PepsiCo recently revealed a new global corporate agenda that emphasizes health and social accountability. That might seem like a stretch for a company best known for hawking junk food, but chairman and CEO Indra Nooyi and chief scientist Mehmood Khan say they’re committed to making their products healthier, empowering their employees, and encouraging environmental responsibility. At the Fast Company Innovation Festival in November, Fast Company’s Robert Safian talked to them about their ambitious plans.
Innovation is a word that is thrown around a lot. From your perspective, what is its definition?
Indra Nooyi: Anything that drives the top line of the company. Around the world, our categories are growing somewhere between 3% and 4%, which means that every year, if we want to maintain or gain [share] in the world, we have to grow our revenues somewhere between $2.5 billion and $3 billion—just to stay flat. And then our base erodes every year because [some of our] products die. So our gross growth has to be about $5 billion a year. That is a big challenge. So I have to innovate the hell out of the company. The magnitude of addition that we have to do to the top line just to hold share or gain a little globally is huge.
Um, do you sleep much at night?
IN: I don’t. And I’m emailing Mehmood about how to get me things faster.
Mehmood, Indra says you’re the star of innovation. When it comes to this $5 billion number, is that on you?
Mehmood Khan: [When we] think of technology and R&D, what we are really talking about is invention, not innovation. Innovation is when you take inventions and actually solve for a consumer need. There’s the consumer-facing innovation that we see on the shelf in the supermarket. There is another on the back end: what products we make, where we get the ingredients, how we grow the agricultural components, how we distribute, how we manufacture. A key part of my role is how to put the jigsaw puzzle together. And the consumer is changing fast and increasingly telling us what they want, but not often in very clear terms.
You just announced a new sustainable-growth agenda for PepsiCo: goals for 2025 based on three pillars. The first is “helping to improve health and well-being” through your products. PepsiCo’s business has historically been built on sugary drinks and salty snacks. Doritos are delicious, but we don’t think of them as being healthy. Is there anything inauthentic about your trying to improve health and well-being?
IN: PepsiCo’s business is three pieces. It has fun-for-you beverages and snacks: Pepsi, Mountain Dew, Lay’s, Doritos, Fritos, Cheetos . . . I could go on. All the ’tos. [Laughs] The second is what I would call better-for-you: Diet Pepsi, Baked Lay’s, Baked Doritos. And then there’s the good-for-you piece: Quaker Oats, Tropicana, Naked Juice. We are trying to take the fun-for-you portfolio and reduce the salt, sugar, and fat. I didn’t create Pepsi Cola. I didn’t create Doritos or Fritos or Cheetos. I’m trying to take the products and make them healthier. And guess what they tell me? “Don’t be Mother Teresa. Your job is to sell soda and chips.” So this is not being disingenuous. We are trying to take a historical eating and drinking habit that has been exported to the rest of the world and make [it] more permissible.
To what extent is your job to teach consumers that we shouldn’t eat foods that aren’t as healthy, versus giving us products that we like?
MK: I might be a health care professional [Khan is an endocrinologist], but that is not my job now. My job is to take the best advice that exists and figure out how we can deliver products to consumers so they can make the right choices. We are doing our part. Everybody else has to do their part.
IN: We have to make sure that the healthier products, [like] Quaker and Tropicana, taste good and are reasonably priced—because you shouldn’t have to pay more for healthy products—and are ubiquitously available. Then we have to display them so that we nudge you to the healthier choices. Look, there is a time and place for the fun-for-you products. We are not nannies, and I don’t think we should be nannies. Our job is to make sure that we put these products out on the shelf and make the labeling clear.
Let’s move to the second pillar: Protecting our planet.
IN: To me it’s personal, because I grew up in a highly water-distressed city in the south of India. We had maybe an hour of water in the morning and had to collect all we could so we could live. That city is still water-distressed, yet we have beverage plants there. And in many parts of the world that are water-distressed, we have facilities. So one of the pillars of our environmental sustainability is reducing the water use in our plants and figuring out how to make the whole community water-positive, bringing our technologies in there, passing on technologies to farmers so they can farm and water their crops in a way that is efficient [to help] conserve water.
Pillar three is empowering people around the world. Part of your agenda includes investing $100 million to support women and girls. Why that specific focus?
IN: The goal is more expansive than just that. We want to create an environment in PepsiCo where every employee can bring their whole self to work and not just make a living but also have a life. We have done a lot in terms of setting up day care centers in our facilities, giving people maternity and paternity leave, giving people flextime. But we want to make sure that everybody in the world has a chance to come to work at PepsiCo, not just those lucky enough to get an education. Women and girls in particular are discriminated against in many, many countries. We believe if you educate a woman, you educate society. And it improves our consumer base. So we are going to invest in every country to uplift women and girls. In Saudi Arabia, for example, in most of our quality-control labs there are only women working there. When you go to some of our manufacturing facilities, there is a wall [per religious law]. On one side of the wall the women are working; the other, the men. So we have created an environment where women [are able to] come to work.
Many large companies are bigger than countries. With our market cap, we are the 37th-largest republic in the world. And we have global governance, which many countries don’t, or many regions don’t. I think we have to do our part to bring our heft and the fact that we have global governance to find ways to improve society wherever we are.
MK: We are committing to extend our code of conduct across our supply chain. One-third of all humans work on a farm. Most of them are women. And if we can impact the lives of women, it impacts the lives of the next generation, the local community, but they are [also] generating the economy at the village level, which then impacts across the whole system.
Indra, you’ve talked about the responsibility you feel as one of the few women running businesses as large as PepsiCo. That number doesn’t seem to be changing very rapidly. Why does this situation persist?
IN: More than 50% of people who are graduating from colleges, from professional schools, are women. And some of the top grades are being [earned] by women. So we don’t have an entry-level problem. We bring them into the company, they do very well in the early stages. And then what happens? If they choose to get married and have kids, that’s the time they have to build a career, and most companies don’t have support systems that allow women to have a life and a livelihood. We almost force people to choose.
And then women leave, or take a step back. For example, how do you take the kid to the pediatrician if the doctor is not open Saturday or Sunday? If we don’t provide the support system when the employees are in their thirties and their forties to allow them to have a family and work, there is no way we’re going to build a pipeline to the C-suite. It is a long-term problem. We have to address it.
The second issue we have, and some people may not agree with me: I still think we hold women to higher standards than men. We still think that a woman has to prove herself by working 20% or 30% better than the man. In my case, when I was early in the workforce it was 50% to 100% better than the men—at least the number has come down a bit, thank God. And we haven’t yet reached an equitable place in society. If that happens, then maybe women will have a much better shot at reaching the top of the organization.