Transcript Presentation - Kellogg School of Management

KIN Summit 2007
Innovation For Marketplace Success
Albert Manzone
President, PepsiCo Shelf Stable Juices
PepsiCo, Inc
June 18-19, 2007
Innovation Has Been Critical To Meet PepsiCo
Growth Target
2004-2007E
~40% of growth
061807_KIN Summit_Legal Approved Copy
2
Up To Today, We Have Been Able To Figure Out The
World Around Us
 Innovation a relatively “simple” competitive advantage…
 …Relying on a “repeatable” formula that values scale, reach
and speed
 Fast follower is enough to win
 Narrower portfolio and competitive pressure mostly Coke
 Space not a constraint
061807_KIN Summit_Legal Approved Copy
3
We Know What Works
Innovation Success Formula
Compelling
Consumer
Proposition
• Deep insights
• Differentiated
proposition
• Product and
packaging fulfill
consumer need
Impactful
Marketing
• Relevant
messaging and
activation
• Sufficient and
sustained
support
Aligned
Operating
Envelope
• Leverages
current assets
• Serve national
footprint
Sustained
Execution
• Distribution
targets achieved
• Right placement
• Right level of instore inventory
• Ongoing support
Right
Expectations
• Clarity on
innovation role
Structural and Cultural Enablers
1. Risk tolerance and patience
2. Pace of innovation
3. Algorithm expectation
061807_KIN Summit_Legal Approved Copy
4

Compelling
Consumer
Proposition

Impactful
Marketing

Aligned
Operating
Envelope

Sustained
Execution

Right
Expectations
061807_KIN Summit_Legal Approved Copy
5
The World Around Us Is Changing
 Consumers more savvy, sophisticated, and demand fragmenting
 Categories blurring
 Emboldened Pure Plays are true innovation leaders
 Stronger, more demanding customers
 Broader portfolio to support
 Space bottlenecks
061807_KIN Summit_Legal Approved Copy
6
Space Bottlenecks Have Increased Dramatically
5 Years Ago
225
Today
375
Grocery
30,000 SKUs
061807_KIN Summit_Legal Approved Copy
7
New Realities Are Challenging Our Innovation
Compelling
Consumer
Proposition

• Rushed to
market
• No advantage
versus
competition
Factors Contributing To Innovation Misses
Impactful
Marketing

• Limited launch
A&M and not
sustained
Aligned
Operating
Envelope

• Late alignment
with conflicting
messages to
the system
Sustained
Execution

• Distribution
targets not
achieved
• Support window
only
• Giving up in
less than 1 year

Right
Expectations
• Push/pull
unbalanced
• False optimism
Structural and Cultural Enablers
1. Low risk tolerance and lack of patience
2. Amount of innovation beyond sales / system capacity to execute
3. Algorithm constraints
061807_KIN Summit_Legal Approved Copy
8
In This New Environment, Innovation Has To Achieve
A Better Balancing Act
Fuel the Core
Mostly Scale, Some Niche
Expand Out
Mostly Niche Initially, With
Intent To Scale
Internal Development /
Organic
External Development /
M&A
061807_KIN Summit_Legal Approved Copy
9
And We Need To Find New Ways To “Expand Out”
“Fuel The Core”
“EXPAND OUT”
M&A
Fast Follower
Greenfield
$$$
• Few available
• Scale vs. timing
• Sky-high valuation
• When can
leverage existing
assets or
competitive
advantage
• Create future
advantaged growth
in emerging
categories
• Does not address
blurring/
fragmentation
• Required when no
competitive
advantage in
category
• Challenging in
image-driven
categories
• But more difficult
and requiring more
patience
061807_KIN Summit_Legal Approved Copy
10
Develop More Nimble Commercialization
And Incubation
Incubation approach
GTM Option
Partner with key
Customers
Prove it out in a
region or a series
of targeted
markets
Pre-seed in a
specific channel
where we have
advantaged reach
Warehouse/
Distributors
DSD
061807_KIN Summit_Legal Approved Copy
11
Patience And Sustained Investment Culture
MM cs (8 oz)
400
Aquafina
350
300
250
Gatorade
200
150
Propel
Snapple
Monster
100
Red Bull
50
Vitamin Water
0
1
2
3
4
5
6
7
8
9
10
11
12
13
14
15
16
Years from launch
061807_KIN Summit_Legal Approved Copy
12
Case Study
061807_KIN Summit_Legal Approved Copy
13
Discovery: Provide Stimuli To Targeted Consumers For
Their Interpretation
Show. Don’t Tell
1) Anchor in a ‘backed-up’ proposition
– Product: Delicious, Natural/GFY, Unique, Stylish Design
– Company With a Conscience: Global Education Fund
– Company With a story (entrepreneurial, Boulder)
14
15
Discovery 2, 3, 4: Provide Stimuli To Targeted Consumers
For Their Interpretation
Show. Don’t Tell
 Anchor in a ‘backed-up’ proposition
– Product: Delicious, Natural/GFY, Unique
– Company With a Conscience and a Story
2) Present a premium, impeccable appearance
3) At the right places…
2) High-profile events
3) Culture-driving locations
4) Hip, premium venues
5) Retail
4) In the right hands
2) Influencers and celebrities
3) Culturally creative, discerning adults
16
IMPECCABLE APPEARANCE: consistency in Field Force creative and presentation – always beautiful, premium
17
IMPECCABLE APPEARANCE: consistency in Field Force creative and presentation – always beautiful, premium
18
PREMIUM APPEARANCE: present the ‘art’ of IZZE
19
RIGHT PLACES. RIGHT WAY – Retail demos are key
20
INFLUENTIAL EVENTS & ASSOCIATIONS
Victoria Secret
Tribeca Film Festival After Parties
Gibson Guitar Lounges
Natural Food Trade Shows
Celebrity Events
Guess CoPromotion Event
Spa Event
21
RIGHT HANDS: (celebs and influencers)
22
The Structure: PepsiCo’s Innovation Republic

Separated structures within Corporate culture!

Protected resources – people / funds

Aspirational leader reporting to the top

Outward orientation

Great set of external partners

Different type of matrix
061807_KIN Summit_Legal Approved Copy
23
CORPORATE,
Chief
Innovation
Officer
FRITO LAY
NORTH
AMERICA
PEPSI COLA
NORTH
AMERICA
Confederation of Decentralized
"States"
QUAKER
TROPICANA
GATORADE
PEPSICO
INTERNATIONAL
061807_KIN Summit_Legal Approved Copy
24
Dedicated Structures
Innovation
Marketing
CMO Split: Chief Marketing Officer/Chief Innovation Officer

Dedicated resources

Top management oversight
Chief Marketing Officer/Chief Innovation Officer Roundtable

Quarterly forum for cross-divisional
opportunities

Share best practices

Drive innovation agenda

Aligned vision
061807_KIN Summit_Legal Approved Copy
25
Non-Traditional Executive Profile
Not Only Marketers:

Proven problem-solvers

Strong analytical minds

Leveraging of external resources & partners

Cultural bilingualism – balanced brain

Self-motivated / creators
061807_KIN Summit_Legal Approved Copy
26
Challenging Our Thinking With Best-In-Class
Partners “The Dudes”
New Best-In-Class Partners

Developing breakthrough
innovation with best-in-class
partners that challenge our
thinking
•
New capabilities
•
New mindset
•
New insights
061807_KIN Summit_Legal Approved Copy
27
Pushing The Innovation Envelope
Different Set of Matrix
Risk
Return
C
B
A
New Benefits
New Markets
Complexity
061807_KIN Summit_Legal Approved Copy
28
Marketer Of The Future
Historian
Ethnographer
Storyteller
061807_KIN Summit_Legal Approved Copy
29