 "We will continue our ties with cricket: D Shivakumar")
As people become aspiration-driven, premium products and localised innovation will drive growth for PepsiCo India, says D Shivakumar, the chairman and chief executive who took charge in December 2013. The business reorganisation over a year-and-a-half led to a slew of products. More such products are in the pipeline, he tells Alokananda Chakraborty and Sangeeta Tanwar in an exclusive interview.
PepsiCo India, which was a title sponsor of the IPL, terminated its five-year contract with the league two years ahead of schedule. How does that affect your sports or summer marketing?
While PepsiCo India has moved out of the IPL, we are continuing our association with cricket and BCCI. We are in talks with Shashank Manohar and Anurag Thakur to figure out what more can be done, in terms of brand associations with cricket. We continue to be associated with sports in a big way. PepsiCo India was the exclusive beverage sponsor for the All-Star Cricket Series. We have been associated with ISL's soccer league. We are also the beverage sponsor for the Champions Tennis League started by Vijay Amritraj. Going forward, we will continue to be associated with where the consumers' passion lies and continue investing in our brands.
India has a certain product approval route. The industry body and the industry has agreed to move towards an ingredient approval strategy. India will mature on that front, sooner or later. Also, working on an ecosystem is very important. Now food and food safety is paramount for consumers in India - mothers will never allow their children to have anything that is remotely doubtful. Then there is this whole issue of social media and online reputation management. We track all the commentary on social media around Pepsi on a 24-hour basis. We listen to social media and make these reports available to the research and development (R&D) team, the marketing team and the management team. In a social media world, brands that are not humble and fall short of orchestrating a response when needed, lose out.
About a year-and-a-half ago, PepsiCo realigned its portfolio under beverages, global snacks and global nutrition. How has that played out?
This is PepsiCo's global operating model. Put the focus on beverage, snacks and nutrition as categories. It helps develop a much deeper focus on one category at a consumer level with dedicated efforts, R&D and focus. All the recent innovations from PepsiCo have been a result of this. We launched the 7UP Revive drink with vitamins and electrolytes in Tamil Nadu and Kerala, Tropicana Slice Alphonso, Kurkure Butter Masti, Lay's Maxx and 7UP Nimbooz Masala Soda. This is a result of a focused category-based strategy.
You have launched a range of products developed and specifically targeted at the Indian market. So where does India stand in Pepsi's global scheme of things?
India has always been a major consumer market and extremely important. In fact, it is one of the top 10 markets for us. Indian consumers are driven by aspiration, quality and price points. It is maturing in terms of innovation and premium products. Companies are breaking away from the Rs 5 and Rs 10 price points. Then there is the issue of ease of purchase. Thanks to e-commerce, consumers now have the ability to sit at home and browse for products online. In a way, the principle of aspiration, quality and price-value will always continue to rule.
Coca-Cola, for instance, is working on a direct-to-consumer strategy. Do you have something along those lines?
See, e-commerce is already doing that. An average household deal with 75-100 brands. Any one company can cater only 10-12 brands. So it is better to leave it to the experts.
How has the slowing rural demand impacted PepsiCo?
Take NREGA, unseasonal rains, minimum support prices, credit availability in the rural marketplace and the sale of tractors. If we look at these five parameters, the rural market is slower this year than the last. So there is bound to be an impact. We are focusing on the right advertising, the right value points and right prices to drive rural demand.
In a recent interview to Business Standard, you said Pepsi is working on a hyperlocal strategy. What is the crux of this strategy?
India has a surfeit of outlets. We have 8.8 million FMCG retail outlets and an overall 15 million retail outlets. The cost of distribution is Rs 60 to Rs 80 per kilo. As e-commerce picks up, consumer impatience grows. The order and receipt window now is just too small. The best model in FMCG is hyperlocal as it allows you to reach out to the consumer quickly. We are working with local retailers so that when a customer places an order - be it Ghatkopar in Mumbai, Mylapore in Chennai or Howrah in Kolkata, we should be able to identify the pincode of the consumer and to attach that person's order to nearest neighbourhood retailer.
Following the reorganisation of business, a whole lot of people have left PepsiCo in the recent past. Is attrition a big issue before you?
Attrition is an issue and will continue to impact companies across industries. In our industry, the attrition rate is 15-20 per cent, in retail it is upwards of 40 per cent. This is so because there is no social security system in India. So young people want ownership at an early age. Your only route to asset building is your salary. So, today, youngsters are much more willing to take risks. People have what I call hurried aspirations. They want a big car, a huge house - there's nothing wrong in that - but then they switch jobs for Rs 5,000 and Rs 10,000. EMI is an important concern for young managers. Anybody with an EMI more than 25 per cent of their salary is constantly in the job market. They want to bring it down to 10 per cent.
So a company has to offer people large jobs, offer a culture of collaboration and a cohesive environment where you have more friends than colleagues. As corporations, we have to invest in capacity-building. Even if they leave you, so be it. Specifically, leaders have to spend more time with their team. A leader needs to see their people not as employees but as volunteers and treat them accordingly.
PepsiCo India, which was a title sponsor of the IPL, terminated its five-year contract with the league two years ahead of schedule. How does that affect your sports or summer marketing?
While PepsiCo India has moved out of the IPL, we are continuing our association with cricket and BCCI. We are in talks with Shashank Manohar and Anurag Thakur to figure out what more can be done, in terms of brand associations with cricket. We continue to be associated with sports in a big way. PepsiCo India was the exclusive beverage sponsor for the All-Star Cricket Series. We have been associated with ISL's soccer league. We are also the beverage sponsor for the Champions Tennis League started by Vijay Amritraj. Going forward, we will continue to be associated with where the consumers' passion lies and continue investing in our brands.
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What lessons did Pepsi draw from the controversy surrounding Nestle's Maggi? Did you have to look at your food and beverage marketing or packaging strategy in any way?
India has a certain product approval route. The industry body and the industry has agreed to move towards an ingredient approval strategy. India will mature on that front, sooner or later. Also, working on an ecosystem is very important. Now food and food safety is paramount for consumers in India - mothers will never allow their children to have anything that is remotely doubtful. Then there is this whole issue of social media and online reputation management. We track all the commentary on social media around Pepsi on a 24-hour basis. We listen to social media and make these reports available to the research and development (R&D) team, the marketing team and the management team. In a social media world, brands that are not humble and fall short of orchestrating a response when needed, lose out.
About a year-and-a-half ago, PepsiCo realigned its portfolio under beverages, global snacks and global nutrition. How has that played out?
This is PepsiCo's global operating model. Put the focus on beverage, snacks and nutrition as categories. It helps develop a much deeper focus on one category at a consumer level with dedicated efforts, R&D and focus. All the recent innovations from PepsiCo have been a result of this. We launched the 7UP Revive drink with vitamins and electrolytes in Tamil Nadu and Kerala, Tropicana Slice Alphonso, Kurkure Butter Masti, Lay's Maxx and 7UP Nimbooz Masala Soda. This is a result of a focused category-based strategy.
You have launched a range of products developed and specifically targeted at the Indian market. So where does India stand in Pepsi's global scheme of things?
India has always been a major consumer market and extremely important. In fact, it is one of the top 10 markets for us. Indian consumers are driven by aspiration, quality and price points. It is maturing in terms of innovation and premium products. Companies are breaking away from the Rs 5 and Rs 10 price points. Then there is the issue of ease of purchase. Thanks to e-commerce, consumers now have the ability to sit at home and browse for products online. In a way, the principle of aspiration, quality and price-value will always continue to rule.
Coca-Cola, for instance, is working on a direct-to-consumer strategy. Do you have something along those lines?
See, e-commerce is already doing that. An average household deal with 75-100 brands. Any one company can cater only 10-12 brands. So it is better to leave it to the experts.
How has the slowing rural demand impacted PepsiCo?
Take NREGA, unseasonal rains, minimum support prices, credit availability in the rural marketplace and the sale of tractors. If we look at these five parameters, the rural market is slower this year than the last. So there is bound to be an impact. We are focusing on the right advertising, the right value points and right prices to drive rural demand.
In a recent interview to Business Standard, you said Pepsi is working on a hyperlocal strategy. What is the crux of this strategy?
India has a surfeit of outlets. We have 8.8 million FMCG retail outlets and an overall 15 million retail outlets. The cost of distribution is Rs 60 to Rs 80 per kilo. As e-commerce picks up, consumer impatience grows. The order and receipt window now is just too small. The best model in FMCG is hyperlocal as it allows you to reach out to the consumer quickly. We are working with local retailers so that when a customer places an order - be it Ghatkopar in Mumbai, Mylapore in Chennai or Howrah in Kolkata, we should be able to identify the pincode of the consumer and to attach that person's order to nearest neighbourhood retailer.
Following the reorganisation of business, a whole lot of people have left PepsiCo in the recent past. Is attrition a big issue before you?
Attrition is an issue and will continue to impact companies across industries. In our industry, the attrition rate is 15-20 per cent, in retail it is upwards of 40 per cent. This is so because there is no social security system in India. So young people want ownership at an early age. Your only route to asset building is your salary. So, today, youngsters are much more willing to take risks. People have what I call hurried aspirations. They want a big car, a huge house - there's nothing wrong in that - but then they switch jobs for Rs 5,000 and Rs 10,000. EMI is an important concern for young managers. Anybody with an EMI more than 25 per cent of their salary is constantly in the job market. They want to bring it down to 10 per cent.
So a company has to offer people large jobs, offer a culture of collaboration and a cohesive environment where you have more friends than colleagues. As corporations, we have to invest in capacity-building. Even if they leave you, so be it. Specifically, leaders have to spend more time with their team. A leader needs to see their people not as employees but as volunteers and treat them accordingly.