Performance with Purpose Speech: Our Vision for Sustained Growth

Virtual Video Recording

June 21, 2007

Hi everyone.  Thanks for taking the time to hear about something that I feel is very exciting for our company, and each of us personally.

As you know, we’ve had a run of industry leading performance over the last several years at PepsiCo.  I thank you for that, and we can rightfully take great pride in what we’ve accomplished together.

Yet when we reflect on, and celebrate our success, a  simple but vital question is inevitable:

“How do the best get even better?”

I say that question is inevitable because like all great winning teams, building on success is a given for PepsiCo.

For us at our time in this great company, I believe the answer to how the best get even better can be found in a simple but powerful phrase:

By delivering “Performance with Purpose.”

Over the next few minutes, I’d like to provide you an understanding of Performance with Purpose. It’s a vision that I hope you will share with me.  I believe it is our opportunity to take PepsiCo's foundation of strength and build on it to create an even more dynamic company that benefits all the communities we serve around the world.

Make no mistake about it:  Performance is absolutely key for a growth company like ours and for driven perfectionists like each of us.

But the fact is that all of us come to work every day looking for meaning … as well as money.  We want to construct a life … as well as make a living.  I believe that’s true of individuals, and it goes for companies as well.

Without a larger Purpose to give our lives meaning, we will never reach our fullest potential -- either as individuals or as a business.

So it’s important to understand that Performance and Purpose go hand-in-hand, each enabling the other.

Naturally, it all starts with Performance.

As I mentioned, the outstanding results we’ve delivered over the last five years have led the industry. I believe our results reflect a unique set of advantages we must continue investing in.  I put them in three categories: Structural Advantages, Capability Advantages, and Cultural Advantages.

I’ll start with the Structural – the advantages grounded in years of carefully building PepsiCo’s assets.

For starters, there’s our geographically dispersed businesses.  Businesses that are rooted in:

Ø  Investments made over decades to build a beverage business in 160 countries, and snack businesses in 80.

Ø  With tremendous room to expand further in new markets … while growing per caps in markets we’re already in.

Next, our growth opportunities are enormous.  We’re in the right categories at the right time.

Ø  Our focus on convenient foods & beverages is really paying off -- the categories are outgrowing overall food & beverage.

Ø  And that growth is bound to continue because people are increasingly time starved.  By providing wholesome, great-tasting foods and drinks that are easy to find and consume … what we really do is nourish and delight consumers the world over while giving them the gift of time.  We may be the only company on the planet doing that for consumers millions of times a day through the simple act of “a rip, a flip, a twist or a tear.” 

It’s a powerful advantage, and one offering huge room for growth.

We also benefit from our unmatched portfolio of muscular brands -- the envy of our industry.  We talk a lot about our 17 Billion-Dollar-Plus brands.

No other food & beverage company can match that line-up.  Even our closest competitors can’t -- Nestle only has 13, and Unilever comes in at 16.

That’s impressive … but did you know we have another 14 brands generating retail sales between $250MM and $1B … and 14 more with sales of $100-200MM?

Put them all together and that’s an arsenal of over 40 beloved brands producing literally billions of dollars for PepsiCo every year with none of them priced more than a few dollars and most of them a lot less.  That’s an amazing growth engine.

Our portfolio is also as diverse as it is strong … with products consumers adore – all the way from “treats” to actively nutritious.

Finally, all of our great-tasting products are not only made with the highest-quality and safety standards the world over … they’re ubiquitous thanks to our world-class supply chain.

Now, take those Structural Advantages and augment them with our Capability Advantages -- the ones resident in our people and processes -- and we’ve got a clear formula for success.

Leading the Capability list, we’re known for tremendous strategic acuity.

We see around corners earlier and out farther than anyone else.  That means we’re quick to anticipate and act on changing consumer needs.

Take our pioneering shift to non-carbonated beverages as an example … or any of the acquisitions bolstering our good-for-you transformation.  Both those moves happened long before people even realized “good-for-me is important to me.” 

Or consider the on-going effort to improve our core -- like eliminating trans fats before anyone else and moving to heart-healthy oils.  That’s another good example.

And, there are other reasons behind our reputation as an innovative company.

We constantly generate “news” and bring excitement to our categories.  Look what FLNA did for Doritos at the Super Bowl.  Frito got more attention inviting a few consumers with camcorders to make clever commercials than virtually anyone else did with much larger investments. 

We’re also good at getting more bang for the R&D buck by improving ideas developed elsewhere – taking an idea from good to great.  We do it all the time and there are success stories in literally every one of our businesses and practically every brand.

But we don’t stop there.

We skillfully leverage our brand portfolio globally.  Take Lay’s for instance, where we developed five unique platforms, then expanded them into over 160 flavors worldwide to create a global brand juggernaut where none existed. 

Finally, the Capability Advantage that’s the most significant in my view:  PepsiCo’s management talent and the sheer power of our people.

We have the best people.  It’s that simple.  And it’s not a secret.  We all know the way PepsiCo people are admired and talked about because we hear what’s said:  

Ø  “PepsiCo has the best people.”

Ø  “PepsiCo people are the brightest and smartest.”

Ø  “PepsiCo has a solid bench.”

That’s the impartial validation our people are tops … and it makes me incredibly proud to be part of this admired team. 

Next, take those Structural and Capability Advantages, and boost them with our Cultural Advantages -- the ones resident in our DNA -- and you get a potent mix.

Start with our unparalleled ability to execute.  That’s the variety of activities we do so well every day that have been refined and perfected over decades.

We prove year-after-year that we know how to operate quickly, efficiently and flawlessly.  We get the big things right … and we get the little things right too.  And we get them right millions of times over -- everywhere.

Not surprisingly, given that executional excellence, we’re highly results-oriented.

Since the day Don Kendall and Herman Lay created PepsiCo, measuring results has been integral to what we do.  We focus, we measure what we focus on, and we reward based on results.  It’s that direct.

Next, we’re committed to finding, developing and retaining the best & brightest talent:

Which is why we embrace diversity and inclusion.  That makes PepsiCo attractive to all reaches of the talent pool and affords us the greatest selection.  And we know we’re at our decided best when our employees reflect the full range of cultures, sensibilities, and opinions of the consumers we serve.

Next among our Cultural Advantages is the sense of ownership we engender.

PepsiCo is the world’s largest company that thinks like a small entrepreneurial one.  Our job is finding solutions for our customers and consumers -- doing what it takes to satisfy them beyond their expectations.  With that empowerment comes a real sense of engagement carrying immense benefits.

And our final Cultural Advantage:  the one that unites us all no matter what we do or where we do it -- PepsiCo’s Values. 

Our focus here is single-minded.  We’re committed to delivering sustained growth through empowered people, operating with responsibility and building trust.

Our Values commitment and the eight guiding principles that support it define what we aspire to be each and every day.  They've made us great, and are critical to our future.

They are our bedrock.

So there you have them:

Ø  Cultural Advantages,

Ø  Capability Advantages,

Ø  and Structural Advantages

and they are all uniquely PepsiCo’s.

Of course, using these competitive tools, we intend to build our future Performance.  We’re focusing on five specific priorities to sustain our great Performance.

First, we have to step-up International growth.  This is a period of unprecedented global macro economic stability.  Now is the time to capture as much of the global growth as we can.  Our competition is … we must too.  We will do it judiciously – organically and with tuck-in acquisitions.  Mike White and the PI team are developing a number of different strategies that will accelerate international’s powerful growth engine.

Our next priority:  We have to step-up our efforts to deliver break-through innovation.  That’s why we are increasing our investment in breakthrough R&D.  And in a rapidly changing competitive and media environment, our brand-building activities have to constantly evolve to allow us to cut through the clutter.

Next, we must redouble our efforts to make our world-class Supply Chain a true center-of-excellence worldwide.  That means greater and faster sharing of best practices between North America and International, so we can unleash benefits that can be deployed to driving our topline growth even more.

Along with this, we also intend to extend our Productivity legacy by making “every penny a prisoner.”  As a consumer goods company, our lifeblood is innovation -- and innovation requires investment.  We’re going to ensure we fund innovation by wringing the most from every penny we make, and every penny we spend.

And finally, we’re recommitting to every aspect of our successful Ownership Culture.  But don’t get me wrong.  That doesn’t mean “controlling” everything.  What I’m really talking about is collaborating across the company.  Collaboration is key to PepsiCo’s future success. 

You’ll be hearing much more about the action steps supporting these

5 performance-enhancing priorities in the months to come.  The Division Presidents and their teams are already working them into their Strat Plans to ensure we fully operationalize each one.

(Pause)

Now, with such vital and competitive Performance capabilities -- each requiring great care and feeding …  and specific plans to enhance our future performance -- you might be wondering: 

“Indra -- how can we take on Purpose?” 

Performance alone, you could argue, is a fulltime job.

And you’d be right. 

Performance is, indeed, a fulltime job.

But it is not a full description of who we are … and what we need to be.

A successful business provides a good product that improves customer’s lives at a fair price.  Do that well, and we’re rewarded with profits and growth. 

Those profits support all of us as employees and our families, our partners and investors, and the communities where we operate.  They also enable us to invest back in growing our business to benefit all those we serve even better. 

It’s the proverbial “virtuous circle.”

That’s why our first obligation is to sustain a successful portfolio business. 

Without Performance, the cycle gets reversed -- fewer customers, smaller profits, less impact. 

So our number one responsibility is to be good, smart and responsible businesspeople who keep the Performance cycle moving forward. 

But Purpose means looking more closely at each of the

different steps in that cycle. 

Start with the consumer.  In our categories, every single person on earth is a potential consumer. 

The questions we must ask ourselves every single day are:

Ø  What do they need?

Ø  And how can we provide it better than anyone else?

Beyond meeting their varying needs for nourishment, we need to know what consumers are actually thinking.

More and more of today’s consumers see their spending decisions as a way to make their own difference in the world -- to make a statement about what they believe. 

They want to see their own values and sensibilities reflected in the businesses and brands they support.  They want to see their communities improved and the world strengthened with their buying choices. 

More and more people are coming to the realization and the expectation that they will support businesses that are concerned, responsible and caring citizens -- just like them.

All of us and our colleagues across PepsiCo are no different … and I don’t believe it will be any different in the future for those who come after us.

The best potential employees want to work for a company they can believe in.  I’ll give you a “for instance.”  Lets face it -- most business schools haven’t been considered bastions of corporate compassion.  Yet today, 80% of graduating MBAs want their place of employment to be socially responsible -- that’s non-negotiable. 

If that’s not enough, communities have shown they are willing to impose restrictions on companies that don’t behave as good citizens.

And investors are increasingly aware of corporations that operate in responsible ways as well -- seeing them as  preferred investment opportunities over those who don’t.

All of these things can impose real costs on us … or generate real benefits.  Which is why Performance with Purpose is an absolute necessity if we want to sustain our growth and maintain our excellence.

But most important of all, I’ll tell you why Performance with Purpose is critical.

Because it is the right thing to do.  Not only for our business and our company.  But for all the communities we serve and the planet we share … and especially for each of us individually and our families, friends and neighbors.

So as we focus on PepsiCo’s Purpose, we’re zeroing in on 3 vital areas:

Ø  Human Sustainability,

Ø  Environmental Sustainability,

Ø  and Talent Sustainability.

Let’s start where PepsiCo’s Purpose begins … with Human Sustainability.

As a convenient food and beverage company, we have a

responsibility to nourish consumer’s body and soul -- in terms of the positive nutrition they need, and the indulgences they crave.

Our goal must be to stay true to our core and provide great tasting products covering the entire spectrum of needs -- from nutrition to treats.

The reality is that an aging population and increased focus on health and wellness are combining to slow growth in our core categories.

There are those who point the finger at companies for societal problems like rising obesity rates, diabetes and cardiovascular issues.  And those people have already shown their willingness to propose taxes, bans or onerous labeling.

We must tell our side of the story and respond forcefully to misplaced allegations.  But this isn’t just playing defense.

These trends are our opportunity to demonstrate that we care about the same things our consumers care about -- just like we’ve always done.  It’s also an opportunity to improve and grow our business around that promise.

Human Sustainability demands that we ask:  What if our products that already make people feel so great, made them feel even better?

I see it this way.  Our products make people feel great in spirit -- let’s make them feel great in the body, too. 

Let’s reduce the things people don’t want in our products, and increase the things they do. Let’s prove that “healthy and nutritious” can also be fun.

In other words, let’s literally transform our portfolio.

Well, that is precisely what we’re going to do.  Our Chief Marketing Officers and R&D heads are now working to accelerate best practices

and insights sharing to make it happen.  They are dialing up our work with healthy oils and sweeteners -- just to name a couple of priorities. 

All their ideas and action steps are an integral part of our strategic planning this year.

To ensure we’re making progress, we’ll be rolling out a new global scorecard that tracks good-for-you, better-for-you and treat-for-you growth, as we create a fully-balanced portfolio of consumer offerings.

Purpose #2 concerns the fragile eco-system we all share … Environmental Sustainability.

Caring for our communities and planet is a priority we can all relate to as concerned citizens. 

Increasingly, it impacts the way we do business.

Pick-up a newspaper any day and there are compelling stories about the environment and natural resources.  Key customers like Wal*Mart and Tesco are also focusing here and driving change among suppliers like us -- mandating reductions in packaging and lessening other ways we impact the environment.

We need to accept that as a large, visible company that has always prided itself on doing the right things, we must intensify our efforts to address how PepsiCo touches the world. 

We need to do that not because governments or activists will force us -- but because it is personally important to us and our families and communities and the world we inhabit.

The good news is that this isn’t new for us.

We already do a lot -- in water and energy efficiency, in recycling and solid waste reduction.  These are things to feel proud about.  But we have the opportunity to go much further.  And that’s just what we’re going to do by taking the following steps:

Ø  We’re going to reduce our water usage and move more rapidly towards the ideal of “net zero.”  In other words, for every gallon or liter of water needed to make our products, we’ll return a gallon liter to the water supply.

Ø  We’re going to rollback our greenhouse gas emissions as we grow -- through conservation and use of clean energy sources.

Ø  And as one of the world’s best “packaged goods companies,” we’re going to find creative solutions by moving towards bio-degradable packaging.

We make consumers feel good with our products.  It’s time to make sure the communities where we operate feel good about PepsiCo too.

This won’t be our struggle alone – but we are going to lead the charge.

Our operations and supply chain leaders in North American and International are taking a hard look at water use, energy and packaging – and developing plans to advance this crucial agenda.  We’re going to start with a filter that will be applied to every new capital request.  It will assess the impact of each project on the environment we’re striving to replenish before any request is approved.  As we know, this whole area is one where we all can play a part by our actions.  You’ll be hearing much more in the weeks ahead. 

Here’s my challenge for all of us.  Let’s each do our part to leave our children a healthier planet than the one we inhabit now.  Imagine going home every night knowing that’s one of the commitments that PepsiCo truly stands for ... where each of us makes a difference.

Purpose #3 is all about people -- the critical aspect

 of PepsiCo that’s both a Capability and a Cultural

Advantage:  Talent Sustainability. 

I’m constantly reminded that PepsiCo people are the best and brightest … and that PepsiCo is a great place where people can develop and thrive.

I’m also convinced that Talent Sustainability must be a major Purpose imperative.

We have to learn to cherish the people who make PepsiCo great.

We’ll do that by making PepsiCo the company that hires, develops and retains the best and the brightest -- irrespective of race, color, creed, gender or lifestyle orientation.  That means recommitting to our Diversity imperative and taking it to a new level.

At the same time, we’ll work together to make our culture so inclusive that everyone brings their whole self to work.  By doing so, let’s never lose anyone who is a great contributor to the company -- they should never have a reason to leave.  In other words, we will truly cherish our employees in everything we do.

We have a strong legacy of people processes that help drive our business results. But it’s time to reexamine and retool so that we retain world class talent and world class development.

Cynthia Trudell and the CPOs and entire HR team are taking this on as

a personal priority.  They’ve begun to map-out plans that will sustain the world’s best talent pool on a global basis.  Whether it’s our newly enhanced leadership and individual effectiveness model, or a host of new ideas, we’ll continue to be an “academy company” where people come to grow -- and stay.

Look for lots of exciting new developments from our HR colleagues as they prove once again that when it comes to people … nobody succeeds like PepsiCo.

So there you have them:  PepsiCo’s Purpose planks:

Nourish the consumer with our products through Human Sustainability.

Replenish the planet with Environmental Sustainability.

And Cherish our people through Talent Sustainability.

At our Senior Management Meeting this year, we spent the majority of our time and discussion on these imperatives.  I can assure you that Mike White, John Compton, and all the Presidents and top leaders from across PepsiCo are not only committed to this cause, they are actively and passionately working their part in the agenda -- just as I hope and trust all of you will.

In fact, I am actively soliciting their thoughts about how you and your teams can be a part of designing and executing plans that will get us there.

I’m depending on your full understanding and your full engagement to make Performance With Purpose more than words on a page, or an ideal expressed on a video.  Because only by all of us living it, will Performance with Purpose become our reality.

In closing, I want to be clear that  Performance with Purpose does not mean we run our business and do good deeds on the side. It doesn't mean subtracting from the bottom-line to boost our reputation, or foregoing profits to ease our conscience.

It does mean strengthening PepsiCo in ways that works to the benefit of our consumers & customers, our employees, our suppliers, our investors, our neighbors and communities, and the world we all share.

Simply stated, Performance with Purpose means this:

We do better ... by doing better.

The good news is that while the phrase is new, the idea of building our business while giving back is not.  Each of our CEOs throughout PepsiCo’s history made enormous contributions, building the Purpose pillars we now define as Human, Environmental and Talent Sustainability.

When balanced against our proven capabilities to deliver consistently strong Performance, I have great confidence that we can and will build on our history.

And that brings us to today:   

Ø  Where we have world-class capabilities to help us deliver this vision.

Ø  An increasingly clear focus on where we can make a difference.

Ø  And most importantly … the world’s best people to make it happen.

With this combination, I believe we are destined to succeed -- provided we do what PepsiCo has always done and get after it with our trademark enthusiasm and “can-do” attitude.

Because that’s when we’re at our PepsiCo best … and nobody can

stop us.

I look forward to sharing more details on our Performance with Purpose journey in the months and years ahead, and celebrating our successes with you.

For now, thank you for watching, and for joining me on the journey.

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