PepsiCo CEO Indra Nooyi says she didn’t want a short-term ‘cut, slash and burn’ policy that would have seen the company make enormous earnings from 2006 despite the upset her long-term nutritional foods focus caused some investors.
“I remember going to Boston for an investor show and one particular investor…just took me to the cleaners, said ‘Who are you, Mother Teresa? We are American. We eat chips and drink soda!” she told David Bradley.
Interviewed by Bradley, who chairs Atlantic Media Company, at the Aspen Ideas Festival on Monday, Nooyi spoke of the challenges her role involved, as a woman leading a company with 300,000 staff and almost $30bn in revenues. She even cracked a joke about using drones to deliver Pepsi to people’s homes.
“What’s new in what we like in beverages and food?” Bradley’s open-ended question saw Nooyi reflect on the shifting soda and snack landscape.
“Clearly there’s a health and wellness trends and…focus for all consumers,” she said. “But what health and wellness means is what’s a really confusing aspect today.”
If you’d asked Nooyi 5-7 years ago she would have said that people were focusing on zero-calorie and lower-calorie products, and were switching away from high calorie products.
But over the past couple of years people had taken industry by surprise, ditching diet products because they don’t like artificial sweeteners, she added.
The surprising return of real sugar – Public ditches artificial sweeteners
“I don’t know why because nothing has been written about them not being safe. They’re just fine. But people are not consuming products with artificial sweeteners. They’re going back to consuming real sugar products,” Nooyi said.
“So that’s a surprising shift. Another shift we’re seeing is people going to portion control. Smaller cans, smaller servings, and they’re reading nutrition labels.”
Before the interview Nooyi said she saw a woman read the nutrition label on a can of EZEE. “People are looking for natural organic labelling, and they’re looking for non-GMO labelling,” she said.
“Now some of it is just myth because GMO, nothing is wrong with it, and I don’t know why people worry about those sorts of issues.
“But we’re seeing people because of the media, because of the blogs, afraid of the food system.
But Nooyi insisted that the US has one of the safest food supply systems in the world – while products are being reformulated to cut calories and include healthier ingredients.
‘You can, cut, slash and burn’, or plan for PepsiCo’s long term...
Nooyi also defended her own record at PepsiCo and what Bradley alluded to as her “rearguard action” that started with the purchase of Quaker Oats for Tropicana and the goal of doubling nutrition food sales from $15bn to $30bn by 2020.
“A group of rump investors, largely back in 2012, decided that Indra’s focus on nutrition, on sustainability, on the future, was a fussy sacrifice to short-term profits,” Bradley told the audience.
Addressing this comment, Nooyi said: “For five years, in a big company like PepsiCo, you can cut, slash, burn, make enormous earnings and then let the next person pick up the debris of what you left for them.”
But she insisted that she wanted PepsiCo to survive longer, and from the start of her tenure as CEO in 2006 noticed health and wellness as a trend, the CSD decline and the fact that, as a major plastic producer and water user, the firm had to change its business model to be more environmentally sustainable.
“We were a company making carbonated soft drinks and potato chips and corn chips – fabulous products. Tasted great, brought a smile to people’s lips – but society was changing.”
‘We are American. We eat chips and drink soda!’ Angry investor told Nooyi
This meant a changed model for PepsiCo that those familiar with its business for the previous 20-30 years found challenging, Nooyi said – since it involved cutting sugar in soft drinks and salt in snack products.
Key events included an April 2010 speech at the Economic Club of Chicago where Nooyi unveiled plans to expand healthy brands such as Quaker and Tropicana, and a pledge to stop selling full-sugar drinks in schools by 2012.
“It was not easy…I struggled with those decisions because we always had a group of people inside PepsiCo who questioned those decisions. Let alone investors,” Nooyi said.
Recalling her exchange with that angry investor in Boston who criticized her nutritional focus, who we quoted above, Nooyi relayed more of his words to the audience.
“It’s not your business to transform the company to healthy offerings. If we want to own a company that makes nutritious beverages and snacks, we’ll go and buy a nutritious beverages and snacks company stock’,” he said.
“I said, ‘What about PepsiCo and our future?’” Nooyi said.