Colin Ringleib, director of flavors at Pepsico, began his talk at the NAFFS 93rd Annual Convention with a brief overview of the company’s global product line, including 19 global mega brands which cross different food groups. “Our CEO was very instrumental in creating the ‘Performance with Purpose’ vision,” said Ringleib. “In the last couple of years this has really become part of the culture of the company. And what it represents is that having performance as a corporation is more than just your bottom-line performance. It encompasses other things you do as a corporation to assure you are leaving the world in a better way and creating value for your customers, for the environment, for the community that you are in and for the employees that work for you. I think it’s a very powerful vision and is critical to our business.”
Performance with Purpose covers three areas:
• Human Nutrition – how the company’s customers get value from its products – “fun for you” and “good for you” products.
• The Environment – sustainability is considered in every aspect. When the company builds a building, it looks at renewable energy and how best to protect natural resources.
• Talent – recruiting and retaining productive and motivated people.
“When we talk about human sustainability,” Ringleib said, “we’re really talking about three elements here: how do we formulate our products and how do we create new products? How do we support marketplace initiatives that allow people to understand the products we offer and how they help or don’t help to make informed choices? And in the community, how do we work in partnership? How do we assist them in understanding what are the things that will help them lead to a healthier and happier lifestyle?”
Pepsi sets aggressive targets. Ringleib said there’s always discussion about improving the nutritional profile of the company’s product line. Some initiatives under way;
• Reducing added sugar by 25 percent by 2020.
• Reducing total sodium by 25 percent by 2015.
• Reducing saturated fat by 15 percent by 2020.
“These are all aggressive goals but this is something everyone in the corporation knows we need to do for a lot of different reasons,” Ringleib said. “The challenge is: how will you help us to do that? What can you do to give us a flavor or a food additive or ingredient that will help us to reach these goals?”
Ringleib said Pepsico puts a lot of focus on the marketplace. “How do you build healthy lifestyles? How do you engage in responsible behavior? How do you work with the community groups? We have a number of partnerships to enhance people’s understanding of how to use our products, why they should use our products and how they fit into a healthy lifestyle.”
Ringleib said environmental and cultural issues are of concern. “Pepsico operates in about 140 different countries and there are a tremendous amount of cultures that we deal with. And we don’t just sell products to those countries; we have people working for us in all those countries. It’s a hands-on business. There is a lot of distribution and a lot of local people are involved in all aspects of the business. So understanding the cultures, understanding where you are working, understanding the people’s needs and desires are a critical part of the business,” said Ringleib.
“Just like we have product goals, we have environmental goals. In our water consumption the goal is to take it down 20 percent by 2015. With respect to electricity consumption, we want to take it down 20 percent and fuel consumption down 25 percent based on our 2006 base year.” These are aggressive goals but quite attainable, Ringleib said. Many of the businesses are ahead of target to reach these goals and some have already reached them. Ringleib cited water usage as an example of how the company has made strides with regard to the environment. “Obviously if we sell Pepsi, it’s mostly water, so a liter of Pepsi took about six liters of water between all the washing, rinsing, etc. that we do in our plants. Now most of our plants are down to about 2.2 liters and we believe we can get down pretty close to one liter for one liter. A lot of the technology is being geared on to how to conserve water and how to get more efficiency in what you are putting in a bottle,” said Ringleib.
He said Pepsico achieved a positive water balance in India. There were a lot of challenges in India because there is concern of consumption of the aquifers and a lot of the beverage companies were having issues. “So one of the things Pepsico did in India was not only focus a lot on conserving our own water but creating water conservation for the communities we operate in. So we created ways where rain water is collected and goes back into the aquifers more efficiently. So in India, we are water positive,” said Ringleib. “It takes time and energy to do some of these things but it takes away the pain you feel if you don’t do them.”
Packaging is another area of concern. “We have a number of our plants now that produce zero waste. It either gets recycled or burned for energy – none of it goes in a landfill anymore. That’s an amazing undertaking to take a facility and reduce it to zero waste. But it’s very attainable. One of the amazing things they do in one of our plants now is to take a group of people out to one of the dumpsters and have them come up with creative ideas of what we could do with this rather than throw it away,” said Ringleib. “Can we reuse it, create energy with it or do something else with it?”
Ringleib turned his focus to the “The Three Cs of Talent Sustainability: Culture, Community and Career.” Pepsico is a multi-cultural company, he said. “We have a tremendous amount of local workers in our businesses all around the world. We develop talent throughout the world and although we’re an American company, the number of Americans in Pepsi is probably a small fraction of the whole. In fact, some of our senior leaders are from around the globe.
“Living a culture of diversity inclusion allows us in reality a much stronger understanding of our consumer because our consumer is diverse and has lots of different needs,” said Ringleib. “We have dozens of groups in our facilities that give back to the community, volunteer in the community and sponsor different support agencies. All of that adds a dimension to where we operate.”
The company places an emphasis on its people, too, he said. “Pepsico is committed to building leadership skills in its people and in supporting employees in their development so that we can add value in the future,” said Ringleib. “We have a code of conduct internally that we use and we also push that out to our suppliers. And our code of conduct is very structured as to how we interact in the community and our expectation is that our suppliers will act in that way as well,” he said.
Foresight, Ringleib said, is critical in product development. “ How do you make sure you are leveraging the world for solutions? Everybody in this room has solutions. The more people you can engage and the more people you get involved in things, the more different things you can find out about how to solve issues and problems,” said Ringleib. “The challenge is how do we get those solutions? How do we locate and find them? What makes innovation successful?”
Ringleib asked the audience to think about how powerful the Internet has been. Though it can sometimes result in being bombarded with information it can help create new ideas and spark new things. Ringleib then played a video from YouTube featuring Nora Egger and her company, The Lounging Gourmet, which offers a line of natural floral infusions for cocktails, teas and sodas. What is unique about these elixers is they are all derived from flowers, such as Damascan Rose, English Lavender and Antillean hibiscus. She used the Internet and started experimenting with flavors in her parents’ kitchen and created exotic, global tastes. The Lounging Gourmet elixers are now featured in many restaurants. Ringleib said a local news organization picked up the story and it’s now on YouTube and has spread around the world where everyone can learn about it. “This is just one example of how you can use a variety of different means to get new ideas and information, get your own impression and build something from it. It’s an interesting approach at how the Internet can change things so quickly. When people see things like that, it triggers new ideas and new products. It’s also amazing how viral things become. You see something, pass it on to your friends, order it or try it at a party. Before you know it, 10 other people have it. So the whole nature of the world today and the exposure of new flavors, new tastes is happening at the speed of light,” said Ringleib.
“A lot of the trends can be fleeting, so the challenge is how do you tap into the ones that have a long-term base or at least how do you do them fast, make your money and move on to the next one? It’s important to be thinking about what it is you are trying to do,” Ringleib said.
Foresight, Ringleib said, is an important distinction as to what people typically think of as insight. “Insights typically tell us something from our history and our experience. We understand some information about what happened in the past that tells us a lesson we learned and we get an insight from that information that we can act on that leads us to do something in the future.
“Foresight is about anticipating the future,” said Ringleib. “It’s thinking about what does the future look like and what does that tell me about what do I need to be thinking about today based on where the future is going? So, what will life be like? How will things change? What shifts will cause a consumer to want something that they might not want today but will want in the future? How will it change the way they think about products?”
Ringleib referenced a basketball quote about passing the ball, not to where they are, but to where they are going to be. “The challenge is how do we think about where the world is going to be by the time we make our products when everything is moving really fast?” said Ringleib. “So it’s not thinking about what the world is like in November 2010 but what will it be like in November 2011, 2012, 2013 or 2014? That’s what we need to be thinking about going forward.”
When one thinks about foresight, there are two important components, noted Ringleib.
• One is seeing what’s needed; assessing the world and looking at what do I need to have in the future?
• Then it’s making what’s needed – creating the capability to do what you need to be able to impact the world three, four, five or 15 years in the future. “The approach here is that a small change can lead to various things that can happen. It could change the way we define things, it could change the way we relate to things, it could change in the way we consume things, etc. And each of those changes will have impacts and a series of impacts. And those impacts will change based on other changes.
“If you think about the future, the future is collection of a series of changes which led us to a point and time in place in the future,” said Ringleib. “So it’s not as simple as saying this is going to change and this is the simple result it’s going to be. You have to start thinking about how does that change cascade together and how does it link with other changes to create a future state? That future state is going to dictate what’s important from where you need to be and what products you need to be working with.”
Define what that future state is, Ringleib said. “It could be without oil, it could be changing habits, it could be new laws or regulations. How will it dictate some future requirement? And most importantly, how do you plan for that because many of the changes you need to make rely on things not yet available,” he said. “You may need new technology, new capabilities or new people within your business. And traditionally we invest based on our history or our experiences. I would argue that today we need to invest much more about our foresight of where the world is going because things are changing so fast. History may not be a predictor of what people are going to need in the future. Quoting Henry Ford, Ringleib said “If I had asked people what they wanted, they would have said ‘faster horses’. You have to be careful what you ask people for and what you buy in from what they want because often they want something different.
Ringleib said another thing companies must do is determine how to leverage the fact so many solutions and so much information is available. Open innovation, he said, is very complex but whether a company practices open innovation or other things, it’s dictated about not having all the solutions inside. “I can have a group of 50 or 100 or 500 brilliant people but they are not going to know all the things internally that are going to impact my business,” said Ringleib. “So how do I leverage the world to provide a solution? How do I provide connections? Coming together in a forum like this is exactly one of the ways you do that. For a couple of days you get a chance to interact. You interact with your competitors. You interact with your customers. You interact with peers in the industry. It gives you a new view of the world going forward. It will identify potential solutions. And you may see solutions that a competitor might have but they don’t even understand because you’re seeing it from a different concept.”
Ringleib said one of the challenges of open innovation is the intellectual rights. “Who owns them? That’s a challenge. In many cases, the world is different today in that traditionally intellectual property rights and things like that were viewed as proprietary advantage. Now with the speed at which things are changing, that’s often not the case anymore. The important thing is the speed in what you create, you may not be able to protect it totally. And what is protected is the rate at which you change. It’s the speed at which you move. If you are faster than your competitors, you’re going to be more successful. Yes, there are challenges with who has the intellectual property. You could spend years trying to sort that out or you could get going and make something and get something out of it and share it in some way and be successful. So the important thing is how do you balance that and how do you sort through those ideas? Another thing to keep in mind is that your competitors typically have access to the same solutions you do. In today’s world, the flow of information is pretty quick.
“If you don’t innovate, somebody else will,” said Ringleib. A lot of businesses go out of business each year because technology moves forward and essentially wipes them out. The idea is to think about where your future is. Are you being made obsolete from something that was developed five years ago or will be developed five years from now? Will your business disappear?”
Ringleib talked about six innovation success factors needed.
1. Products need to work!
2. What is the consumer’s value proposition?
3. Provide competitive advantage
4. Attainable manufacturing platforms
5. Workable supply chains
6. Connect with consumers
“If you link all these things together and have a lot of elements working for you, you’re going to be at ‘the sweet spot’ of products you’re delivering,” said Ringleib.
For food and beverage products, working means that it has to taste great, he said. The first level in food is about the taste and flavors the product has. But they also need to function as advertised. The potential is to create something interesting and get people to jump on it. And before you know it, it becomes a wild success.
“The value proposition is really critical today,” said Ringleib. One of the challenges is that price matters but value is more than price. We all understand prices and we understand what we pay for something but what do we consider a value? In food products today, we have a lot of stuff with private label. Every company-branded product has a challenge from private label products. So part of the question is: what is the intrinsic value that the consumer sees? Does it taste better? Does it perform better? Does it last better? Is the packaging better? One of the things that makes it different is innovation,” said Ringleib. “If you can keep innovating and you can create new flavors, different concepts, different packaging and different availability for your customers, that’s going to create a value proposition for you that’s going to separate you from the others.”
Competitive advantage, Ringleib said, is about creating value, often through change. “And often to really make a change, you need a step change. You can’t do it incrementally. You need to be looking at how to create breakthrough innovation as compared to incremental innovation.”
So how do you identify what will change the way people think? Often it’s meeting an unknown need. Competitive advantage is often linked to technology improvements. “For example – the Walkman to the Ipod to the Ipod Nano,” Ringleib said. “There’s a series of steps that have gone into that and you can continue that to the Iphone and Ipad, etc. So there’s a series of things that happen. Those changes give competitive advantage.”
When talking about manufacturing, Ringleib said it’s really critical to think about how you are going to make the products. “One of the biggest issues for companies is often innovation is going to make some of their assets obsolete or it’s going to cause them to have to invest in future assets. You do need to consider that and take that into account but you need to know the world around you is changing at the same time. And although you may want to protect your assets, your competitors may be changing it or a new startup may be coming into the marketplace and will obsolete you. As the world changes, you need to think about how your assets will be impacted and if they will be the right assets going forward,” said Ringleib.
Ringleib emphasized the importance of supply chains. “You need to make sure your existing supply chain is going to work. Also, will your existing suppliers work for new products you create or do you need to create new ones? Can they easily adjust for changes? One of the challenges of innovation is it is very hard to predict the success of it. You could need one tenth the amount you thought you needed or you could need 10 times the amount you thought you needed. When you launch something new it can be wildly successful and blow through your projections quickly. So how will your supply chain respond to that?
“Connecting with consumers is really about head, heart and hand,” said Ringleib. “You have to create a logical connection with consumers. Consumers really have to understand what we offer, why we offer it and how that adds some value to them so they can make a logical conclusion about it. But more important, how do you create an emotional connection? This is an interesting dynamic. If you can create an emotional connection to your product, it’s very strong.”
The other thing to not lose sight of is touch – the tactile connection with the hands. Ringleib said he heard if you can get a consumer to pick up your product, it’s three times more likely that they’ll buy the product because they touched it. And that’s because now they have a mental image of them having that product and holding that product. “It’s a very strong force – whether they buy it then or buy it eventually. So how do you create the connection across all three of these? How do you have a logical connection? How do you create an emotional connection? And how do you create feeling about it? And it could be about how people connect with the physical product.”