For the first time PepsiCo’s beverages and foods businesses have been brought under a common leadership in India and the country now has a ‘region’ status. PepsiCo’s beverage head in India, Sanjeev Chadha, is now chairman of India region and also has the additional responsibility of foods business. With the mandate of implementing global chairman & CEO Indra Nooyi’s ‘power of one’ strategy in India and tripling business over the next three years, Mr Chadha is spearheading the beverages and snack food major’s massive restructuring. He spoke about what the restructuring means and the roadmap ahead.
India has recently been accorded with a ‘region’ status by PepsiCo Inc. What does it translate into for the company?
Well, in a nutshell, it reflects the prioritisation of the Indian market. It means India as a region is closer to the senior management at the headquarters. It also translates into faster and more independent decision making, more empowerment and authority to the region, quicker allocation of capital and resources.
Also, it means greater scrutiny of our plans. The India region will report in to the Asia Middle East and Africa (AMEA) division — one of PepsiCo International’s two divisions. We are looking at acceleration of growth, not just maintenance. The restructuring will come into effect starting January next year. The India region includes Bangladesh, Nepal, Sri Lanka and Bhutan.
PepsiCo is giving high priority emerging markets such as India and China for growth when globally the company has reported 9.6% decline in third-quarter net income and is slashing 3,300 jobs. How is PepsiCo India preparing itself to meet targets set by the parent company?
Yes, these are turbulent times in the macroeconomic environment. Some developed markets are going through difficult times. But in developing markets, it’s a different story. These markets are buoyant and there is a lot of potential to grow and expand the businesses.
The investments and prioritisation of India and China is a measure of confidence: it reflects PepsiCo’s confidence in the potential of these markets. Both the beverages and foods businesses in India are galloping ahead in terms of growth and we will, in fact, create more jobs directly and indirectly. We are particularly happy about our talent sustainability initiatives. PepsiCo India has given the world 27 CEOs and I am certain there are many more to come.
The foods and snack foods arms have always functioned as independent entities in the country. What challenges will the integration pose and how do you foresee the merger panning out across functions ?
Well, we are at the beginning of the integration journey and the mandate is to maximise synergies between both businesses and leverage their scale of operations. Beverages and foods are well-placed in terms of momentum. But we have a lot to learn from each other — it implies, for example, sharing best practices, trans-movement of people, allocating bigger opportunities and portfolios to team members.
That both me and Gautham (Mukkavilli — FritoLay MD and now president India region) have led both businesses in other PepsiCo markets helps — it brings in that much more experience and knowledge to the businesses. Coming back to integration, our mandate is to see where synergies exist so that we can build both businesses. We are exploring all key areas where cross learnings are possible.
Procurement of raw material, agriculture and IT are functions that are good examples of where we are looking to drive common integrated platforms. We are exploring how to take forward the ‘power of one’ strategy across the board. Certain operations such as legal, HR and corporate affairs are already integrated across beverages and foods. I am not in a position to say whether the finance functions will be merged in the long run. Production lines is another area where we could consider combining resources.
Has work begun on allocating the fresh investments of $500 million over the next three years?
Yes, very much. Many of the plans are in place, now the implementation of these plans is in progress. The investments will go in a variety of functions and divisions. These will include increasing production lines in existing plants and setting up new ones both for traditional and newer packaging formats.
Besides increasing production capacities, the investments will be infused in marketing infrastructure, environment sustainability and R&D. As we have said in the past, we are committed to transforming our portfolios to healthier products. With the new investments in place, PepsiCo’s total investments in India stand at over $1.5 billion.
The FMCG sector has so far been largely insulated from the slowdown. How has PepsiCo India performed in the past few quarters?
Numbers in the July-September quarter were exceptionally good. October has been even better. The growth has come from a combination of factors put together — value-added products, new packaging formats, a wider footprint of our products, ramped up distribution, marketing and, of course, the weather conditions which have helped us. Besides, work on balancing our portfolio and offering choices to consumers continues.
We are adding to our health and wellness portfolio so that we offer an equal number of good-for-you and treat-for-you products. Top line growth have been good for the sector in the past quarter, though bottom lines are under pressure because of rising commodity costs. We are doing what we can to balance rising commodity costs and hold on to consumer prices as far as possible.
6 months ago