PepsiCo’s innovation imperative in a world where ‘small is cool’

In a world where small businesses are emerging as genuine threats to larger organizations, PepsiCo’s countermeasure is to focus on the experiential rather than the transactional aspects of its brands.

It’s a shift inextricably linked to how brand management in the traditional sense is becoming redundant at the company. People experience Pepsi, Doritos and Gatorade in more ways than ever before, meaning that their marketers can’t just manage agencies and instead are having to think more like publishers.

Marketers need to think like celebrity publicists

“Imagine if we launched brands like publicists managed celebrities,” mused Brad Jakeman, president of PepsiCo’s global beverage group. Speaking on a Mashable panel during SXSW he denounced the role of a brand manager as “old," explaining that by adopting an editorial attitude to marketing “you don’t spend hundreds of millions of dollars on media because a publicist gets their celebrity to do things that get them noticed, consequently creating content that then gets shared. I think that’s how brand managers should be thinking."

It also means adjusting how a brand recruits brand ambassadors. Whereas in the past it was easy to show another side of a famous face in an ad campaign, now because of how accessible their lives are to the masses, that standard approach to celebrity endorsement no longer yields the same value. “Celebrity users” is the term Jakeman used to describe who the brand now tries to partner with, people who actually “live and breathe the product and the values of the brand”.

That change in thinking is emblematic of the new pressures on the global business in a world where being small is now considered cool. Craft is king in the eyes of many younger, healthier drinkers, pushing PepsiCo to promote its healthier products harder but also have a more expansive view of what those brands can be.

Kids today don’t think of brands as constrained to the product form that they happen to be and “there’s a generation that were never introduced to [carbonated] drinks in their early lives,” explained Jakeman. Consequently, broadening products beyond the format they’re in – a tried and tested sales driver for many FMCG firms – has greater priority at the business, though those extensions are being framed against an expansion of the actual brand itself.

Gatorade, for example, now views itself as a sports nitration company, stretching the brand beyond the competitive sports drinks market into other potentially profitable areas, such as a protein bars for people to eat after a workout.

“Who’s to say Pepsi couldn’t be a music company [in future] or a technology company?” asked Jakeman.

“I don’t want to create innovation departments. I want create a place where great brands can come from anywhere in the organization and from outside it too…people think I wake up every day and worry about that beverage company that’s based in Atlanta – obviously I keep my eye on them – but I’m more worried about the entrepreneurs that are going to come up with these fantastic ideas, get them on the shelves faster than larger organizations are able to do. That’s how we have to behave.”

Diversity in business can't happen organically

Innovation can’t happen without talent, meaning the business has had to take a more strategic approach to recruitment, particularly when it comes to fostering a diverse environment. However, the crème of the crop increasingly want to start their own businesses rather than join a global one and so PepsiCo has to stress to potential recruits that they’ll be able to create change. Its newly-built design and innovation centre in lower Manhattan, New York encapsulates this focus, with it being staffed by “70 designers from some of the world’s best design companies and design schools,” claimed Jakeman.

There are still challenges when it comes to spreading diversity across the business, something Jakeman highlighted using his search for a senior designer. “I got a whole bunch of resumes for a very senior design job going and they were all men,” he revealed. “The search consultant said they couldn’t find any female candidates for the role and I told them to look harder or I’m going to find someone that can. This is my point, unless you make it a strategy and unless you bring it to the consciousness then it [diversity in the workplace] doesn’t happen organically.”

Early elements of the plan helped the business grow revenue by 4 per cent in is most recent quarter and 5 per cent for the full year 2015.

“There’s just an incredible breadth of choice for consumers now and I think that’s causing them to be a lot more discerning about what they drink and eat,” said Jakeman. “We have to continue to drive the breadth of the portfolio that allows people to have the right beverage and the right food at the right time whatever their choices. And we need to do act responsibly when we do it."