‘We Are Committed To Our Consumers’

Pepsico has successfully completed 25 years of operations in India. According to chairman and chief executive officer of PepsiCo India D. Shivakumar, the company is focused on expanding the health and wellness products while strengthening its current food and beverage portfolio. Speaking to BW Businessworld on the sidelines of World Franchise Congress, he talked about a range of subjects including the announcement of investment by PepsiCo in India, the lessons from the Maggi controversy, the country’s franchising industry, ways to strengthen the food licensing system, and the food market in the country, among others. Edited excerpts of the interview.

PepsiCo India’s chief says important lessons have been learnt by multinationals from the Nestle-Maggi controversy, and that the IPL fiasco has not strained relationships with the BCCI

What is the status of the investments announced by PepsiCo Chariman and CEO Indra Nooyi?
When Indra was here she had committed Rs 33,000 crore, which is the single-largest non-stock investments in India by a multinational company. Most MNCs have bought back stocks but this investment was purely into our business here. One chunk of that investment went into the commissioning of the Sri City plant. Indra had announced this in November 2013. We commissioned the Sri City plant (in Andhra Pradesh) with an investment of more than Rs 1,200 crore. We inaugurated it on April 3rd this year. The plant has one of the best efficiencies and we are very happy with its progress. If you look at the full value chain, the investments are ongoing. In this industry coolers are very important. We continue to invest in that. Upgrading facilities in each of the factories is another investment which continues. Investments in IT systems and processes are big so that is also continuing.

What went wrong with your brand association with IPL?
We have had a very good association with cricket, which continues despite the IPL. For the record, we continue to be in dialogue and discussions with the Board of Control for Cricket in India. Currently, we are the beverage sponsors of ISL, the soccer league, and also the beverage sponsor for the Champions Tennis League along with Gatorade. Also for the recent Sachin-Warne All Stars Cricket series, we were the principal sponsors. So it is completely wrong to assume that PepsiCo is getting out of all sports. What is done and dusted is over, let’s not look behind. I am not looking behind. We need to look forward. We have investments in all the right properties and we are committed to sports. We are committed to consumers and their passions.

How is PepsiCo faring on the health and wellness front?
Health and wellness is very important for PepsiCo. As Indra Nooyi and the Board have outlined, we want to give products which are truly healthy and contribute to a better society. So we are focused on Tropicana and Quaker in a big way. We are saying that Tropicana is the best breakfast accompaniment. India traditionally did not have juice for breakfast. So building that as a habit is an important aspect of growing Tropicana. We are also one of the few companies committed to reducing the sugar levels and saturated fats in our products. That journey is underway which we call the human sustainability agenda. We have clear goals, year-on-year, for the next five years. After five years we will have a huge fillip. Indra has classified them as products that will be “good-for-you”, “better-for-you” and “fun-for-you”. So after five years, the components of “good-for-you” and “better-for-you” will be in a significantly larger proportion of our portfolio.

As an MNC operating in the food and beverage space, what lessons, if any, have you learnt from the Maggi controversy?
While we are always confident of our products, we still got all of them tested (at the time of controversy). We subscribe to every single specification in the country. When this controversy was on, a lot of our own employees were concerned. So after getting all our products tested we wrote back to our employees and shared the results saying this is where we stand. There were two big lessons learnt. First, be absolutely sure on the product side. We checked all our licences. If there were extra approvals required (for variants etc.), we went ahead and got them. The next set of learnings come from the social media. If an issue comes up and four people comment on it, should the company react or not? When four become 40, do you respond or not? When it becomes 400, do we respond or when it becomes 4,000, should we respond? It is a fine balance. So one of the things we do — and we are possibly the only company within the FMCG space to do so ­ — is Online Reputation Management (ORM). Every morning we go through the status management of all our brands to see what the consumers have been saying. It includes emails written to us or comments made on social media platforms. This report then goes out to our departments like R&D, legal, management team and marketing. We track this every morning to see the positive commentary and the challenging commentaries, if any. If there is something challenging, we ask ourselves what we should do and then we get that done. We have also tightened our response to consumer complaints. We have seen that once you reach out to the consumers, they are far more willing to respond. These are the lessons we learnt.

Your take on the licensing system here and what can be done about it...
Among the top markets that we operate in, India is the only market where licensing is based on product approval and not on ingredient approval. Most of the countries follow the ingredient approval route, which means that if the ingredients going into a food product have been declared safe for human consumption there is no need to get the product approved. So if a product (instant noodles) has got approvals and the taste enhancer comes with the product then there should not be any problem. The argument here is that the taste enhancer mixture is not sold separately, and is a part of the product.

Banning has not helped the entire category (noodles, pasta, vermicelli, etc.) as reflected in the sales numbers. The earlier we settle the entire issue and from every angle, the better it is for the consumers and the companies. It is a complex issue. The right thing is to start with the product and ingredient approval processes. The FSSAI has promised to address all the issues. I believe India will get there. The industry and its various bodies are united on the issue, and we are glad that both the food ministry as well as the consumer affairs ministry understand what is required.

Tell us about the new products that you will soon be rolling out nationwide.
There is a new product called the 7UP Revive that we are test marketing in Tamil Nadu and Kerala. It is a hydration drink with vitamins and electrolytes to help the body stay active. It falls in the health and wellness category. We have also tested a 100 per cent mango Alphonso drink under Tropicana which we will roll out. Then we have put out a completely new product called Lays Maxx, a harder product in the market with limited distribution, which has done well. Also, a new range of namkeens under the Kurkure brand has been launched. Then the Nimbu Masala Soda is there to compete with the local products. Quaker Plus has been launched too. So it has been a busy year for us and all these products will be built up in 2016.

What is your take on the food market in India?
The Indian food palate has been changing and is led by young people. When young people go out and eat, they bring some of those eating habits back home. So you see a lot of food combinations. Taking a cue from that we have done a nice innovation of Kurkure with Pizza Hut. Burger King is also putting our chips in their burgers. So we are doing a lot of work in this ecosystem to see how some of our products could be part of the offerings of others.

These associations have been tried out across the world in many countries. But we are doing this for the first time in India. People are not education poor or health poor, they are time poor. As a result of which processed foods are extremely important for them because it helps save time. That is one of the biggest drivers of our food business especially with more double-income households.

ashish@businessworld.in; @ashish_bw

(This story was published in BW | Businessworld Issue Dated 14-12-2015)