More to the Fizz

What is the importance of PepsiCo Mexico in the company’s global operations?

In regard to beverages, PepsiCo arrived in Mexico in 1907; however, foods came later, approximately 70 years ago, when the company purchased a local foods entrepreneur. His company had a very small production facility and we initially launched a potatoes and wheat line. Currently, Mexico is the second largest market for PepsiCo outside the US, with Russia in first place. In Russia, we acquired a large dairy company and a juice operation. I like nothing more than taking on challenges, and my team reacts very well to them.

PepsiCo Mexico offers more than 20 brands. Which are in the highest demand here?

In terms of snacks, basically it is Sabritas, Ruffles, Doritos, Cheetos, and Fritos, which are all potato chips. Regarding our biscuit business unit, we have Emperador, and Marí­as, a traditional Mexican cookie. Those are the two most important cookie brands. In our foods business unit, we have Quaker products and we also have a confectionary product line called Sonric’s. In beverages, we have Pepsi, Mirinda, Manzanita Sol, Gatorade, and 7up.

Which offer the greatest potential for growth?

We are seeing the greatest potential in the fact that all the products are growing equally. In the future, the demand for nutritious products is bound to grow. For example, in Quaker, we have Quaker cookies, which make oats more accessible to our customers. Innovation is also crucial. In 2013, we launched new products in the cereal area for young people who want more protein, fewer calories, and a great taste. We are offering value-added products, meaning that the company is increasingly starting to target different segments. This is where we see the potential for attracting new consumers.

What new products are you planning to launch?

We have already launched Ruffles Extra Crunch, which is a thicker potato cut and with extra spice. We also launched a soft brownie, called Chokis brownie, which utilized a new technology. As said, we have also launched Stila cereal, made using a unique technology, and which offers high protein content—a basic necessity.

How do you adapt your products through innovation?

We operate a very robust “stage gate” process. This process begins in the hopper, which is where we collect ideas from all over the world. We introduce many different sources of thinking and innovation there. Once there, we apply a very specific filter every three months. Then, we choose which products leave the hopper and go into the stage gate process, and after that we begin a process of six or seven stages wherein, if the product meets certain criteria, it proceeds to the next stage. Each one of the products can either come through a breakthrough, a lift and adapt, or a line extension. Increasingly, we are focusing on breakthrough products.

What are some of the peculiarities of the Mexican market?

This market caters to a highly demanding consumer who has been used to these products for many years. For Mexicans, tortillas have been consumed since the time of the Aztecs, so to satisfy the consumer we have to offer the best tortilla products. The Mexican consumer loves repertoire, meaning they want to change from one product to another and eat many different brands. Also, the Mexican consumer is very sensitive to price points, which means they want to buy a product by size and weight, and they want options. The Mexican consumer is much more sensitive to certain tastes than other markets; therefore, we have a process to determine the shelf life of the product and make daily taste quality checks.

What is the current performance of your production plants?

All of our plants operate with state-of-the-art technology. We invest increasingly in two things: automated packaging and package flexibility. The plants are receiving huge investments. In 2009, our Chairman and CEO, Indra K. Nooyi, announced an investment of $3 billion over the subsequent five years. Much of that was capital investment to automate the plants and boost flexibility. We will continue with this and aim to make another multi-year announcement. We have been present for more than 100 years and this market of more than 20 million people remains attractive for us, and will continue to attract our investment. In regard to the food lines, we regularly visit almost 900,000 customers, many of them more than once a week. Therefore, we make around 2 million sales calls per week. When people ask me what I do, I tell them two things: we are an agro-company because we buy numerous products from farmers, but we also connect with people every week nationwide. We have an extended network in every major city and some smaller cities around the country.

How do you train your workforce?

This is one of the areas where we have seen the most recognition. We have two areas: training and development. In the area of training, we have established and extended a platform that we developed for executives, managers, coordinators, and analysts called PepsiCo University. At the distribution centers and plants, we now have digital classrooms where people can take these courses online. From there, we have built a very robust program of development that includes those in “boot camp,” who then graduate to management. They go to the leadership academy, where directors receive very advanced training. We have been recognized by PepsiCo as one of the best markets in terms of developing people, especially general managers.

What are your efforts to protect the environment?

At PepsiCo, performance with purpose is our philosophy. We have to deliver the numbers, but we also have to make sure the company is sustainable for the future. I really enjoy that our team set up a five-year plan with goals related to water savings. We wanted to achieve 25% water savings within five years, and in less than five years now use 40% less water. This will make a big difference in terms of saving water and protecting the environment. We are also doing a lot in energy; today, 25% of our energy comes from wind power. We also actively participate in recycling and waste management programs. For me, that is one of the beauties of this company. We have the scale to invest in the areas that make a difference for the future, the people, and the planet.

How will the new reforms affect you?

We are hopeful and our outlook for Mexico remains good. The reforms will really help the country break through current bottlenecks, and in particular we applaud the labor- and education-related reforms. Others, like the fiscal reform, we don’t necessarily agree will be for the best. Meanwhile, from a health perspective, we believe that obesity has multiple factors, and I think that simply levying taxes on certain products only distorts the problem. We have been here for a long time and PepsiCo wants to be part of the obesity solution; therefore, we are working with many groups to obtain a better understanding of how to truly address obesity. For example, in 2013, we were the first company in Mexico to sign an agreement with the Ministry of Social Development in the Crusade against Hunger program.

© The Business Year – February 2014