Salman Amin, then EVP Sales & Marketing of PepsiCo, now COO, SC Johnson & Son, visited SOM on Nov 9th to share his perspectives with selected SOM students. During his visit, he was interviewed by Ravi Dhar, the George Rogers Clark Professor of Management and Marketing and Director of the Center for Customer Insights.
Ravi Dhar: I’m Ravi Dhar, Professor of Marketing at Yale School of Management and today I have with me Salman Amin who is the Executive Vice President of Sales and Marketing at PepsiCo. He was at Yale campus talking so I thought I would take the opportunity to ask him a few questions in marketing. Welcome.
Salman Amin: Thank you.
Dhar: So let me start by asking you really about PepsiCo’s mantra, if not the mission, you see it written a lot about, ”Performance with Purpose.” My question is really what does it mean for the sales and marketing function within Pepsi?
Amin: So it’s a great question Ravi. I think actually “Performance with Purpose” is entirely integral to what we are doing in marketing for example. The reality is that consumers today are looking for a greater meaning from brands. It’s not just that we speak to them in a way that’s relevant, it’s not just that we offer them products that are well differentiated and that taste good. It’s also, there’s a “What’s more are you doing for the society we live in.”
So we are bringing purpose, particularly the purpose side to life in our brands for example in how we are reformulating them, in many of our fun-for-you brands. How we are focusing on our good-for-you brands, like Quaker and Tropicana. How we are going forward in terms of environment by working in partnerships with groups like the Carbon Trust in the UK where we are measuring our carbon footprint, where we are working on water conservation projects and finding ways to work our way towards a “net zero” company. So all of these things as you start to put the brand stories together and you talk about how these brands are integrally focused in these areas makes a difference to how consumers are viewing our brands. So it’s very much a part of what our brand strategies are all about.
Dhar: You mention sustainability or the environment so obviously you can think of sustainability along many different dimensions, whether it’s the environment, the water conservation, carbon emissions. And one of the things I find in some of the research we did is the consumer seems to say they care about these things and there is obviously a person which really cares about it. And the others are not willing to compromise on the benefit of the product. Let’s say it’s a detergent. Yes they care if it’s friendly to the environment but if it doesn’t clean as well they worry about it. Do you find similar issues in your categories that matters, and which of these aspects of sustainability are more important to your consumers or within Pepsi? How you look at it to decide what should we focus on, given that there’s so many of these things out there?
Amin: One of the principles that we followed is the reality that we are a food and beverage company and everything we sell has to taste fantastic all the time. So when we started to reformulate our products and as we’ve gone forward one of our absolute nonnegotiables internally was we would make no tradeoff in taste. So that was the guardrail we put around all of our reformulation efforts. To say “You know what, we are going to go and not do the ‘either/or’ thing, we are going to do the ‘and/and’.” That’s why it’s taken us a bit longer in some cases to reformulate our products because we really wanted to ensure that taste performance is as good as it’s ever been, if not better. While delivering reductions in sodium or saturated fat in some cases or measuring our impact on environment we’ve made sure that nothing interferes with the tastes.
Dhar: That’s kind of interesting, across the portfolio obviously you have a lot of different brands, and does it create more of a challenge for beverage brands or food brands or “kind-of” food brands? Is it easier to do at some end of spectrum of the portfolio?
Amin: I think there are challenges with all of our brands when you start to do that, when you say you are going to take something that is integral out and we don’t want the taste to change. It’s not necessarily an easy exercise. The good news for PepsiCo has been that we’ve worked on these technologies for many, many years. Our R&D and food science teams are incredible adept at this. So it’s been a journey that’s been in the making for the last 5 to 8 years, the fruits of which we are beginning to see now as we roll these new products out.
Dhar: You also mentioned that, broadly speaking, you have brands that are fun-for-you and brands that are good-for-you in the portfolio. And one of the issues that really, across the whole industry that we find that “How do we get people to eat or consumer more of the good-for-you things?” And one way to do it is through innovation, which is try to make fun-for-you brands also good-for-you, which is taking some of the ingredients out or putting in more healthy ingredients. And the second is obviously what we call behavioral change, we get people to consume less or exercise or engage in other activities and manage a balanced lifestyle. In other words, you still eat a combination of things. And as a marketer you probably end up doing a little bit of both. So I think when you were at PepsiCo UK you were engaging in some of the health initiatives at PepsiCo. What are some of the things that you did, some of the lessons learned, which translates across nations or some of the challenges in doing that?
Amin: So I think there’s a few things that are important to do and these are not alternatives, I think we need to do all of these. The first one is, I think it’s really important to communicate the benefits of a balanced diet. At PepsiCo there’s no debate in our mind we have to communicate to people what a balanced diet is about. The second thing, which goes very closely with the balanced diet, is to create the balance between diet and exercise and how do we do that. Third is information. How do we make our products and our packages more informative such that people know what they are actually consuming in each packet or each bottle. So we have been very focused on labeling initiatives, front of pack labeling. We are part of a coalition of food manufacturers and retailers that have aligned together to say we are going to have standard labels.
Which is exactly what we did in the UK starting in 2006 when we went to a standard label. But we didn’t stop there. We said we also then need to focus on consumers and help them understand how to interpret those labels. So industry came together as a group and funded a campaign in the UK which focused over a multi-year period of time, three years actually, to teach people how to interpret those labels and what do they mean in the context of a balanced diet. Those are the sorts of initiatives that are critical for us to be focused on as we go forward in order to create a society that is well informed and makes choices that are right for itself.
Dhar: It’s interesting that you mention that because we certainly find certain types of consumers who read labels and the question is how to you get, even the small thing that you mentioned taking from the back of the packaging and to the front of the packaging. At one level how hard is it to turn the packet around. But in the world of CPG products I think those little things can make a lot of difference in terms of awareness and processing.
Amin: So what we did was we tracked very diligently awareness of the new front-of-pack labels, comprehension of those new front-of-pack labels, and usage, importantly. Because those three taken together over a longer period of time will create behavior change. And we found that because of the investment in the education campaign the numbers actually started to climb very rapidly and the majority of the population first became aware, then started to understand, then started to use it. I think the broader question you are asking is “How long does it take to create lasting behavior change?” And I think that is a multi-year process. People got used to purchasing things a certain way and consuming without necessarily understanding what they are consuming. And the process of having clearer, fact-based objective labels that put the facts there and teaching people how to interpret them I think is a very powerful process that in the years to come I am very confident will pay dividends.
Dhar: Great. Let me ask you you’re the executive vice president of sales and marketing. So normally at a lot of firms these functional areas are quite separate, and the idea of integrating it obviously makes a lot of sense. Tell me some of the things that you do which seem to be working or any examples that you might have of what you did of integrating this that really pays or you think is going to pay dividends if it’s ongoing.
Amin: We have the belief in PepsiCo that what we need to build in the next generation of leaders coming up at PepsiCo is commercial acuity. Because the reality is the world where customers where at one end of the spectrum, our retailer customers and partners, and brands where at the other end of the spectrum, that day is long gone. We have to develop, we have to innovate, and we have to build brands recognizing the roles that our customers play, as well at what consumers are desiring. So to me this microcosm is already one. And the quicker that we can create an awareness of what it means to work together with customers and consumers and start to create the sensitivity in both our sales leaders as well as marketing leaders I think the better off we are going to be.
Now, it is a change, it is an evolution. It will take some time of doing it continuously for many years for it to really make a lasting change. But we have started that journey and we have started with small steps. In some cases moving people from big sales roles to big marketing roles, and the other way around. But also starting to build an appreciation for why this is so important because our customers have their own brands too. Virtually all the customers have their own private label brands which they do a very adequate job of marketing, they are quite good at it. So we have to continue to “up” our game to create those differentiated propositions and understanding both sides of that I think is critical going forward.
Dhar: You mention many of your customers have their own store brands so that leads to a natural question and when I talk to a lot of the CPG companies they vary on the idea of whether or not they should make store brands. Some say especially during a recession or downturn they have some excess capacity, they obviously have the know how and the capability to make that soup or the toothpaste or the detergent or the soda and if their customers are asking “Hey why don’t you make some soda where we could put our name on it? Would you do that?” And I find that companies vary on it, Proctor and Gamble says that they will not do that at all, I think they have some legacy purchase they did with Duracell where they have it, but it’s a very firm belief that it’s not a good idea to do it and I was just wondering your thoughts on it. How does PepsiCo think about its own brand versus making some products for its customers as store brands?
Amin: So at PepsiCo we are very clear on our mission. We are a house of brands. And we have built these brands over a long period of time. And I think we are very comfortable building brands that we believe that are well differentiated from anyone else’s brands and that’s frankly what gives us the reason to be. There is no reason for PepsiCo to exist if we could not deliver differentiated brands that are consumer preferred and make sense for our shareholders. So we are very much in the camp of saying we are very comfortable making and marketing our own brands and have no plans to start to manufacture brands for others.
Dhar: I notice the other thing is a lot of the beverage brands you have are much more global in terms of the same brands in many different countries. You do have obviously local beverage brands also but the food business tends to be more local in terms of, well you do have obviously some global brands but they seem to have many names that are specific to the different countries. Do think it is harder to build global brands in certain categories like food because it is inherently cultural in meaning, versus in beverages or it’s just the way of acquisition, how it developed. What is your take on that?
Amin: So it’s a very interesting question actually. It’s absolute true that food is largely local. There’s no doubt, tastes are locally driven. After all if you look at from country to country there are many things that unite us but there’s a few things that make us unique in a given country. Food and cuisine is one of it, language is another, music is another. So in that context food brands tend to be very local. That said, what we’ve done with brands like Lays and Doritos and Quaker is we’ve said while the taste that we will deliver in a given country may be different, the brand positioning, the brand architecture, the brand guardrails, they will be the same everywhere. So that’s point number one.
And to your point on beverages, it’s really interesting because I would actually segment beverages into a couple of areas. If you look at colas that’s largely true. It’s the same profile everywhere. If you look at non-carbonated beverages, some of the teas, if you look at juice drinks, ex cetera, those actually tend to be very very local again. And in that arena we are again similar to the food brands. We are very focused on what those local tastes are.
Dhar: So why do you think that is? Is that because those teas and coffees, it‘s closer to food or is it because tea is made differently with different leaves. Tea was just an example but you meant other types of beverages as well.
Amin: So I think it’s really interesting. I think all food and beverages are local. The only thing that’s different is cola. Because there is no indigenous cola drink in any country. This is a flavor that is an acquired flavor that has come in over the top so to speak, horizontally around the world. And it’s perhaps the only food and beverage category that tends to have very little barriers.
Dhar: That’s interesting. I think that reminds me of I was discussing with one of the Indian retailers and he said it was easier to do well in categories where there was no obvious substitutes in India. So for example if they had an alternative way of making that product versus if no such thing existed the takeoff was much faster in some sense. So cell phones was an example where it just took off because the landlines where just nonexistent in some sense. But where you had a close substitute, let’s say you had unorganized retailing which kind of does the job pretty well in these countries, the organized retailing is finding it much harder to take off. So cola, to your point, I think was... didn’t really have an obvious substitute, where if you have a global tea brand you always had a local tea brand or a local way of making which might have made it harder for to global brands to build connections with the consumers.
Amin: I think you’ve right. The only sort of slight difference in how I might say it is I think we will forever have local tastes but that should not preclude the building of global brands in the sense of the architecture, the graphics, the look, the feel of the brand, what it stands for in a portfolio. Because you’ve right, almost all food and beverage brands tend to be analogs for something that’s in the local cuisine.
Dhar: Let me ask you, we talked about brand building so certainly in Pepsi’s case and many of the companies now traditional way of building brands, spend a lot of money on television advertising, which is still the mainstay for most of these large brands but more and more they are sort of putting their feet into the world of social media. What is the role you think that social media plays in brand building, how does it fit into the bigger piece of everything else that you do to brand build, brand sustaining if you like. What are some of the pluses, the minuses of using it?
Amin: I step back and I ask myself the question “What do I need to do to continue to engage my consumers?” How continuously do I need to do that? In which ways do I need to do that such that my brands stay differentiated? And when I ask the question that way, social media, digital media, takes on a place of its own because our consumers are consuming social media. So it’s incumbent upon us to be present there and to find ways to talk to consumers. For me it’s been an add/add. I don’t think traditional media like television is going to go away any time soon. In fact, if you look at other mediums like print, print is actually prospering. Everyone said magazines are dead and newspapers will be dead. The reality is there is a lot of volume going through that and readerships are doing okay. So there is a role for what we would call classic media. So I think right alongside social media or digital media and I think from our perspective we intend to make full use of all of those as long as they are available to us.
Dhar: Do you worry about the amplifying nature of social media for word-of-mouth or other things the plus side and obviously the minus side because everything gets amplified and we know that negative word of mouth is more likely. People who are unhappy are more likely to complain than people who are satisfied and so part of the challenge is how do you manage a media where you have less control than what you as managers are accustomed to? And so as a result you find often extreme people don’t want to do certain things on social media because they feel they lose control and how to manage the process of not having full control of brand building or the messaging. And obviously you have a range of people in the company, a range of brands. Do you find people who embrace this are different in some ways than people who will worry about this or it’s as a company do you find everyone seems ready to jump in?
Amin: I don’t think at PepsiCo we are debating the value of social media, I think we all buy into that. I think the question is “Where does the control reside?” to your core question. And I have a firm belief that the control has always resided with consumers, they always had a choice to say yes or no to your proposition. It’s just become more pronounced over the last say 5 to 10 years. And it is absolutely critical for us to go and embrace it. Despite all the uncertainties, despite all the risks, it would be silly of us not to go out there and learn what we need to be doing differently about it. And yeah, will be some learning. Sometimes difficult learnings that we are going to have to embrace. But we need to be out there in the space that our consumers are in.
Dhar: Great. So last question is really on the career advice for students. As somebody who is going out into the world of marketing today or even broadly a career in general management based on your experience and the changes that you see in the world what are 2 or 3 skills that you think are really critical in being successful in today’s world?
Amin: The few things I would say. One is change will be eternal in the young person’s life who is coming out of university today, business school, undergraduate. They are going to see a greater, faster rate of change than perhaps Ravi you and I did over the last 20 years. So the first thing I would say to them is learn to embrace change and don’t take change as an adversary but as something to say it’s just going to be there. And that requires young people to build a healthy tolerance for ambiguity and to learn to prosper despite change, despite not having certainty around them, how do you actually move forward. That’s one.
Second, learning agility. I think the world where we are creating information, where consumer as change rapidly as they do, our competition changes as rapidly as it does, our ability to be learning agile and say we will continuously be students I think is critical.
The third I would say is to how you can be more articulate. You have to be able to take complex problems and simplify them. I think it’s critical to build the skills that allow people to explain in simple words what complex problems are all about.
And last, but not least, is resilience. Because it’s a difficult world, because change is thrust upon us and we can’t control it, it can create difficult times or a feeling of stress. And I would say our ability to ride through it, to be resilient, to take some of the adverse things that happen and still keep going forward will be critical for young people going forward.
Dhar: Thank you so much for your time.
Amin: Thank you Ravi.