Nooyi steps down

On August 6, 2018, Indra Nooyi, one of the most dynamic women CEOs in the history of the United States of America announced she would be stepping down on October 3, 2018 after 12 years as head of PepsiCo, the world’s second largest beverage and food company (in terms of net revenue).

A statement by Nooyi read: “Leading Pepsi has truly been an honour of my lifetime, and I am incredibly proud of all we have done over the past 12 years to advance the interests of not only of our shareholders, but all of our stakeholders in the communities we serve. Growing up in India, I never imagined I would have the opportunity to lead such an extraordinary company.”

The announcement was accompanied by the news that Nooyi was leaving the company in the capable hands of her successor, Raymond Laguarta, current President of PepsiCo. Laguarta is an old hand at PepsiCo, with successful stints as the CEO of the European and Sub-Saharan operations. Nooyi, it was reported, would stay on the PepsiCo board until 2019 to ensure a smooth transition.

Financial performance reflected the strength of Nooyi’s strategy. The company’s annual revenue rose from $35 billion in 2006 to $63.5 billion in 2017, with much of the growth coming from international markets and the new product categories Nooyi created or re-energised.

The news was widely covered in national and international media and PepsiCo stock rallied on the promise of continued growth and confidence in the plan. Some observers opined that Nooyi should not leave, given the dearth of women leaders among the Fortune 500 companies – and one with such a track record of success. Others commented that during Nooyi’s 24-year career at PepsiCo, the secret of her success was the fact that she never let her gender or origin defines her. She once said that upon starting her career in the US corporate world, she was self-conscious of the fact that she only possessed two suits and that she would alternate them every other day. She soon came to the conclusion that she would not let ‘how she looked’ define her, but make consistent performance and reliability the bedrock of her career. That move paid off and Nooyi gained a reputation as the person to go to in order to get things done. She is said to have had a keen eye for detail, coupled with an endless appetite for administration and the ability to think laterally while multitasking.

By all counts, Nooyi has been a stellar all-rounder. The woman who grew up in India reportedly as a guitar and cricket playing maverick had a stellar rise to the top. She majored in physics, chemistry and mathematics from the University of Madras and then did an MBA from IIM-Calcutta before proceeding to the Yale School of Management for another Masters. At the end of her stint at PepsiCo, she had acquired honorary degrees from at least 11 other universities across the US. She has consistently appeared on the Forbes list of 100 most powerful women, ranking at number 11 in the 2017 rankings. Before joining PepsiCo, Nooyi worked in India at Mettur Beardsell and for American companies such as Johnson & Johnson, Motorola, BCG and many others.

Nooyi’s tenure at PepsiCo is considered an unqualified success. Taking over as CEO of the company 12 years ago, she went against the prevailing conventional wisdom in the soft drinks industry of disinvesting from ancillary business and focusing on core products (read: soda and sugary drinks). On the contrary, Nooyi was to spot the trend whereby consumers were moving to healthier offerings far earlier than her contemporaries and she made PepsiCo make the necessary, albeit painful changes to their portfolio.

Under Nooyi, Pepsi undertook a comprehensive review of their product portfolio, which at the time was divided into three buckets. The first was Fun for You; the legacy sugary drinks and snacks. The second was Better for You which represented the middle ground and the last was Good for You, which included products such as Quaker Oats and Naked Juices. Nooyi bucked the trend of limiting the two latter categories to ancillary businesses and instead increased the focus on acquiring more assets in these areas.

The shift of strategy that Nooyi oversaw, often in the face of strong criticism, has ensured that PepsiCo remains a revenue powerhouse with share value growing 78% during her tenure, a fact that industry insiders believe will be her lasting legacy.

Furthermore, Nooyi added a new billion dollar plus brand to PepsiCo’s portfolio every alternate year. She grew the Good for You and Better for You parts of the portfolio (despite some hiccups, ups and failures along the way) to account for approximately 50% of PepsiCo’s product offering (up from 38% when she joined). When she needed to cut fat, she disinvested from Tricon (a restaurant business that included KFC) and used the resource space to pick up strategic acquisitions such as Tropica, Quaker Oats and Gatorade.

She also increased focus on foreign markets and took PepsiCo to new turfs, with the acquisition of Sabra, one of the US’s leading Hummus makers and of Mabel, a Brazilian snack company. She reinvigorated PepsiCo in China through a strategic alliance with Tingyi Holding. This acquisition strategy kept PepsiCo closer to home in packaged drinks and snacks but considerably widened the brand footprint among a new consumers segment. As consumer preferences moved to healthier offerings with less sugar and no artificial sweeteners, sales of PepsiCo’s core products, like sodas and diet drinks began to shrink and went down by as much as 15% annually in some markets.

Financial performance reflected the strength of Nooyi’s strategy. The company’s annual revenue rose from $35 billion in 2006 to $63.5 billion in 2017, with much of the growth coming from international markets and the new product categories Nooyi created or re-energised.

The shift of strategy that Nooyi oversaw, often in the face of strong criticism, has ensured that PepsiCo remains a revenue powerhouse with share value growing 78% during her tenure, a fact that industry insiders believe will be her lasting legacy.

Tariq Ziad Khan is a US-based marketer and a former member of Aurora’s editorial team. tzk999@yahoo.com