PepsiCo challenge: Creating customer intimacy and hyper-productivity
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PepsiCo challenge: Creating customer intimacy and hyper-productivity

Alara Basul & Kenny MacIver — April 2019
PepsiCo global CIO Jody Davids shares insight into building customer trust in analytics and personalization, streamlining business IT services through digital transformation and supporting “tech warriors.”

An all-American icon with global reach, PepsiCo has been an industry leader in the beverage industry for over a century and a major force in snack foods since the 1960s. Through its eponymous soft drink and brands such as 7up, Tropicana, Doritos and Lay’s potato chips, it generated $65 billion in annual revenues in 2018 — split evenly between food and beverage, US and international.

While its growth strategy has largely been acquisition-led, Pepsi faces a constant stream of new challengers, many of whom can exploit hyper-efficient, digitally driven business models. Its response is built around two pillars: a focus on IT-enabled productivity and a dramatic reduction of costs; and the application of technologies that drive loyalty among its millions of customers.

Jody Davids, global CIO, PepsiCo
Jody Davids, who has been PepsiCo’s global CIO for the past three years and previously held senior IT leadership roles at Cardinal Health, Nike, Best Buy and Apple, emphasizes the expanded role that technology is playing in enabling PepsiCo to thrive in the current disruptive business environment. It means being “a company that is incredibly consumer-centric,” she says. And excelling at that today requires a deep commitment to data analytics and the personalization of the customer experience, she adds, which translates into activities such as predictive analytics, real-time marketing, dynamic merchandizing and tailored offers.

In the words of her boss, Ramon Laguarta, PepsiCo’s CEO since October 2018, it’s about building “consumer intimacy.” As he said a recent Consumer Analyst Group of New York briefing: “[We must] understand the consumer in a much more granular way. We used to understand consumers in groups of millions; now we're trying to understand at the household or individual level, [by using] multiple sources of data. Once you have that information you can then go into personalized communication — an area [where] we're doing a lot, but we will do much more. [Today] we're maybe creating 20 messages for 100 audiences; in the future we’ll be creating a thousand messages for a million audiences.”

Laguarta is looking even further down the digital path: “Eventually we want to get to a place where we can have almost personalized pricing or [at least] personalized pricing for a group of consumers. [The aim] is to maximize the value creation for each consumption occasion. That is the type of capability where we're investing in.”

Unsurprisingly, given concerns about how companies handle the customer data they work with, Davids is quick to stress that such an increased focus on analytics and personalization is based on earning and maintaining customer trust in how its data is used.
Productivity push

The focus on analytics is set against a backdrop of changing market dynamics, particularly targets e-commerce platforms as key for business growth.

Direct ecommerce, with consumers buying through channels such as Amazon, has become a $1 billion channel in terms of annualized revenue. However, PepsiCo’s 2018 annual report shows concern about the ability of consumers to use digital technology to compare prices on a real-time basis, thereby putting pressure on the company to maintain competitive prices. Despite the growth and price pressures, ecommerce is still dwarfed by revenues from its traditional channels of wholesalers, foodservice customers, grocery stores, drug stores, convenience stores, and others.

Its evolving competitive position is at least some of the inspiration behind the recently announced  ‘2019 Productivity Plan,’ a multi-year initiative that is a follow-on to PepsiCo’s 2014 program that aimed to “leverage new technology and business models to further simplify, harmonize and automate processes; re-engineer our go-to-market and information systems, including deploying the right automation for each market; simplify our organization and optimize our manufacturing and supply chain footprint.”

The new 2019 Productivity Plan will require an investment of around $2.5 billion over four years, and will continue the company’s migration to shared business services across its global operations, the company states. Indeed, since joining PepsiCo, Davids has led a major push to centralize services, which had historically been siloed around specific products or geographies.

As Ramon Laguarta told the Consumer Analyst Group: “We’re going to transform holistically our cost structure on an on-going basis, adopting technology, adopting data in a way that allows us to execute with more efficiency at the same time be more effective.” He cited an example from PepsiCo in Mexico where the application of route-optimization technology has increased the number of store deliveries a truck can make by 14%, from 22 to 25.
The characteristics of a leader

But successful application of IT in areas such as productivity and analytics is not all about technology, Davids emphasizes. It requires leadership and the right people, says Davids, who heads a worldwide IT group of 3,100 staff: “You can’t do this without bringing in the right people.”

She likens the features of the successful modern workplace to the three main characteristics that a warrior needs to persevere: be fit for the fight, don’t try to accomplish tasks alone, and be resilient. “That requires teams to have clear and measurable goals, as well as a solid understanding of the business’s strengths, its chosen focus areas for improvement and its successes,” she says.

Davids says her own career at companies such as Cardinal Health and PepsiCo has taught her a lot about, for example, the business mechanics and related technology support needed for successful acquisitions. In short: “Surround yourself with the best team. And then trust them.”

• Jody Davids was a keynote speaker at Cloud Expo Europe in London
First published April 2019
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