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One on One:: 'Time for Pepsi co to reinvent'

Pepsi co India has gone through the wringer but, as Chairman Rajeev Bakshi puts it, ?We have weathered the storms. But now is the time to reinvent?.

business Updated: Jan 02, 2006 12:15 IST
Hindustan Times
Hindustan Times

Pepsi co India has gone through the wringer but, as Chairman Rajeev Bakshi puts it, “We have weathered the storms. But now is the time to reinvent”. If India gave Pepsico some testing times in 2003, the country has now become the test bed for innova tion. It’s optimising production processes and generating backward supply chain linkages that may soon put India both on the raw material as well as the best practices sourcing map for the parent. Last week, for the first time in the history, PepsiCo was valued more highly on the Wall Street than its competitor. “But in times to come, PepsiCo India will have many firsts to add to the company’s credit,” he told Prerna K. Mishra in an interview. Excerpts: Post-2003 ordeal, the company trained a lot of focus on social responsibility.

Has it helped Pepsico India mature as a corporate?

The turmoil seems to have encouraged us to adopt best practices like never before and that has become the breeding ground of innovation within Pepsico India. By 2006-end, we are committed to consume water not more than two times the beverage that we produce in all our factories. While the global average for the same is 4.5 times, we will be the first destination within PepsiCo to get to this bench mark which exists only in one other nonPepsiCo destination so far. Using less water, in fact, makes wonderful business sense too as we pay less for it and make our processes more energy efficient. Another first that we are targeting is to make our factories zero discharge. This again will make very good business sense. The product portfolio in India has seen a major shift from carbonated to more non-carbonated add-ons.

Has the controversy dogging the company impacted the sale of carbonated drinks?

It’s a fact that the share of non carbonated drinks, that include water, juices and carbonated diet cola, has gone up from 10 per cent of the turnover to 20 per cent. Health drink Gatorade and wellness segment have become important contributors. But those are not telltale signs of carbonated drinks being side-lined.

As a category, non-carbonated drinks have never grown at a YoY growth rate of less than 10 per cent in any year except 2003. In 2004-05 also, the growth for this category was in double digits. However, the category that contributed 90 per cent of the portfolio in the 90s, is now in the high 40 per cent range. But its is also due to the change in business environment, consumer preference and hence the portfolio mix.

How would you describe the changing business environment and the new target audience?

There are three things happening in the market that FMCG com panies should have an eye on — there is a trading up happening in consumers. For instance, there is a strata that can afford to buy packaged juices or diet cola which is three times the price of a normal cola. The mass luxury segment in India has arrived. The other thing to take note of is that the one-sizefits-all theory is passe as each category has become a multi-layered target audience. And lastly, the old FMCG mantra of penetration pricing works no more. As the market gets flooded with options, the trickle down effect is not even a political argument today. There is a category within category and a consumer within a consumer.

Do you see the contribution from the returnable glass segment decrease in the near future as PET and single serve glass takes over?

Presently, 65 per cent of the business is coming from returnable glass. It was about 80 per cent five years ago. However, quoting precedents, in Thailand and Egypt — two countries with comparable per capita income as India — returnable glass still contributes 50 per cent of the business. We see India moving to that level in the next three to four years.

First Published: Jan 02, 2006 12:15 IST