementing the law exempt manufacturers from providing the required warning if it can be demonstrated that the defined substances occur naturally in the product or are present in municipal water used to manufacture the product. We have assessed the impact of the law and its implementing regulations on our beverage products and have concluded that none of our products currently requires a warning under the law. We cannot predict whether or to what extent food industry efforts to minimize the law’s impact on food products will succeed. We also cannot predict what impact, either in terms of direct costs or diminished sales, imposition of the law may have. Mexican Water Regulation. In Mexico, we pump water from our own wells and we purchase water directly from municipal water companies pursuant to concessions obtained from the Mexican government on a plant-by-plant basis. The concessions are generally for ten-year terms and can generally be renewed by us prior to expiration with minimal cost and effort. Our concessions may be terminated if, among other things, (a) we use materially more water than permitted by the concession, (b) we use materially less water than required by the concession, (c) we fail to pay for the rights for water usage or (d) we carry out, without governmental authorization, any material construction on or improvement to, our wells. Our concessions generally satisfy our current water requirements and we believe that we are generally in compliance in all material respects with the terms of our existing concessions. 7 Table of Contents
These excerpts taken from the PBG 10-K filed Feb 27, 2008. Governmental
Regulation Applicable to PBG
Our operations and properties are subject to regulation by
various federal, state and local governmental entities and
agencies in the United States as well as foreign governmental
entities and agencies in Canada, Spain, Greece, Russia, Turkey
and Mexico. As a producer of food products, we are subject to
production, packaging, quality, labeling and distribution
standards in each of the countries where we have operations,
including, in the United States, those of the Federal Food, Drug
and Cosmetic Act and the Public Health Security and Bioterrorism
Preparedness and Response Act. The operations of our production
and distribution facilities are subject to laws and regulations
relating to the protection of our employees’ health and
safety and the environment in the countries in which we do
business. In the United States, we are subject to the laws and
regulations of various governmental entities, including the
Department of Labor, the Environmental Protection Agency and the
Department of Transportation, and various federal, state and
local occupational, labor and employment and environmental laws.
These laws and regulations include the Occupational Safety and
Health Act, the Clean Air Act, the Clean Water Act, the Resource
Conservation and Recovery Act, the Comprehensive Environmental
Response, Compensation and Liability Act, the Superfund
Amendments and Reauthorization Act, the Federal Motor Carrier
Safety Act and the Fair Labor Standards Act.
We believe that our current legal, operational and environmental
compliance programs are adequate and that we are in substantial
compliance with applicable laws and regulations of the countries
in which we do business. We do not anticipate making any
material expenditures in connection with environmental
remediation and compliance. However, compliance with, or any
violation of, future laws or regulations could require material
expenditures by us or otherwise have a material adverse effect
on our business, financial condition or results of operations.
Bottle and Can
Legislation. Legislation has been enacted in certain
U.S. states and Canadian provinces where we operate that
generally prohibits the sale of certain beverages in
non-refillable containers unless a deposit or levy is charged
for the container. These include California, Connecticut,
Delaware, Hawaii, Iowa, Maine, Massachusetts, Michigan, New
York, Oregon, West Virginia, British Columbia, Alberta,
Saskatchewan, Manitoba, New Brunswick, Nova Scotia and Quebec.
Legislation prohibited the sale of carbonated beverages in
non-refillable containers in Prince Edwards Islands in 2007, but
this law is expected to change in 2008.
Massachusetts and Michigan have statutes that require us to pay
all or a portion of unclaimed container deposits to the state
and Hawaii and California impose a levy on beverage containers
to fund a waste recovery system.
In addition to the Canadian deposit legislation described above,
Ontario, Canada currently has a regulation requiring that at
least 30% of all soft drinks sold in Ontario be bottled in
refillable containers.
The European Commission issued a packaging and packing waste
directive that was incorporated into the national legislation of
most member states. This has resulted in targets being set for
the recovery and recycling of household, commercial and
industrial packaging waste and imposes substantial
responsibilities upon bottlers and retailers for implementation.
Similar legislation has been enacted in Turkey.
Mexico adopted legislation regulating the disposal of solid
waste products. In response to this legislation, PBG Mexico
maintains agreements with local and federal Mexican governmental
authorities as well as with civil associations, which require
PBG Mexico, and other participating bottlers, to provide for
collection and recycling of certain minimum amounts of plastic
bottles.
We are not aware of similar material legislation being enacted
in any other areas served by us. We are unable to predict,
however, whether such legislation will be enacted or what impact
its enactment would have on our business, financial condition or
results of operations.
Soft Drink Excise Tax
Legislation. Specific soft drink excise taxes have
been in place in certain states for several years. The states in
which we operate that currently impose such a tax are West
Virginia and Arkansas and, with respect to fountain syrup only,
Washington. In Mexico, there are excise taxes on any sweetened
beverage products produced without sugar, including our diet
soft drinks and imported beverages that are not sweetened with
sugar.
Value-added taxes on soft drinks vary in our territories located
in Canada, Spain, Greece, Russia, Turkey and Mexico, but are
consistent with the value-added tax rate for other consumer
products. In addition, there is a special consumption tax
applicable to cola products in Turkey. In Mexico, bottled water
in containers over 10.1 liters are exempt from value-added
tax, and we obtained a tax exemption for containers holding less
than 10.1 liters of water.
We are not aware of any material soft drink taxes that have been
enacted in any other market served by us. We are unable to
predict, however, whether such legislation will be enacted or
what impact its enactment would have on our business, financial
condition or results of operations.
7
Table of Contents
Trade Regulation. As
a manufacturer, seller and distributor of bottled and canned
soft drink products of PepsiCo and other soft drink
manufacturers in exclusive territories in the United States and
internationally, we are subject to antitrust and competition
laws. Under the Soft Drink Interbrand Competition Act, soft
drink bottlers operating in the United States, such as us, may
have an exclusive right to manufacture, distribute and sell a
soft drink product in a geographic territory if the soft drink
product is in substantial and effective competition with other
products of the same class in the same market or markets. We
believe that there is such substantial and effective competition
in each of the exclusive geographic territories in which we
operate.
School Sales Legislation;
Industry Guidelines. In 2004, U.S. Congress
passed the Child Nutrition Act, which required school districts
to implement a school wellness policy by July 2006. In May 2006,
members of the American Beverage Association, the Alliance for a
Healthier Generation, the American Heart Association and The
William J. Clinton Foundation entered into a memorandum of
understanding that sets forth standards for what beverages can
be sold in elementary, middle and high schools in the United
States (the “ABA Policy”). Also, the beverage
associations in the European Union and Canada have recently
issued guidelines relating to the sale of beverages in schools.
We intend to comply fully with the ABA Policy and these
guidelines.
California Carcinogen and
Reproductive Toxin Legislation. A California law
requires that any person who exposes another to a carcinogen or
a reproductive toxin must provide a warning to that effect.
Because the law does not define quantitative thresholds below
which a warning is not required, virtually all manufacturers of
food products are confronted with the possibility of having to
provide warnings due to the presence of trace amounts of defined
substances. Regulations implementing the law exempt
manufacturers from providing the required warning if it can be
demonstrated that the defined substances occur naturally in the
product or are present in municipal water used to manufacture
the product. We have assessed the impact of the law and its
implementing regulations on our beverage products and have
concluded that none of our products currently requires a warning
under the law. We cannot predict whether or to what extent food
industry efforts to minimize the law’s impact on food
products will succeed. We also cannot predict what impact,
either in terms of direct costs or diminished sales, imposition
of the law may have.
Mexican Water Regulation.
In Mexico, we pump water from our own wells and we purchase
water directly from municipal water companies pursuant to
concessions obtained from the Mexican government on a
plant-by-plant
basis. The concessions are generally for ten-year terms and can
generally be renewed by us prior to expiration with minimal cost
and effort. Our concessions may be terminated if, among other
things, (a) we use materially more water than permitted by
the concession, (b) we use materially less water than
required by the concession, (c) we fail to pay for the
rights for water usage or (d) we carry out, without
governmental authorization, any material construction on or
improvement to, our wells. Our concessions generally satisfy our
current water requirements and we believe that we are generally
in compliance in all material respects with the terms of our
existing concessions.
Governmental Regulation Applicable to PBG Our operations and properties are subject to regulation by various federal, state and local governmental entities and agencies in the United States as well as foreign governmental entities and agencies in Canada, Spain, Greece, Russia, Turkey and Mexico. As a producer of food products, we are subject to production, packaging, quality, labeling and distribution standards in each of the countries where we have operations, including, in the United States, those of the Federal Food, Drug and Cosmetic Act and the Public Health Security and Bioterrorism Preparedness and Response Act. The operations of our production and distribution facilities are subject to laws and regulations relating to the protection of our employees’ health and safety and the environment in the countries in which we do business. In the United States, we are subject to the laws and regulations of various governmental entities, including the Department of Labor, the Environmental Protection Agency and the Department of Transportation, and various federal, state and local occupational, labor and employment and environmental laws. These laws and regulations include the Occupational Safety and Health Act, the Clean Air Act, the Clean Water Act, the Resource Conservation and Recovery Act, the Comprehensive Environmental Response, Compensation and Liability Act, the Superfund Amendments and Reauthorization Act, the Federal Motor Carrier Safety Act and the Fair Labor Standards Act. We believe that our current legal, operational and environmental compliance programs are adequate and that we are in substantial compliance with applicable laws and regulations of the countries in which we do business. We do not anticipate making any material expenditures in connection with environmental remediation and compliance. However, compliance with, or any violation of, future laws or regulations could require material expenditures by us or otherwise have a material adverse effect on our business, financial condition or results of operations. Bottle and Can Legislation. Legislation has been enacted in certain U.S. states and Canadian provinces where we operate that generally prohibits the sale of certain beverages in non-refillable containers unless a deposit or levy is charged for the container. These include California, Connecticut, Delaware, Hawaii, Iowa, Maine, Massachusetts, Michigan, New York, Oregon, West Virginia, British Columbia, Alberta, Saskatchewan, Manitoba, New Brunswick, Nova Scotia and Quebec. Legislation prohibited the sale of carbonated beverages in non-refillable containers in Prince Edwards Islands in 2007, but this law is expected to change in 2008. Massachusetts and Michigan have statutes that require us to pay all or a portion of unclaimed container deposits to the state and Hawaii and California impose a levy on beverage containers to fund a waste recovery system. In addition to the Canadian deposit legislation described above, Ontario, Canada currently has a regulation requiring that at least 30% of all soft drinks sold in Ontario be bottled in refillable containers. The European Commission issued a packaging and packing waste directive that was incorporated into the national legislation of most member states. This has resulted in targets being set for the recovery and recycling of household, commercial and industrial packaging waste and imposes substantial responsibilities upon bottlers and retailers for implementation. Similar legislation has been enacted in Turkey. Mexico adopted legislation regulating the disposal of solid waste products. In response to this legislation, PBG Mexico maintains agreements with local and federal Mexican governmental authorities as well as with civil associations, which require PBG Mexico, and other participating bottlers, to provide for collection and recycling of certain minimum amounts of plastic bottles. We are not aware of similar material legislation being enacted in any other areas served by us. We are unable to predict, however, whether such legislation will be enacted or what impact its enactment would have on our business, financial condition or results of operations. Soft Drink Excise Tax Legislation. Specific soft drink excise taxes have been in place in certain states for several years. The states in which we operate that currently impose such a tax are West Virginia and Arkansas and, with respect to fountain syrup only, Washington. In Mexico, there are excise taxes on any sweetened beverage products produced without sugar, including our diet soft drinks and imported beverages that are not sweetened with sugar. Value-added taxes on soft drinks vary in our territories located in Canada, Spain, Greece, Russia, Turkey and Mexico, but are consistent with the value-added tax rate for other consumer products. In addition, there is a special consumption tax applicable to cola products in Turkey. In Mexico, bottled water in containers over 10.1 liters are exempt from value-added tax, and we obtained a tax exemption for containers holding less than 10.1 liters of water. We are not aware of any material soft drink taxes that have been enacted in any other market served by us. We are unable to predict, however, whether such legislation will be enacted or what impact its enactment would have on our business, financial condition or results of operations. 7 Table of Contents
Trade Regulation. As a manufacturer, seller and distributor of bottled and canned soft drink products of PepsiCo and other soft drink manufacturers in exclusive territories in the United States and internationally, we are subject to antitrust and competition laws. Under the Soft Drink Interbrand Competition Act, soft drink bottlers operating in the United States, such as us, may have an exclusive right to manufacture, distribute and sell a soft drink product in a geographic territory if the soft drink product is in substantial and effective competition with other products of the same class in the same market or markets. We believe that there is such substantial and effective competition in each of the exclusive geographic territories in which we operate. School Sales Legislation; Industry Guidelines. In 2004, U.S. Congress passed the Child Nutrition Act, which required school districts to implement a school wellness policy by July 2006. In May 2006, members of the American Beverage Association, the Alliance for a Healthier Generation, the American Heart Association and The William J. Clinton Foundation entered into a memorandum of understanding that sets forth standards for what beverages can be sold in elementary, middle and high schools in the United States (the “ABA Policy”). Also, the beverage associations in the European Union and Canada have recently issued guidelines relating to the sale of beverages in schools. We intend to comply fully with the ABA Policy and these guidelines. California Carcinogen and Reproductive Toxin Legislation. A California law requires that any person who exposes another to a carcinogen or a reproductive toxin must provide a warning to that effect. Because the law does not define quantitative thresholds below which a warning is not required, virtually all manufacturers of food products are confronted with the possibility of having to provide warnings due to the presence of trace amounts of defined substances. Regulations implementing the law exempt manufacturers from providing the required warning if it can be demonstrated that the defined substances occur naturally in the product or are present in municipal water used to manufacture the product. We have assessed the impact of the law and its implementing regulations on our beverage products and have concluded that none of our products currently requires a warning under the law. We cannot predict whether or to what extent food industry efforts to minimize the law’s impact on food products will succeed. We also cannot predict what impact, either in terms of direct costs or diminished sales, imposition of the law may have. Mexican Water Regulation. In Mexico, we pump water from our own wells and we purchase water directly from municipal water companies pursuant to concessions obtained from the Mexican government on a plant-by-plant basis. The concessions are generally for ten-year terms and can generally be renewed by us prior to expiration with minimal cost and effort. Our concessions may be terminated if, among other things, (a) we use materially more water than permitted by the concession, (b) we use materially less water than required by the concession, (c) we fail to pay for the rights for water usage or (d) we carry out, without governmental authorization, any material construction on or improvement to, our wells. Our concessions generally satisfy our current water requirements and we believe that we are generally in compliance in all material respects with the terms of our existing concessions. | EXCERPTS ON THIS PAGE:
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