What's Good For You Is Good For PepsiCo: Ex-CEO Tells How It Happened

For the first or so five years of Indra Nooyi's tenure as CEO of PepsiCo, she was not a favorite with investors or the press. Then things changed.

Why?

Because Nooyi has remained rooted in her convictions. She remained focused on the journey she undertook for PepsiCo and the company began to deliver. PepsiCo had adopted environmental, social and governance (ESG) goals long before anyone knew what they were, Nooyi said.

"If I was fired for my beliefs, was that wrong? No, because they were good beliefs," she told the invitation-only audience at of the Amazon Business Reshape 2022 conference at the Hyatt Regency Resort and Spa on Wednesday.

Speaking at the opening session of the two-day event, which is focused on businesses using Amazon's commerce services, Nooyi went in-depth on a number of topics with Aster Angagaw, Vice President of Commercial, Public and Strategic Sectors for Amazon Business. Nooyi, who retired from PepsiCo in 2019 after 24 years with the company, 12 as CEO, and now sits on the boards of Phillips and Amazon, spent the first half of his conversation to detail the journey she took PepsiCo on its transition to a company that offered "good for you" products rather than just "fun for you" products. The transition did not sit well with some.

Nooyi took over as CEO of PepsiCo PEP in 2006 after a stint as chairman. Many new CEOs, she said, come in and change things immediately.

"I wasn't running to be CEO," she said. "When you become CEO, you say everything the previous guy did was wrong. The book says you have to smash the finances…until you run out of [track]."

This strategy, however, was not the right one for PepsiCo. For starters, Nooyi said it was hard to say anything previous leaders did was wrong since she was one of them. But she recognized that PepsiCo had to change.

"I started looking at the big trends that are impacting the business," Nooyi said, noting that consumers were turning to more health and wellness products. be, giving up sugary drinks in favor of diet drinks and water.

"We had to change our portfolio because the consumer was going to another location," she said.

At the same time, PepsiCo and other big companies were facing increasing pressure from East Coast politicians concerned about the amount of plastic appearing on shorelines. Additionally, water, which was a key ingredient for many PepsiCo products, had to be conserved. It took 2 ½ liters of water to produce 1 liter of product, she says.

"We had to drastically reduce our water consumption; we had to reduce our plastics," Nooyi said.

And there was another problem that was beginning to creep into the business: the ability to attract new employees was diminishing. The company's image just wasn't good, Nooyi said.

"We had to change our portfolio from fun to good for you," she said, noting that the goal was to change PepsiCo's image and philosophy. to attract new customers and employees, and always do good to the world. PepsiCo, she said, needed to have "performance with purpose."

So Nooyi refocused PepsiCo with a goal in mind. It has reduced the amount of fat, sugar and salt in its fun products and has invested in creating healthier products.

"Our investors weren't [impressed] because they were focused on the quarter," Nooyi said. "I had to take three to four years of, excuse my French, total s— investors."

Nooyi said the changes were important to continue fueling the growth engine that is PepsiCo, but it wasn't easy. She started with the Frito-Lay division, which she said was the "toughest" division in the company at the time. Nooyi traveled to Plano, Texas, and presented her vision to Frito-Lay management. Within days they were in agreement with the plan, and Nooyi knew the vision would succeed.

But even after that, there were internal and external challenges along the way. Nooyi cited a few examples, including switching to heart-healthy sunflower oil for Lay's potato chips.

"So we launched Lay's with sunflower oil and within weeks we were getting complaints," she said. "What are you doing? The product tastes awful."

The customer didn't like it, so PepsiCo decided to remove the mention of sunflower oil from the packaging. Almost immediately, the complete...