As the CEO of PepsiCo, Indra Nooyi has more than a few things on her mind. The company’s products are sold in more than 200 countries and territories around the globe–and the business pressure is intense. During a wide-ranging discussion earlier this year, Nooyi talked about her mission as PepsiCo’s leader, the mantle she carries as a role model, and the relentlessness of Wall Street’s financial demands. WIth 66 billion dollars in revenue, PepsiCo faces growth demands from investors at four to six percent a year–which, Nooyi says, means the company needs to find an additional three-and-a-half to four billion dollars of revenue. Every year. “And we have to do it when the world is changing faster than ever–consumer taste, regulation, digital technology,” Nooyi says, “and every competitor out there, global and local, is gunning for us.”
Here is a conversation with her, edited and condensed.
How do you get out of bed in the morning with that to worry about?
You don’t not get out of bed; you don’t go to sleep. For leadership of companies like this, we’re always worried about where growth is going to come from. Are we looking at the right demand spaces, are we looking at the right unmet needs, are we looking at the right competitors to take share from?
There was a time where growth meant line extensions, right?
You might get growth from five more flavors of Doritos, but it’s the same consumer you’re going after, right? At some point, that person is going to ask, Where is my original flavor of Doritos? Or last year I had some interesting new flavor of Doritos, why did you change it? When you put too much clutter out there, you confuse the consumer.
We realized that growth only through line extensions was not sustainable; cannibalization was too high. So we had to think about growth in very different ways. We had to retool the insights machine, the R&D machine, and build a design capability.
This is both a cultural change and a structural change?
And capability enhancement, massive. We looked at the biology of taste, the chemistry of taste, and the physics of products. How do we figure out how people feel salt or sweet? People are thinking about how many calories come from sugar and how much sodium they consume. We had to build new capabilities that did not exist in the company.
Can you give us an example?
Take Lay’s potato chips. Even though Lay’s potato chips, a single serve bag, has less sodium than a slice of bread, in spite of that, we had to take down the sodium levels. Now, if I told you we’ve taken down the sodium levels 25 percent, you’ll say, it tastes different.
Yeah, it doesn’t taste as good.
So what we had to do is sneak in that reduced sodium by taking it down 5 percent at a time. And we’ve done it across many of our product lines. We’ve reduced sodium levels, we’ve eliminated trans fats.
Are you gradually convincing me that the taste isn’t changing when it is?
No. Taste doesn’t change. The beauty of our R&D is that taste of the product does not change. Unlike bread where salt is a leavening agent, in salty snacks it’s a surface salt. So we can vary how we apply the surface salt so that when it hits your tongue, you still get the feel of salt even though less is there. What we are trying to do is sneak goodness into you, without compromising taste.
You frame the mission of Pepsi around the phrase “performance with purpose.” This sounds like linking separate things, financial results on the one side and altruistic elements like sustainability and human health on the other. How do they fit together?
When we articulated this notion of performance with purpose as the guiding principle of PepsiCo, people said, oh, this is corporate social responsibility. Wrong. What we said is that you cannot deliver performance without focusing on purpose, and you cannot deliver the purpose agenda unless you deliver performance.
For us to deliver financial performance on an ongoing basis, we had to do three things. First, we had to transform the portfolio to include healthier products, reduced sodium, reduced sugar products. Because without that, consumption of our products won’t go up.
The second plank was our environmental footprint. There are countries in the world where we can’t get a license to open a plant because there’s no water. Plastic costs go up, there are recycling mandates, the price of fuel is volatile–the only way to manage this is by reducing how much you use. Our environmental sustainability agenda helped communities, but it was also linked to financial performance. And the third part was our people. How do we create an environment in PepsiCo where everybody can bring their whole selves to work? That attracts talent, recruiting and retention, and helps drive our top line.
Performance with purpose is not how we spend the money we make, it’s how we make the money. That’s a fundamental difference from corporate social responsibility. It’s not something we do after hours. So in our case, performance and purpose are intimately linked and you can’t do one without the other. I think that’s where all companies need to go into the future. You can’t treat CSR as an evening program and then you run the company differently. You can’t do it that way.
Has this been effective?
I went to Jonesboro, Arkansas, our Frito-Lay facility, a highly tenured work force, everybody there has been there 20, 25 years. I did a plant tour, crawled all around the machines, tasted wonderful chips off the line. And then a group of workers said, “Mrs. Nooyi, we’d like to show you something special.”
So we walked into a separate room and they explained to me that a lot of the incoming stuff came in plastic trays which they used to send to the landfill. But then the local landfill said it was full, and they needed to go to another town, 20 miles away to use their landfill. This group of workers, they said this is wrong. The landfill is full of plastic that’s not going to biodegrade soon, and that’s going to impact our community. So they came up with ways to recycle the plastic into new crates, into fleece jackets, into all kinds of new uses. They saved a ton of money in the process.
And then they went to the local school and said bring your kids to our plant because we can teach them how to create a better world. So all of a sudden, the community feels great about the plant that’s not only providing jobs, but doing the right thing by the community, and the children feel great about the future.
I think this is a closed-loop system, and in the process, we’re saving a lot of money. It’s unleashing the passions of people in PepsiCo.
For a long time, the goal of many large businesses was to be efficient. As our world changes faster, it requires a company to be more agile. How do you marry the need for agility with the need for efficiency?
Our company is big, but you know what? How big or how small it is is all in your mind because if your mind is big enough, you can cope with the big. If your mind is small, you’ll have trouble coping with the big.
At PepsiCo, we practice something called connected autonomy. We connect the company and leverage scale where it makes sense, and we give people autonomy where it makes sense in the local markets. So I’ll give you a classic example.
I’m going back to Lay’s potato chips. Anywhere in the world you go, the Lay’s potato chip will taste phenomenal–same crunch, the same golden look. The bag will look the same, yellow with the banner sun on it. But you might have a cuttlefish flavor potato chip in Thailand, you might have a seaweed flavor in China, you might have chicken tikka masala in India. Every country may have 15 flavors, with three or four consistent and the others local flavors.
What we’ve told the teams is you gotta make sure when somebody sees Lay’s, they see a great taste, so use the same potato varietal, the same process, the same quality standards, offer the core three flavors that everybody loves. And after that, go ahead and innovate.
So we connect in some places and give autonomy in others. Deliberately. That’s for new product development, for systems, for business practices. When we creep too much into the connectedness and people say I want more autonomy, we have a discussion. It’s not an easy job, but we are balancing this constantly.
What is the purpose of design within PepsiCo?
In the past, old-line companies like ours–and I call us old line because we’re not one of these startups–design was, I hate to use this word, but sort of a lipstick on a pig, you know? After everything is done, we might go to design and say, fix this label or change the cap. It was cosmetic. That worked okay when markets were growing in leaps and bounds and there was a natural tailwind for growth.
All of a sudden, now, you’ve got to cut through the clutter on the shelves and go after more consumption occasions, more cohort groups, more need states. And you realize that the old feature functionality that we worked with is no longer operative. We’ve got to think very differently about our products.
In 2006, when I became CEO, I spent some time with Steve Jobs at Apple. Apple, in many ways, opened everybody’s eyes to design. When he talked about design, it was how he lived and how he thought. He thought about design vertically and horizontally. Whether it’s iPhone or iPad, he worried about what it looked like, how the consumer interface looked, the form function. But he also worried about the accessories, who was innovating for Apple, what is the store going to look like, what is every app going to look like. Every aspect of Apple, he worried about it as an experience.
In the past we didn’t. A specific product example: Doritos. Typical guys, when they eat Doritos, they’ll eat the chips in the bag, lick their fingers, and then at the bottom, pour it into their mouth. Our ethnography says that’s how they do it. However, if you want to encourage women to eat Doritos, I don’t know too many women who are gonna sit there, licking their fingers and I don’t know too many women who are gonna pour the Doritos into their mouth. And when you go in an office location, women don’t like the loud crunch because it draws attention.
So, how do you design a snack for women? How do you give them the great Doritos taste, but in a form function that women like, that women can carry? Because if you put a bag of Doritos in your handbag, it’s now Doritos powder and god help you if it breaks open into your treasure trove, it’s a real problem. And so we have to think about what’s the right snack for women, how are you going to carry it, how are you going to consume it, how are you going to keep it in your office drawer so you can eat it discreetly.
The design is not about give me a new label. We had to bring design into the early stages of innovation, to get into the core building blocks of development. That’s the next new product. It may not even be called Doritos.
You’re one of the world’s most prominent woman leaders. Is that a burden ? And where do you think we are in terms of gender progress in business?
I think we’ve come a long way. When I started working my first jobs in consulting in 1980, many times you’re the only woman in the room and you could feel the guys rolling their eyes when the women talked. I mean, they did all the time.
Today, with more women in the workforce, we have the numbers. Women have begun to call the guys out. They still roll their eyes, but you can now say, “what are you rolling your eyes for?” I think the debate and the discussion is more overt, that’s good news.
What has to happen going forward is that we can’t allow the progress to be impeded. More than 50 percent of degrees are being awarded to women, many of the master’s degrees, the PhDs are being awarded disproportionately to women. So if we want to tap into the entire workforce, we have to make ourselves an inclusive workplace. Companies have to get more flexible to accommodate everybody’s need, and we have to make sure we train people on inclusive behavior by modeling the right behavior.
I honestly believe the next two decades are the decades for women. Women are needed in the workforce. Women do pretty well today but we women have to help each other. We have to give each other feedback and mentor each other. I mean, my mentors have all been men. Women have to mentor women.
There’s discussions about how women’s style as managers can be different. Do you feel like you had to learn a style, change a style, or do you not think about it that way?
Guy A, guy B, the styles are different. So the woman is guy C. Just look at it that way. Just because the octave level is a little bit different and they wear some colors, just relax.Yeah, we come from different perspectives. Our approach to things, our statements may be a little different, we may use less four-letter words when we scream and yell. But the fact of the matter is we’re all focused on doing a great job. So as long as we accept each other for the job we are doing, as opposed to you wear glasses, you don’t wear glasses, you’re a woman, you’re African-American, you’re Latino, it’s irrelevant. We have a common, shared purpose.
With all the change in the world and with all these brands that you have to keep track of, how do you stay caught up with everything?
You have to be an absolutely voracious reader. If you’re not willing to do that, you cannot keep up with large companies. I have a couple of bags of mail every evening and I have about three hours to go through it before my Jon Stewart and Steven Colbert begin. So, I make two piles, what do I want to read in detail, what do I just skim through. I draw a line through everything I’ve looked at, push it to the side. The detail stuff, I really read.
So if you learn this discipline of segmenting your reading, going deep where you need to, staying above the fray when you need to, if you develop that skill and learn to speed-read, you can cope. You can cope.
Being a CEO can’t be a part-time job.
Oh, not a chance. I think it’s not a job. If you want to be CEO of a large company or any company, it’s got to be a passion, it’s gotta be your calling. When somebody asks me about work-life balance, I think, What work-life balance? The job is work and life. Home is also work and life, so there is no balance. It is a 24-7 job because some part of the world has some issue at all points in time.
You’ve just gotta love what you’re doing, and you’ve gotta believe in what you’re doing, and you’ve gotta say to yourself, when I feel like I’ve done enough with this company, I want to leave feeling great about my contributions and the legacy I’m leaving behind. If you approach the job that way, it’s a very fulfilling, phenomenal job. If you look at it as just oh god, I gotta go to work, I gotta get this big CEO paycheck, that’s not the right way to approach the job.