Pepsi Co. : Getting Too Far Ahead of Investors
Indra Nooyi became CEO of US based Pepsi Co. in October 2006 and almost immediately began to emphasise both profits and purpose for the company. The shared purpose that she articulated for Pepsi Co. was to promote the health and wellbeing of its customers. Nooyi pushed Pepsi Co. to try to double its revenues from “good for you” products to $30 Billion by 2020. These nutritious products included yogurts, dairy and fruit juices, hummus based offerings, and other low calorie snacks and beverages to complement the traditional calorie heavy offerings. PepsiCo’s drive during 2006–11 for a shared purpose became a symbol for how large corporations could do well for themselves as well as do good for the world.
By the end of 2011, however, investors had become increasingly restive. Many complained that Pepsi Co. was neglecting the beverage business and had ceded even more ground to beverage focused Coca Cola, especially in North American markets. Wall Street became concerned about Nooyi’s strategy, as actual profits missed targets and the stock was down 1 percent during her leadership in 2006–11. PepsiCo’s market capitalisation had remained stuck around $100 billion in these five years.
By contrast, Coca-Cola’s market capitalisation had grown 51 per- cent to $153 billion in the same period. Investors were complaining that Nooyi had paid insufficient attention to beverages, and there were calls to split up the snack and beverage businesses into two separate companies. As far as investors were concerned, purpose was pilfering from profits rather than promoting them.
PepsiCo’s board extended a strategic review in November 2011 of the company’s business strategy, including its goal of growing nutritional offerings that were good for its customers. The results of the review were announced in March 2012. A management restructuring of the company was decided. A new role of president was created and filled by John Compton, previously the head of PepsiCo’s Americas food division. The division included the highly successful Frito Lay and Quaker food and snack businesses. Compton was also going to work with PepsiCo’s regional groups in Asia, Europe, Africa, and the Middle East to reduce operating costs, create new products, and develop PepsiCo’s brands globally. International brand leadership was going to become a major focus for the company.
Compton’s previous role was filled by Brian Cornell, the president and CEO of Walmart’s highly successful Sam’s Club division. Cornell was expected to bring the required leadership to compete with Coca-Cola in the slowing North American market. PepsiCo was going to try to regain market share by boosting its spending on advertisements by $500 million and by developing new products.
To finance this spending, the company reduced its workforce by 3 percent and let 8,700 employees go. Investors seemed to like all these changes since shares immediately gained 1.3 percent, more than they had over the five years of PepsiCo’s existence. It seems that business leadership had fought against investors and lost.
Is there an approach to corporate success in which business leadership can anchor itself, one that is more permanent than ephemeral, produces deep and steady satisfaction rather than the anxiety of comparison during its pursuit, and addresses the needs of a variety of corporate stakeholders rather than only investors?
It turns out that there is such an approach to business success that is consistent with Beingful leadership. It has long been central to Upanishadic thinking and is now getting more attention in society.