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12.1: Taking on the Pepsi Challenge: The Case of Indra Nooyi

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She is among the top 100 most influential people according to Time magazine’s 2008 list. She is also number 5 in Forbes ’s “Most Influential Women in the World” (2007), number 1 in Fortune ’s “50 Most Powerful Women” (2006), and number 22 in Fortune ’s “25 Most Powerful People in Business” (2007). The lists go on and on. To those familiar with her work and style, this should come as no surprise: Even before she became the CEO of PepsiCo Inc. (NYSE: PEP) in 2006, she was one of the most powerful executives at PepsiCo and one of the two candidates being groomed for the coveted CEO position. Born in Chennai, India, Nooyi graduated from Yale’s School of Management and worked in companies such as the Boston Consulting Group Inc., Motorola Inc., and ABB Inc. She also led an all-girls rock band in high school, but that is a different story.

What makes her one of the top leaders in the business world today? To start with, she has a clear vision for PepsiCo, which seems to be the right vision for the company at this point in time. Her vision is framed under the term “performance with purpose,” which is based on two key ideas: tackling the obesity epidemic by improving the nutritional status of PepsiCo products and making PepsiCo an environmentally sustainable company. She is an inspirational speaker and rallies people around her vision for the company. She has the track record to show that she means what she says. She was instrumental in PepsiCo’s acquisition of the food conglomerate Quaker Oats Company and the juice maker Tropicana Products Inc., both of which have healthy product lines. She is bent on reducing PepsiCo’s reliance on high-sugar, high-calorie beverages, and she made sure that PepsiCo removed trans fats from all its products before its competitors. On the environmental side, she is striving for a net zero impact on the environment. Among her priorities are plans to reduce the plastic used in beverage bottles and find biodegradable packaging solutions for PepsiCo products. Her vision is long term and could be risky for short-term earnings, but it is also timely and important.

Those who work with her feel challenged by her high-performance standards and expectation of excellence. She is not afraid to give people negative feedback—and with humor, too. She pushes people until they come up with a solution to a problem and does not take “I don’t know” for an answer. For example, she insisted that her team find an alternative to the expensive palm oil and did not stop urging them forward until the alternative arrived: rice bran oil.

Nooyi is well liked and respected because she listens to those around her, even when they disagree with her. Her background cuts across national boundaries, which gives her a true appreciation for diversity, and she expects those around her to bring their values to work. In fact, when she graduated from college, she wore a sari to a job interview at Boston Consulting, where she got the job. She is an unusually collaborative person in the top suite of a Fortune 500 company, and she seeks help and information when she needs it. She has friendships with three ex-CEOs of PepsiCo who serve as her informal advisors, and when she was selected to the top position at PepsiCo, she made sure that her rival for the position got a pay raise and was given influence in the company so she did not lose him. She says that the best advice she received was from her father, who taught her to assume that people have good intentions. Nooyi notes that expecting people to have good intentions helps her prevent misunderstandings and show empathy for them. It seems that she is a role model to other business leaders around the world, and PepsiCo is well positioned to tackle the challenges the future may bring.

Based on information from Birger, J., Chandler, C., Frott, J., Gimbel, B., Gumbel, P., et al. (2008, May 12). The best advice I ever got. Fortune, 157 (10), 70–80; Brady, D. (2007, June 11). Keeping cool in hot water. BusinessWeek . Retrieved April 30, 2010, from http://www.businessweek.com/magazine/content/07_24/b4038067.htm ; Compton, J. (2007, October 15). Performance with purpose. Beverage World, 126 (10), 32; McKay, B. (2008, May 6). Pepsi to cut plastic used in bottles. Wall Street Journal , Eastern edition, p. B2; Morris, B., & Neering, P. A. (2008, May 3). The Pepsi challenge: Can this snack and soda giant go healthy? CEO Indra Nooyi says yes but cola wars and corn prices will test her leadership. Fortune, 157 (4), 54–66; Schultz, H. (2008, May 12). Indra Nooyi. Time, 171 (19), 116–117; Seldman, M. (2008, June). Elevating aspirations at PepsiCo. T+D, 62 (6), 36–38; The Pepsi challenge (2006, August 19). Economist . Retrieved April 30, 2010, from http://www.economist.com/business-finance/displaystory.cfm?story_id =7803615 .

Discussion Questions

• Indra Nooyi is not a typical CEO. How does she differ from your idea of what a typical CEO is like? How do you think your current image of CEOs was created?
• Indra Nooyi is touted as being “unusually collaborative” for someone in charge of a Fortune 500 company. Why do you think her level of collaboration is so unusual for top executives?
• Do you think Nooyi’s story represents a transition of American companies to a different type of leader or simply a unique case?
• Pepsi-Cola dates back to 1898 and officially became PepsiCo after merging with Frito-Lay in 1965. What are some challenges the CEO faces today that were not an issue at that time? What are some aspects that make the position easier in modern times?
• If you were in Indra Nooyi’s shoes, what direction would you take the company, given the success you have had thus far? What are some challenges that could arise in the near future for PepsiCo?

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Reimagining PBNA’s frontline experience

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Consumer goods

Helping PepsiCo Beverages North America transform its frontline experience

PwC gets the clients’ perspective

PepsiCo Beverages North America (PBNA) is PepsiCo’s beverage business with operations in the United States and Canada. Its product portfolio includes brands, including Gatorade, Mountain Dew, Aquafina, Lipton and Pepsi-Cola that each generate more than $1 billion in estimated annual retail sales each year.

PBNA transformed its business to increase customer service productivity and drive customer acquisition, onboarding and retention. PBNA is also focused on boosting revenue and improving frontline operational efficiency and effectiveness.

Interview with: Johannes Evenblij President, PBNA West Division

What was the challenge?

“The beverages industry is moving faster than ever — with consumer needs, sales channels and competition becoming more complex. PBNA needed a way to meet consumer’s increasing demands in less time.

Our vision is simple — deliver what consumers want, when they want it. This is a massive program to digitize our North America beverage business, with more than 23,000 employees affected, fundamentally changing the way our frontline works. Not only does this help our employees, it will ultimately allow PBNA to become faster, stronger and better for consumers.”

How does the solution blend the strengths of technology and people?

“We know the importance of investing in our future. This is more than technology implementation, it’s a digital transformation reimagining business processes through human-centered design. It drives new ways of working and smarter selling with advanced analytics.

Today’s workforce comes through the doors expecting us to have applications, software and analytics at their fingertips. We want them to know we’re investing in them.”

Interview with: Ian Martin VP of Transformation, PBNA

Tell us more about the solution.

“From the ground up, we meticulously crafted a platform and experience to enable PBNA’s frontline team with Salesforce Consumer Goods Cloud, enabled by components from PwC’s Connected Digital Front Office configuration and robust mobile framework. As a team, we rapidly created designs and prototypes, crafting a minimum viable product (MVP) version of the application of 700+ user stories that will be deployed by seven scrum teams over nine months.

Our frontline team is responsible for selling merchandise and taking our products to stores. This new technology will help them provide better service, and sell more, all in less time. With analytics at their fingertips, they can make better recommendations.”

Where or how did innovation come into play?

“We have a long history of developing cutting-edge tools for our frontline team. What I saw with Salesforce Consumer Goods Cloud was an opportunity to marry a leading platform with our internal know-how to bring these tools to life. This work also sets us up for the next generation of tools we can continue to build on and innovate for our frontline.

Now that we’ve laid the technology foundation, we expect more people will think about the evolving possibilities, which will accelerate company-wide innovation.”

Reduction in frontline legacy applications

Users across the U.S. and Canada empowered by the Salesforce platform

PwC and Salesforce, the new equation for your fully connected customer.

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Principal, Salesforce Consulting, PwC US

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PepsiCo Company Harvard Case Solution & Analysis

Home >> Management Case Studies >> PepsiCo Company

PepsiCo Company

Companies’ need to be more focused in operations management in order to produce and deliver goods and services that are up to the mark. The field of operations and quality management will always remain an important part for the success of any business. It serves as a theoretical base to encounter the real problems in the corporate world and thus it is a crucial part of the organization as well (Sweet, Franklyn, 1964). PepsiCo is the world’s famous brand and is known to be a leader in beverages and food products. Major brands of the company are PepsiCo beverages North America, Quaker foods North America, Frito-lay North America and PepsiCo international. Much of the brands in PepsiCo are more than hundred years old. The company is engaged in providing handy and convenient foods for customers.

Quality issues faced by the company:

The company stands out as a leader and achieved sustainable advantage but still the company has faced various problems regarding quality of products and services. PepsiCo is known to be one of the United Kingdom’s most well-known brands with respect to taste and quality of its products. Unfortunately, the company has faced several issues in the quality that resulted in great losses in terms of the reputation of the brand. The basic reason behind the problem was mismanagement in the quality control and inspection department of the company. Pepsi today stands as one of the most popular and well reputed brand but still such a well reputed and quality conscious brand failed to manage the quality of its famous brand Cadbury as there were several quality issues in the products of Cadbury.

Few years back, there was breaking news regarding PepsiCo that told the public that Pepsi was contaminated with pesticides that were dangerous for human health . The news was so shocking that it spread like a fire in the jungle. Contamination with pesticides was due to lack of attention and negligence of the quality inspection and operations management department of the company, and it affected the company in every term. The company had to bear significant monetary loss and loss with respect to brand image and brand trust as well (Ishikawa, 1985).

The news was deplorable and shocking for all the consumers worldwide because the company has built a very strong brand image, and it was one of the most trusted brands; therefore, consumers could never think of it what the breaking news conveyed to them. Because of this, other beverage companies got an opportunity to make their place in the market. Finding pesticides in Pepsi was shocking and as a result of this, Pepsi was banned in most of the countries globally. In addition to that, stocks in factories were seized, and the company was not allowed to take the stocks out of the company. These issues questioned the current management and practices that have been followed in the quality control and inspection department in Pepsi (Stephen, 1991).

Furthermore, the reliability, authenticity and accuracy of these practices were questioned and analyzed. Several other companies like Coca-cola were also in charge of finding contamination with pesticides in their beverages. The basic reason behind these contaminations was the poor sewerage treatment and industrial pollution. A test conducted by laboratory of monitory pollution revealed that the samples of Pepsi contained four severely dangerous pesticides that included: DDT, Chlorpyrifos, Lindane and Malathion, which were extremely dangerous for human health . In addition to that, number of pesticides found in the brand was almost 0.0180 mg per liter on average that is 36 times more than the limit given by EEC. Even though, the company always give importance to the maintenance and quality of the product but still severe quality issue were identified.

It is a fact that various machines were used for the cleaning and purification of water used in the manufacturing of Pepsi but still the contamination and residues of pesticides were found in the bottles of Pepsi. An investigation committee was setup to find out the root cause of the issue. The investigation committee has identified that the water used in the production of Pepsi was highly contaminated (Gilbert, G. 1992).

How does that company address quality?

After the damage in terms of money and brand image, the company has taken measures to identify the root cause of the problem to eliminate it. For the contamination of water, the company has installed various water purifiers in the factories and enhances the use of boiling water containers that boil the water and make it free from all the germs and bacteria (Hyde, 1992).

Furthermore, the company has taken every possible measure to ensure the safety in production with no compromise on quality in overall production and manufacturing process. Not only in quality but the company also focused on ........................

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