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‘A vision that transformed a company’: What could change at the top mean for PepsiCo?
Among the world’s most prominent female business leaders, Nooyi has worked at PepsiCo for 24 years. Since she was appointed CEO in 2006, shares in PepsiCo have gained 78%.
Key to her legacy is the philosophy of “performance with a purpose”, which aims to drive business growth ethically.
“For me, and all of us at PepsiCo, performance with purpose is — and always has been — about the way we make money, not the way we spend it. About who we are, the character of our company,” Nooyi explained.
“Our aspiration of creating a good company — good ethically and good commercially — is now coming to fruition, yielding a broader, more lasting impact than we ever imagined.”
Performance with purpose: Profits, products, people, planet
Performance with a purpose is loosely based around the principle of improving profits while increasing the proportion of better-for-you products sold, reducing the environmental impact of PepsiCo’s operations and investing in the communities in which the company operates.
Achievements since 2006 include a 25% improvement in water efficiency, reductions in the use of fossil fuels in favour of renewables and investments of some $14.3m since 2015 to support the economic success of women.
The company has also focused on improving the health profile of some of its well-known soda and snack products. PepsiCo said that it has grown its portfolio of good-for-you and better-for-you options from 38% of sales in 2016 to nearly 50% this year.
“We need to continue finding new innovative ways of offering more nutritious foods and beverages without compromising on taste,” Nooyi argued.
According to SIG analyst Pablo Zuanic, shifting to more nutritional products is one of Nooyi’s key legacies for PepsiCo, although he also noted that this drive may have been diluted by the 2013 boardroom battle with Neston Peltz. Nooyi dramatically saw off activist investor Peltz, who was calling for the company to merge with Mondelez International and spin-off its snacks businesses.
“Post the Wimm-Bill-Dann transaction in Russia [in 2010], we had expected the company to build a fourth platform along ‘health and wellness categories’. But eventually that was diluted to improving the “healthiness” of the existing portfolio, and what we would describe as isolated deals (hummus, kombucha). We think the fight to stop the break-up played a part,” he suggested.
What will the future hold?
Nooyi will step down as CEO on 3 October. She will be replaced current PepsiCo president Ramon Laguarta as chief executive but will remain chairman until early 2019 to ensure a “smooth and seamless” transition.
Nooyi’s replacement is well regarded as an executive with extensive international expertise.
Wells Fargo analyst Bonnie Herzog said expressed confidence in the calibre of Laguarta. “Nooyi has been an exemplary CEO and sets the bar high... That being said, we are confident that Ramon Laguarta is more than capable to lead PepsiCo into its next generation of success.”
Laguarta joined PepsiCo in 1996 and moved through the ranks of the European business, to eventually lead the Europe Sub-Saharan Africa division before moving to the global HQ.
He has stated that he wants to raise PepsiCo’s growth rate. In a recent presentation to staff on Vimeo, Laguarta said he hopes the company can grow at 5% versus its current 2-2.5%.
In order to achieve this, Zuanic predicted that there will be an increase in the rate at which PepsiCo is transforming its portfolio as well as a focus on global expansion. “To grow at 5% maybe more aggressive portfolio re-engineering will be required, as well as further expanding the global footprint.”
