1. Leadership – The Indra Nooyi Way
Group Members: -
Sanjay Singh
Ramkumaar B. Singh
Sanket Jain
Ruchi Sinha
Neha Verma
Navneet Kaur Kalra
Ritesh Kumar
Ankit Pandey

2. INTRODUCTION

3. Introduction
Indra Nooyi became the 5th CEO of PepsiCo Inc. in 2006 at the age of 50
Ranked #3 by ‘Forbes Magazines’ for the Worlds 100 most Powerful Women
Ranked #1 by ‘Fortune Magazine’ for 50 most Powerful Women in Business
Joined PepsiCo as SVP in 1994
Promoted to CFO in 2000
Faced problems regarding product health issues

4. Awards Received By Nooyi

5. Financial Highlights Of PepsiCo

6. Nooyi As A Strategist

7. Problem 1 - Restaurant Business -> Sluggish phase with lower sales, volumes & profits -> Adopted a management & distribution model -> More suitable for a packaged good industry
Strategy –
Management & distribution for restaurant business requires larger capital than the beverage & snacks business
Indra Nooyi believed that the restaurant business reached a stage where it could be spun off into an independent business
She believed that it did not fit in with the core PepsiCo business of snacks & beverages

8. Problem 2 – Over expansion of International Beverages Business -> Repercussions felt on its Balance Sheet -> Venezuelan bottler was bought off by its competitor -> Bottlers in Brazil & Argentina ran into financial problems -> Consequently posted losses in special charges & asset impairments, international write-offs & restructuring
Strategy –
Spin-offs & divestitures
Assessed strong brands, good cash flows & strong workforce as PepsiCo’s strengths
Rigorous financial controls to maximize cash flows
Expansion of international business in emerging markets
Money-spinning moves such as strategic M&As, emerging markets infrastructure development & stock buy-back

9. Introduced Direct Store Delivery System (DSD)
Problem 3 – Increasing Distribution Costs & Lack of Contact with Customers
Strategy –
Introduced Direct Store Delivery System (DSD)
Directly stocked the shelves of the retailers through their sales force
Enabled retailers to order supplies directly from PepsiCo
PepsiCo sales representative would frequent these stores a fixed number of times in a supply chain cycle
Fixed number of hours divided into –
Selling the product to the retailer
Stocking its shelves
Taking orders for replenishment & fresh supplies
Interacting with the customers
Dual advantage of reaching customers directly & helping PepsiCo to eliminate middlemen in order to reduce costs

10. Problem 4 – Underutilization of Real Estate; required higher capital investment & was labour intensive but generated a lower level of returns as compared to the core business
Strategy –
Visited competitors’ restaurants
Found heavy competition & saturation in the fast food industry
Nooyi argued that PepsiCo could not add enough value to the fast food industry with the current service chain
Divestiture of the company’s larger restaurants to PepsiCo’s existing shareholders
Taco Bell, Pizza Hut & KFC were spun off into an independent company Tricon Global Restaurants, Inc., which was later renamed as YUM! Brands Inc.
Smaller restaurants such as Hot’n Now, Chevys, California Pizza Kitchen, D’Angelo Sandwich Shop & East Side Mario’s were sold to new investors

11. Acquisition of Tropicana (rival of Minute Maid) for US $ 3.3 billion
Problem 5 – Competition – Coca Cola acquiring a juice brand named Minute Maid
Strategy –
Acquisition of Tropicana (rival of Minute Maid) for US $ 3.3 billion
Helped the brands foray into healthy beverages market
Helped in improving company’s brand image & added to PepsiCo’s earnings
Indra Nooyi had the foresight that the brand possessed great potential to improve PepsiCo’s bottom line
Hence she was even ready to settle for a lower Return on Investment VS

12. Problem 6 – Bottling business required high levels of investment & was labour intensive
Strategy –
Spun off the bottling business into a separate business called Pepsi Bottling Group (PBG)
This resulted into higher margins
An IPO took place for PBG & PepsiCo retained a majority stake in it

13. Nooyi Becomes CFO &The Quaker Oats Merger

14. Nooyi Becomes CFO
Focus on Innovation, Finance, Procurement, Investor Relation, IT
Strategies -
Acquisitions and product development
Product synergies
Image makeover
Healthy snack and drink
Innovations in Quaker & Tropicana
Acquired SoBe: Herbal Tea & Life Water in Portfolio

15. The Quaker Oats Merger
Merger with Quaker Oats for US$13.8 Billion
Acquired ownership of Gatorade: leading sports drinks in USA
Business Process Optimization Plan
Logistical Challenges: Implementation of Quaker’s Enterprise Software
Implemented Direct Store Delivery in Quaker Oats
“Power of One” Strategy

16. Challenges Of Achieving Double Digit Growth Rates
(Neha)

17. Nooyi as CEO

18. Nooyi as CEO In October 2006, Nooyi got promoted as PepsiCo CEO
Nooyi believed that as CEO she needed to present PepsiCo as a good sustainable global company
She adopted vision of “Performance With Purpose” – focusing on sustainability of environment
PepsiCo shifted its focus from US saturated market to emerging global markets
Increased the size of the executive team to 29

19. CONT Believed in diversity Encouraged women & socio economic culture
Believed that communication is of great importance
during strategic implementation
Nooyi is a tough negotiator & motivator

20. PepsiCo Product Portfolio Categorization
Category
Type of Product
Examples
Fun for you
Highly indulgent
Pepsi, Ruffles & Lays
Better for you
Continued to taste good but healthier alternative
Baked Lays, Low Fat Ruffles, Rold Gold Pretzels
Good for you
When consumed, added back functionality into one’s system
Tropicana with Calcium & Quaker Oats
Strategic Acquisitions as CEO
Company
Type of Product
Bluebird Snacks & Izze (2006)
Snacks & drinks
Sandora (2007)
Juice
Naked Juice (2006)
Organic juice & Soy drinks
JV with Unilever
Ready-to-drink tea
Whole Foods Market (2007)
Flat Earth Fruit & vegetable chips
Lebedyansky (2008)

21. Response To Global Economic Slowdown

22. Response To Global Economic Slowdown
PepsiCo faced number of economic challenges in 2008:
- Fuel prices
- Cost of Raw Material
- Packaging Cost
Strategies applied by Nooyi:
- Raise prices across product categories
- Product Weight outs
PepsiCo remained recession proof
Introduced ‘Productivity for Growth’ program
- Shutting down plants
- Pre tax savings
- Restoring growth of beverage products

23. The Criticism

24. The Criticism
She was criticized for her lack of operational experience. She had joined PepsiCo after six years in consulting and at PepsiCo too had worked as a strategist before becoming CFO and later CEO
Critics believed that Nooyi was merely anticipating the regulation and following consumer trend rather than making conscious effort to make PepsiCo’s product healthy.
A study conducted by City University London on the world’s 25 largest food companies including PepsiCo on their on their conformity to new global diet and health agenda in 2006, found that PepsiCo had not adopted the standards relating to limiting the portion size, on having a specific health policy on advertising, and on initiating staff health programs

25. The Criticism….cont.
Nestle believed PepsiCo was merely following health and nutrition standards to avoid obesity related law suits
Critics felt that efforts taken by PepsiCo to reduce the adverse impact of its product on the health of its consumer were not enough, further adding that the existing non soda alternatives were low on nutrition and contained high level of sugar and more calories then recommended as a part of healthy diet for children
In 2003 PepsiCo came under attack from environmental group in India for having high level of pesticides content in its beverages
Though India accounted for a relatively small portion of PepsiCo’s revenue, analysis felt that these allegations had an impact on tarnishing the companies image worldwide

26. Learnings From The Case

27. Learnings From The Case
Over expansion is not always good
Need to have vision as we can see that even if a particular business is giving less ROI, it may generate cash flows & improve the bottom line in future
Terms learnt – Divestiture, Spin Offs, Strategic M&As, Diversification
Strategic Leadership
“Performance With Purpose” – focusing on sustainability of environment
Direct Store Delivery System (DSD)

28. THANK YOU