1NIELSEN CXO SERIES Copyright © 2013 The Nielsen Company

WITH MANU ANAND, CHAIRMAN & CEO, PEPSICO INDIA

NIELSEN CXO SERIES

CONVERSATIONS IN LEADERSHIP

A P R I L 2 0 1 3

2 NIELSEN CXO SERIES

An ever-evolving strategist of a brand, PepsiCo has over the years

set high standards in terms of corporate social responsibilities,

environment conservation and most significantly, profitable business.

The company’s outlook towards the rural market, strategies to cope

with the economic slowdown and its unique management policies

make it one of the largest and yet rapidly growing companies globally

as well as in India.

Manu Anand, Chairman & CEO, PepsiCo India, shares his views on

the company’s outlook and a number of relevant issues in a tête-à-tête

with Piyush Mathur, President, Nielsen India Region. We get you some

excerpts from the interview.

PEPSICO CHAIRMAN & CEO MANU ANAND (LEFT) IN CONVERSATION WITH PIYUSH MATHUR, PRESIDENT, NIELSEN INDIA REGION

INDIA IS ONE OF PEPSICO’S FASTEST GROWING MARKETS IN SCALE; AMONG THE TOP FIVE MARKETS IN TERMS OF SIZE

3NIELSEN CXO SERIES Copyright © 2013 The Nielsen Company

THE SLOWDOWN HAS LITTLE EFFECT ON CONSUMPTION PATTERNS FOR THE BRAND.

HOW DOES GLOBAL PEPSICO SEE THE INDIA OPPORTUNITY?

India is definitely one of PepsiCo’s fastest growing markets in

scale and among the top five markets in terms of size. Therefore,

PepsiCo has a bullish approach towards the Indian market. Both our

businesses – foods and beverages – are scalable, and there are some

phenomenal brands that are taking them forward. PepsiCo is positive

and confident about the infrastructure, the brands, the people selling

systems and the Indian consumer. We see big opportunities in the

market and will look to invest in India to do justice to our businesses

and consumers in the country.

WITH GDP FOR THE JANUARY TO MARCH 2012 QUARTER DECLINING TO 5.3 PERCENT, HOW IS PEPSICO HANDLING THE SLOWDOWN IN THE MARKET?

There is definitely a slowdown that has impacted industries across

sectors. It is not only an economic slowdown but also a slowdown in

terms of consumption. This is a tough scenario. However, we continue

to get healthy growth and I think there is a logical reason behind it.

Firstly, we are selling small indulgences, a beverage in the evening

or a snack sometime during the day or a combination of the two, at

very affordable price points. The lowest price point for snacks is Rs 2

and for beverages it is Rs 8. The reduction in spending by the average

consumer therefore has little impact on the consumption of these

items.

4 NIELSEN CXO SERIES

HOW IMPORTANT IS INNOVATION IN THIS AGE WHEN THE CONSUMER IS CONSTANTLY EVOLVING? WHAT IS PEPSICO DOING WITH THE FOODS AND BEVERAGES BUSINESSES IN INDIA FROM AN INNOVATION STANDPOINT? First, PepsiCo maintains a healthy growth rate that originates from

the core. It is definitely important to have the infrastructure that

helps reach out to the consumer at various price points on various

occasions. However, we are also innovating beyond the core and

venturing into the health and wellness segment with our Quaker range

and our Tropicana juices. There are also several innovations taking

place for the consumers at the bottom of the pyramid.

In beverages, we have a joint venture with Tata’s NourishCo.

NourishCo has launched two new and innovative products– one is a

hydration product in cup form called Tata Gluco Plus, available at a

very affordable price point of Rs 7, and the other is Tata Water Plus,

which is value-added water with nutrients and minerals, sold both

in PET and pouch format. The objective of selling products at such

low price points is to merge a larger number of consumers, enhance

the distribution network and hopefully, add new consumers to the

category.

In foods, we have set up a value business model called the Lehar

vertical to try to get into more value product offerings with particular

focus on lower price points at Rs 2 and Rs 5. These will be the

mainstays of the business going forward.

EVEN AS FMCG PLAYERS ARE PENETRATING INTO THE RURAL MARKETS, THERE ARE ALSO OPPORTUNITIES IN THE FORM OF MIDDLE INDIA, A SEGMENT MADE UP OF APPROXIMATELY 400 TOWNS, EACH WITH A POPULATION OF ONE TO TEN LAC. HOW DO YOU LOOK AT RURAL INDIA VERSUS MIDDLE INDIA?

Growth in metros is certainly slowing down due to gradual saturation

of the markets. The next level of growth lies in the Tier II and Tier III

cities, where growth is almost two to three times that of the metros.

We have popular brands in these cities as well as in rural areas,

where TV penetration is now fairly high. We are not only leveraging

our brand but also our low price points in these markets. In the

beverage category, the returnable glass model and provision of chilling

infrastructure have yielded positive results for us.

5NIELSEN CXO SERIES Copyright © 2013 The Nielsen Company

PEPSICO WILL CONTINUE TO FOCUS ON GROWTH OPPORTUNITIES IN TIER II AND TIER III CITIES IN INDIA

WHILE TRADITIONAL TRADE CONTINUES TO GROW IN INDIA, MODERN TRADE IS SLOWLY GAINING GROUND. WHAT IS PEPSICO DOING FOR MANAGING THE GROWTH OF BOTH TRADITIONAL AND MODERN TRADE?

Traditional trade is expanding and I can see this every time I go

through Nielsen reports. I am staggered by the numeric additions to

the FMCG universe. Our job is to continue expanding our numeric

and weighted distribution in traditional trade, in order to make sure

that we are fairly represented in these expanding and increasing

outlets.

On the modern trade side, we are bringing in all our global learnings,

combining it with insights on the Indian consumer to try and provide

the right customer experience and ensure growth. It starts with

the right shopper insights. For example, while shoppers go into

modern trade outlets, understanding their preferences, habits and

budgets, provides us with key insights. For us, as a company, we

would certainly want to maximise our benefits and make sure that the

categories get the right space that they require from the consumer-

basket point of view. After that we combine it with the right offerings

in terms of price. Finally, the right promotion is important.

WITH SOCIAL MEDIA EVOLVING, LIKE IT OR NOT, TODAY PLATFORMS LIKE FACEBOOK AND TWITTER HAVE A SUBSTANTIAL INFLUENCE ON THE BRAND’S IMAGE AND SUCCESS. WHAT IS PEPSICO DOING IN THIS SPACE?

We have already taken up that challenge. We deal largely with young

consumers and you cannot really communicate successfully with

this group unless you have a social media presence. We started our

interaction in the financial year 2006-2007 but have scaled it up over

the last two years. Today, brand Pepsi has over three million Facebook

fans, and Lays has more than one million fans. We intend to do more

in this space.

6 NIELSEN CXO SERIES

SOME OF THE BUZZWORDS TODAY ARE ENVIRONMENT AND GOING GREEN. PEPSICO IS SETTING A NEW STANDARD FOR WATER CONSERVATION IN INDIA. TELL US MORE ABOUT THAT.

Performance with purpose has been our main agenda in this segment.

Our CEO Indra Nooyi has outlined three areas in the purpose

agenda which includes human sustainability, talent sustainability and

environment sustainability. Our water conservation endeavours are a

part of the environment sustainability initiative.

The first thing to remember is that PepsiCo is water positive to

the extent of eight billion litres of water, which means that we are

recharging or putting back into the system eight billion litres of water.

This is more than one–and-a-half times our consumption each year.

Moreover, in a season like this, when the monsoon has been erratic,

efforts like ours become even more important. Farmers who were

unsure of these measures now find it a more sensible approach in

terms of water availability and economics.

DO YOU THINK INDIAN COMPANIES AND MULTINATIONAL CORPORATIONS ARE DOING ENOUGH IN THE CSR SPACE?

I think over the last few years the awareness towards Corporate

Social Responsibility has gone up significantly. It is no longer

about just signing a cheque for an NGO; it is about seeing their

efforts come to fruition. When you look around, you will find

companies wholeheartedly taking initiatives and using their areas of

specialisation to make a difference.

ONE OF THE THREE PERFORMANCE AGENDAS FOR PEPSICO YOU MENTIONED WAS TALENT. WHAT ARE THE STRATEGIES THAT PEPSICO IS ADOPTING WITH REGARD TO BUILDING AND MANAGING TALENT WITHIN THE ORGANISATION?

The most important thing for us is to have the right people at the

right place at the right time working on the right thing, and most

importantly, in the right way. The entire cycle starts from recruitment

- going to the right institutes, getting the right courses, depending

on the nature of the job enrolled and then ensuring that you have the

right programmes to train these people.

7NIELSEN CXO SERIES Copyright © 2013 The Nielsen Company

For example, we have several management development programmes

including one called ‘Possibilities’. Through this programme not only

do we provide visibility to everyone within the organisation but also

allow them to chart out their own career path. We try to develop talent,

give them the right responsibility and career prospects and create a

solid platform within the company.

We also have an important programme within the company called ‘I

Care’, where the management interacts with the individuals to ensure

that the relationship is rewarding for both the parties. Moreover,

we have a strong value system within PepsiCo where everybody

understands and lives by them every day.

IT HAS BEEN 18 MONTHS SINCE YOU HAVE COME BACK TO INDIA. WHAT ARE THE THINGS THAT STAND OUT AND WHAT DID YOU NOT EXPECT TO SEE?

I feel India is truly a wonderful place to work. When I returned, it

was sheer growth opportunity and clearly the task was to maximise

that while continuing to build up the existing business. The other

rewarding aspect was returning to a group of talented employees.

Main concerns include the infrastructure as it impacts the productivity

here significantly. The fiscal uncertainty has also been a concern and

it is very important to strategise according to the rapidly changing

policies, bank rates and tax rates. Inflation has also been a challenge,

but it exists across the globe and companies have to work with that.

DO YOU SEE A LOT OF VOLATILITY? HOW DOES PLANNING AND EXECUTION VARY DUE TO THIS?

Your forecast and numbers have to change approximately every three

months. With the inflation and fiscal uncertainty, the biggest thing of

course is to ensure that the growth continues. It is not only finding

order in chaos, but continuing to thrive in it.

COMMITMENT TO ENVIRONMENT SUSTAINABILITY, WATER CONSERVATION AND CORPORATE SOCIAL RESPONSIBILITY ARE INTEGRAL TO PEPSICO

8 NIELSEN CXO SERIES

ABOUT NIELSEN Nielsen Holdings N.V. (NYSE: NLSN) is a global information and

measurement company with leading market positions in marketing

and consumer information, television and other media measurement,

online intelligence, mobile measurement, trade shows and related

properties. Nielsen has a presence in approximately 100 countries,

with headquarters in New York, USA and Diemen, the Netherlands.

For more information, visit www.nielsen.com.

Copyright © 2013 The Nielsen Company. All rights reserved. Nielsen

and the Nielsen logo are trademarks or registered trademarks of

CZT/ACN Trademarks, L.L.C. Other product and service names are

trademarks or registered trademarks of their respective companies.

The interview was conducted in August 2012. The views and opinions

expressed in this article are those of the client and do not necessarily

reflect those of Nielsen. All data provided in this article is for

informational purposes only.