Passing the Pepsi test

The jewel in the crown of PepsiCo is celebrating a decade at the pinnacle of one the world’s most iconic companies – a brand she has transformed, with a workforce and boardroom that seemingly adore her. Can this fairy tale continue?

By Darren Parkin

Indra NooyiWHEN it comes to office parties, it’s usually fairly acceptable to turn a blind eye to the drunken antics of a few badly dressed line managers trying their vein-bursting best to show the staff they can be as uninhibited as anyone when it comes to letting their hair down.

Invariably, things will take a turn for the worse, and the poor boss from supplies will be red-faced for as long the staff care to regale colleagues as they relive his uncharacteristic mishaps at the water cooler.

However, enter stage left, Indra Nooyi – CEO of PepsiCo… the first person at the party to pick up the karaoke microphone and, even more telling, usually always the last one left standing with it at the end of the evening.

When it comes to shaking off the expected boardroom stuffiness in front of the staff, she will not shy away from having a good time. While most CEOs would be happier practising their table manners at a private party as their staff took advantage of the boss’s morale-boosting generosity, you’re more likely to find the livewire Nooyi (one hand clutching the kick-stand as she leans in to the delighted crowd) belting out Bon Jovi’s Livin’ On A Prayer as if the very future of Pepsi depended on it. Curiously, in some strange ways, it actually does.

Many admirers point directly at Indra Nooyi as the sole reason why PepsiCo is such a massively successful organisation, and, again, it could be argued that her position at the top of the company food chain means that ought to be the conclusion that any analyst should quickly arrive at. However, as with most people talented and fortunate enough to be at the pinnacle of huge industries, it’s a little more complicated than that.

Nooyi is a highly talented and massively skilled individual, of that there is little doubt. But there is a particular attribute she possesses which sets her far apart from other potential suitors to the throne of such industrial royalty as PepsiCo – the remarkable ability to get everyone to push, with immense enthusiasm, in the same direction. From the night janitors, up to the disgruntled and aging executives who have been overlooked time and time again from the top jobs, Nooyi is like a mystical lodestone magnetically drawing everyone to believe in the same future and drive the company there on a wave of burning alacrity.

Few would dismiss the idea of PepsiCo’s success being a natural product of Nooyi’s infectious personality – her regular appearances at company parties clutching an electric guitar have certainly endeared her to the staff, but the mass engagement of the ‘Pepsi Family’ has spanned the generations of this 120-year-old icon of American industry.

That engagement has been a successful strategy from day one. In 2006, when then CEO Steven Reinemund was looking for his successor, the decision was down to two people considered to be bitter rivals within the business – Nooyi and another, unnamed, high-flyer. Reinemund and the board opted for Nooyi, who then instantly booked the next available flight to go and meet her vanquished foe.

Her first words to him (believed to be Albert P Carey who is now widely regarded as Nooyi’s heir-apparent should she decide to step aside any time soon) were: “Whatever I need to do to keep you – tell me”. She backed up her pleas with a massive pay rise that almost matched her own eye-watering compensation and the deal was done. He became one of her key right-hand men along with several other doubters who she would soon label, with a wry smile, her ‘team of rivals’.

By that time, Nooyi was already a fixture in the PepsiCo boardroom. She was brought in as the chief strategist for the North American beverages division in 1994 when the company was facing uncertain times. Pepsi’s marketplace was shrinking, and the fizzy drinks cake could only be divided so many times before the slices began to get too thin to allow any business growth.

From the off Nooyi began steering the board to make some incredibly tough decisions. Decisions which, to many, looked like wild gambles with a company built on so much heritage in the soda industry that it looked a little like playing roulette with a national institution. She didn’t see Pepsi as a natural bedfellow of fast food, so she urged bosses to steer a wide course around KFC, McDonalds, Taco Bell and Pizza Hut – all of which were shed as partners in 1997. Instead, Nooyi insisted they chase the money on beverages and, with a few raised eyebrows, packaged food. A year later, there came a $3 billion acquisition of Tropicana, following by an aggressive $14 billion takeover of Quaker Oats in 2001.

Despite some initial head shaking around the boardroom table, company profits began to soar at a jaw-dropping rate – as did Nooyi’s reputation.

It was some rise for the former pupil of the Holy Angels Anglo Indian High School in Madras (now Chennai). Born into a Tamil-speaking family in India, a young Indra had always excelled in education. By the time she left high school to study Physics, Chemistry and Mathematics at Madras Christian College in 1974, the teenager was already dreaming of travelling to the USA to continue studying at Yale. With three bachelor’s degrees under her belt, she then went on a Post Graduate Programme with the Indian Institute of Management in Calcutta. By 1976, aged just 21, she was rising through the ranks as a product manager with textile giant Mettur Beardsell as well as Johnson & Johnson. Yet, still, her dream of heading to America and Yale was always in her thoughts.

That dream came true when, in 1978, a 23-year-old Indra Nooyi found herself stepping off the plane at JFK and heading straight up the road to take her place with the Yale School of Management. By day, she studied hard, and by night she worked part time as a dormitory receptionist (always volunteering for the nightshift because it paid an extra 50 cents per hour). A master’s degree in Public and Private Management soon followed and, upon graduation in 1980, she was snapped up by the Boston Consulting Group, and then Motorola.

A few short years before, she was a simple, cricket-loving girl growing up in a crumbling city where her only respite from endless studies and the poverty which surrounded her had been the guitar she wielded so fiercely twice a week in an all-girl rock band that would gig its way around Madras for tips. Now, here she was, catapulted (with honours) from the world’s leading business school into the jaws of some of the toughest corporate environments on earth. And she was loving it.

After one brief taste of America’s big business environment, Nooyi quickly realised she had found her calling and was completely hooked. Applying for American citizenship, she then immersed herself in US corporate life. Swapping her beloved cricket for baseball, she became a massive fan of the New York Yankees. Her love of rock music, however, did not change. If anything, the sudden availability of New York’s karaoke bars and music venues merely enhanced her enthusiasm.

If her occasional gigging around Manhattan bars with an electric guitar didn’t get her noticed, then her work with Motorola and BCG certainly did. Before long, the head-hunters from the big organisations were following her progress closely. It was only a matter of time before PepsiCo came knocking.

Steve Reinemund was an instant fan, and he understood immediately the potential which Pepsi had inherited. “I saw a deeply caring person who can relate to everyone from the boardroom to the front line,” he recalled.

Aside from the caring and fun-loving image of the boss who likes to party, it’s Nooyi’s long-term vision and fearless attempts at change that are winning her plenty of fans both within and outside Pepsi.

Currently, and against many of the wishes of her peers and elders at PepsiCo, Nooyi is relentlessly pursuing a healthy agenda. Where sugary and fatty snack food and drink were once king, the drive is on to deliver healthier product lines. Needless to say, these must come hand-in-hand with healthier profits – a balance she seems to be unfazed by.

“Stripped down, the PepsiCo business can be categorised into three pieces,” she explains.

“Firstly, you have Pepsi, Mountain Dew, Doritos, Cheetos, Fritos etc – these are the fun-for-you snacks and beverages.

“Secondly, we have the ‘better-for-you’ category, such as Diet Pepsi, Baked Doritos, Baked Lay’s etc.

“The third and final piece is the ‘good-for-you’ category where we have Tropicana, Naked Juice and Quaker Oats.

“What we’re looking to do is to take the fun-for-you piece and move it more towards the better-for-you category by reducing the amounts of sugar, salt and fat which goes into these products.”

It’s a move that doesn’t come without its critics. Pepsi and organisations like it have seen the sinister backhand of protests against its products over the last couple of decades. But, again, Nooyi shows little sign of being daunted by it, and instead keeps the focus on her own path.

“Look, I didn’t create Pepsi Cola. Nor did I create Cheetos or Doritos, but I can take these products and try to make them healthier,” she says.

“There’s no ulterior motive or anything disingenuous about wanting to look at a historical eating and drinking habit that has been exported to the rest of the world and wanting to make it more permissible.”

Whatever your motives, it’s a brave move to attempt to tear up the rule book on a trade-off between people and profits – especially when you’re the head of a company born from a product which is currently experiencing a 30-year low in worldwide consumption.

“Because of the diverse range of our products, making a success of making some of those products healthier does not necessarily mean we have to subtract from the bottom line – this is about bringing together what’s good for PepsiCo with what’s good for the world,” she adds.

“These days, attitudes have changed, and people are bringing their principles to their purchasing choices – and we have a duty to respect that.”

It may be a line she is repeating a lot of late, but it’s also slowly gaining the approval of any doubters that may still exist in her camp – even now, after more than a decade at the helm. Last year, PepsiCo’s market cap was up 18%, despite the effects of the previous year’s market volatility which saw some degree of edgy turbulence across the organisation’s figures. In fact, investors have been queueing to bang on Pepsi’s door as they sense further health food and drink acquisitions on the horizon.

While the company was founded on a caffeinated, sugary drink, it would appear that Nooyi is keen to steer PepsiCo away from those now decaying roots and into more diverse lines. It may not seem like an unnatural path to take, but investors and customers alike are responding well.

Whether or not this move will be Nooyi’s legacy – a final lesson in business for us all before she decides to take life at a slower pace – is anyone’s guess. The stock market has been awash with rumours over the last 12 months that she’s lining a successor up once she’s satisfied that her new health-driven direction for PepsiCo is on track. That successor, whoever they may be, will inherit some 185,000 employees in 200 countries, all loyal to Nooyi’s ambitious transition plans.

But, as she has said herself many times over the last decade, her aim is to “keep pushing the boundaries to get to flawless execution – flawless is the ultimate goal”. Given that Pepsi’s reinvention is some way off being flawless, it would be safe to assume Nooyi isn’t going anywhere just yet.