What will PepsiCo look like in 2025?
Laguarta says that PepsiCo’s vision for the company includes being a ‘much faster growing company’, building on opportunities to grow share in its key categories.
And while the company will invest in areas such as brand building and supply chain capacity, it is also building capabilities in other areas such as e-commerce – ‘large channels that are driving a lot of growth for the categories’.
Barcelona native Laguarta has already spent 22 years with the PepsiCo in a number of executive and leadership roles, and prior to joining the company he worked for confectionery company Chupa Chups in Spain.
‘Immense opportunities for us to innovate’
PepsiCo announced its FY2018 results this month, with full year organic revenue growth of 3.7%. Asked what his 2025 vision for the company is, Laguarta says he believes PepsiCo can grow and become a company that touches two billion people around the world every day.
“You should think of PepsiCo as a company that plays in two huge large categories that globally, have a lot of tailwind,” he said, speaking to analysts in the FY2018 earnings call.
“I think you should be thinking about a company that has a long-term value creation model, centered around accelerated growth and sustained growth, and gaining share consistently in our two large categories.
“How we do it? I think we painted a picture on how we're thinking about our portfolio and how we're going to be look very holistically at the opportunities in each of our categories. And there's multiple demands, spaces, there's a lot of coffers, there's a lot of different dayparts in those categories that provide for immense opportunities for us to innovate and build brands and continue to grow.
“Geographically, you should be thinking about a company that is, I would say, skewed to developed markets, Western Europe and the US. And obviously, long-term, we would like to be stronger in some of our developing markets, where we have strong positions to build on top, so we have strong talent, we have strong market position in some of those markets.
“And you should think about us growing very fast in those geographies. We sell one and a half billion servings a day, so we touch conceptually one and a half billion people around the world every day, so our ambition is to touch at least two billion people every day.
"So you should be thinking around the vectors of how many people we serve every day and around what do we offer those people in terms of the both the convenient foods and the beverage categories.”
North American Beverages: taking on the increased competition
In FY2018, PepsiCo’s North America Beverage (NAB) division saw operating profit decrease 16%. PepsiCo says this “reflects certain operating cost increases, including increased transportation costs, a 7-percentage-point impact of higher commodity costs and higher advertising and marketing expenses. These impacts were partially offset by productivity savings and net revenue growth.”
The division is PepsiCo’s largest sector by revenue, and PepsiCo has been prioritising boosting its NAB unit with increased investment and marketing and innovation, and Laguarta says he is well aware of the challenges faced by the division.
“NAB has many leading brands in growing beverage categories and operates a differentiated integrated business model. We believe our operating model is a competitive advantage that provides superior customer and system alignment, speed to market and system-wide efficiency,” said Laguarta.
“With that said, in a dynamic market, NAB has faced a number of challenges over the past 18 months. New entrants have come to market in some of our stronghold categories. There are opportunities to improve some of our brand marketing and consumer engagement. And there are areas where we can step up our local marketplace execution.”
But Laguarta says the company has ‘good plans’ in place to make the most of its opportunities.
“We've increased both the quality and level of A&M on key core brands, including Pepsi and Mountain Dew.
"We've increased our innovation to address new category entrants and to drive success in higher growth segments, with innovations like LIFEWTR, bubly, Gatorade Zero, new variants of Propel and extensions within our successful Starbucks and Pure Leaf Tea guidance.
“At the same time, we're having good success with Pepsi Zero Sugar, and this has been a key element in stabilizing the performance of our trademark Pepsi business.”
Laguarta says the company is making changes to its NAB organization structure and adding frontline resources to make the company more agile and respondent to local commercial opportunities and local competitive actions.
“While there is more work to do, we're very encouraged by this steady sequential improvement we've seen in the business. We are confident that with more well-placed investments, we'll see continued improvement,” Laguarta concluded.
3 ways PepsiCo plans to grow NAB
Laguarta sets out three areas where NAB can continue to strengthen its business. Firstly is the company’s portfolio of strong beverage brands, with Laguarta says can be further strengthened – pointing to the creation of bubly and LIFEWTR and other innovations.
Secondly is the company’s ability to execute in the market place, both with large customers and locally. And thirdly is to have a very flexible and cost-competitive supply chain, as well as ‘the right high-performance culture in the business’.
Inset pictures: PepsiCo