Industry perspective: Brian Newman — PepsiCo | KPMG | SG

Industry perspective: Brian Newman — PepsiCo

Industry perspective: Brian Newman — PepsiCo

PepsiCo’s head of global operations says technology is helping it to drive innovation.

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Brian Newman

What are the key opportunities for PepsiCo?

In terms of global strategy, our biggest opportunity is to accelerate growth in what we call ‘guilt-free’ nutrition. This refers to everyday nutrition products with nutrients like grains, fruits and vegetables, or protein, plus diet beverages and other beverages with 70 calories or less per 12-ounce serving, and snacks with low levels of sodium and saturated fat. To deliver that growth you need innovation. We spend a lot of time thinking about what types of innovation the consumer is asking for, and making sure we are agile enough to develop the necessary packaging and production.

Underlying everything at PepsiCo is a focus on performance with purpose. We are striving to reach our sustainability goals, which include reducing waste, improving water usage, and reducing greenhouse gas emissions by 20 percent by 2030.

How has digital technology changed your business?

A lot. Traditionally we’ve been a bricks-and-mortar manufacturer and brand owner of products sold to the retail channel, but digitalization is disrupting everything from the consumer to the supply chain. Technology, electronics and apparel were way ahead in terms of online sales. It took a while for grocery and fruit and veg to catch up, but consumers are looking for a more seamless shopping opportunity, accelerating the time it takes to deliver, so we need to adapt and partner with the right teams to deliver what the consumer is asking for.

How far have you progressed in terms of digitalizing the supply chain?

We’re at different stages in different places, but we’re leveraging technology to drive efficiency and effectiveness. It’s taken out over US$1 billion a year in productivity each and every year, so it’s making us more agile and able to think: “How do we have fewer touches? Or even have zero touches? Could we respond more quickly?” Digitalization and automation are key for a lot of our warehousing. Frito-Lay is one of our leaders in trying to move new products closer to the consumer, directly from manufacturing sites to retail outlets.

From an economic perspective, we’re trying to source more locally. At PepsiCo, we have great global scale, but we also recognize the benefits of acting like a local player. Being able to shift sourcing is important when you have pressures from the economy or climate.

How significant is automation?

Very. A huge amount of our cost inflation is in labor, so it’s important to reduce that, increase productivity and make things more efficient, using advanced robotics and autonomous vehicles. We can run 24 hours using machines versus labor, so let’s put the human capital and costs where they create most value, and leverage technology to do the day-to-day chores. That’s really how we try to leverage it – to take cost out of the system to drive greater efficiencies and, in transition, train our workforce to adapt to new technology.

What are PepsiCo's key challenges?

Agility, speed to market. In our e-commerce business, you learn something called ‘fail fast’. You try to develop something and get it to market quickly so you can learn from the feedback, adapt and improve. With our mega-brands, we’ve perfected messaging and taste over time, but the new innovations have to run much faster, so we’re trying to leverage the feedback loop with the consumer to launch, adapt and relaunch as necessary.

What difference are Millennials making to your business?

Millennials want instant gratification. They’re not shopping as much in stores as online, so our content needs to resonate with them. They are shopping on mobile devices, so it’s a smaller screen, and the volume is often turned down, so we need to change our advertising to reach them. Consumers love brands that speak to them. You run the risk that online the consumer may be overwhelmed by the profusion of smaller brands and confused about what a brand stands for. At PepsiCo, 22 of our brands sell in excess of US$1 billion a year. With brands of that scale, you want to make sure you have clarity of purpose and relevance on what each brand conveys.

In terms of listening to consumers, how difficult is it to get the right insights?

Nobody has a crystal ball, but you need the right network and partnerships to reach different consumers, feedback loops and markets. About a year ago, we launched Kickstart, an offshoot from the Mountain Dew brand which contains more added real juice for people to ‘kick start their day’. It soon generated several US$100 million in revenue. We’re launching Izze carbonated lemon drinks – lower calorie, lower sugar, and more natural. When you develop new products like that and launch it in 20 countries at the same time – it has a lot of power. Water is a fast-growing category, and we have launched Life Wtr, which links to the art community because we’re putting the work of local artists on the bottles. That is a different platform for reaching the public. These milestones build confidence that we’re listening to the consumer.

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