retail news in context, analysis with attitude

Last week, MNB took note of a Wall Street Journal report that “a strategic review at PepsiCo Inc. is more likely to result in a renewed marketing push for its core soft drinks business—and sharp cost reductions to pay for it—rather than a rebuke of CEO Indra Nooyi or any drastic move such as a Kraft-style breakup.”

Nooyi reportedly has been under pressure from the investor class because of a perception that she has focused on healthier products at the expense of the soft drinks portfolio, a charge that she has rejected as being inaccurate.

According to the story, it seems likely that Pepsi will “slash hundreds of millions of dollars in costs, including the elimination of thousands of jobs, and increase the marketing budget for its flagging North American beverages by around 20% this year, to pump life back into brands such as Pepsi after being heavily outspent by Coke in recent years.”

My comment:

When I talk to people in the industry, there are two words often used to describe Indra Nooyi’s situation: “thin ice.”

MNB user Tom Redwine responded:

I read with interest this story on PepsiCo's strategy review. Maybe they do need some better and stronger marketing. But the problem I'm seeing is distribution.

Pepsi Max, their challenger to Coke Zero, just tastes better to me. I'd prefer to buy a 12oz. can of PMax than a Coke but rarely do I have the choice. Maybe I'm just living in a bad area for PMax distribution. Maybe Coke's better packaging blinds me to PMax opportunities. (My wife and I have a recurring joke about "male pattern blindness" when it comes to my occasional inability to find items in stores or in the fridge. That's right, I said "occasional...")

Re-energizing the brand marketing to get Pepsi in back into consumers' minds is all well and good, but will it matter if I can't get a can in my hand?


Another MNB user wrote:

As a former PepsiCo (not Frito, not Pepsi, not Quaker) employee that found myself on the wrong end of one of Indra’s more recent reengineering efforts I can confirm that there has been internal concern of Indra’s focus on H&W at the expense of core CSD for a number of years.  More importantly she has transformed the culture, losing many of the intangibles that originally attracted talented professionals to PEP in the past.  Gone is the belief that PEP employees work for a company with the heart of a warrior, gone are the days when local managers could manage layoffs to protect talent and prune the chaff,  gone are the days when new ideas from the field were embraced by corporate. 

Now decisions come from the ivory tower at Purchase without field input.  Indra’s MO has been to centralize and disassociate from the field sales organizations.   From the Tropicana debacle to HR  to  Gatorade Indra’s team has bypassed wisdom from the sales field to make corporate decisions in a sterile vacuum.   To your comment.  That’s what’s under today’s thin ice.


From another MNB user:

No surprise here. This is PepsiCo doing what they do best: make poor long term marketing decisions and then have the rank and file employees, good people who have executed the misguided plan flawlessly, pay for it with their jobs.

I speak from experience. I was a Director of Sales for Naked Juice in 2007 when PepsiCo bought the company and immediately folded it into their Tropicana division. I was at a meeting in Chicago later that year where Indra Nooyi got on the stage and talked almost exclusively about PepsiCo's laser focus on the health and wellness segments of the industry. I left that meeting, and over the next 18 months, I executed the sales and marketing objectives laid out by the executive leadership of PepsiCo flawlessly. Begrudgingly because I knew the plan was misguided, but flawlessly.

Apparently I did such a good job executing their plan that I was handed my pink slip, along with  every other Naked Juice employee, in late 2008. The problem was that PepsiCo executive leadership knew nothing about how to operate a niche business like Naked Juice. They forced it into the mold of their Tropicana business and subsequently destroyed the #1 market position Naked Juice had achieved.

The point: Nooyi is now reaping the seeds of what she has sewn. The poor direction she has provided PepsiCo over the last 5 years is coming home to roost. And of course she is in denial. The biggest shame is that once again we'll see thousands of good mid-level managers who executed a misguided marketing plan like good soldiers lose their jobs while Ms. Nooyi and her top brass move on to destroy the next successful small company that PepsiCo purchases and we'll be reading in 18 months about another 3,000 folks being put out of work. Very sad.


Specifically regarding Nooyi’s focus on healthy foods, MNB user John Rand wrote:

Coming in a week when the maker of Twinkies and Wonder Bread re-enters bankruptcy, and everyone agrees it is at least partly because they missed the shift to healthier breads and snacks, one has to wonder whether “the investor class” should have its collective head examined.
KC's View: