KIN Summit 2007 Innovation For Marketplace Success Albert Manzone President, PepsiCo Shelf Stable Juices PepsiCo, Inc June 18-19, 2007

KIN Summit 2007KIN Summit 2007Innovation For Marketplace Innovation For Marketplace

SuccessSuccess

Albert ManzonePresident, PepsiCo Shelf Stable Juices

PepsiCo, IncJune 18-19, 2007

061807_KIN Summit_Legal Approved Copy 2

~40% of growth

2004-2007E

Innovation Has Been Critical To Meet Innovation Has Been Critical To Meet PepsiCo Growth TargetPepsiCo Growth Target


Up To Today, We Have Been Able To Figure Up To Today, We Have Been Able To Figure Out The World Around UsOut The World Around Us

Innovation a relatively “simple” competitive advantage…

…Relying on a “repeatable” formula that values scale, reach and speed

Fast follower is enough to win

Narrower portfolio and competitive pressure mostly Coke

Space not a constraint


Innovation Success Formula

Impactful Marketing

Aligned Operating Envelope

Right Expectations

Compelling Consumer

Proposition

Sustained Execution

• Leverages current assets

• Serve national footprint

• Relevant messaging and activation

• Sufficient and sustained support

• Distribution targets achieved

• Right placement• Right level of in-

store inventory• Ongoing support

• Clarity on innovation role

1. Risk tolerance and patience

2. Pace of innovation

3. Algorithm expectation

We Know What WorksWe Know What Works

Structural and Cultural Enablers

• Deep insights• Differentiated

proposition• Product and

packaging fulfill consumer need


Impactful Marketing


Right Expectations

Compelling Consumer

Proposition

Sustained Execution


The World Around Us Is ChangingThe World Around Us Is Changing

Consumers more savvy, sophisticated, and demand fragmenting

Categories blurring

Emboldened Pure Plays are true innovation leaders

Stronger, more demanding customers

Broader portfolio to support

Space bottlenecks


Space Bottlenecks Have Increased Space Bottlenecks Have Increased DramaticallyDramatically

5 Years Ago225

Today375

Grocery30,000 SKUs


Impactful Marketing


Right Expectations

Compelling Consumer

Proposition

Sustained Execution

• Late alignment with conflicting messages to the system

• Limited launch A&M and not sustained

• Distribution targets not achieved

• Support window only

• Giving up in less than 1 year

• Push/pull unbalanced

• False optimism

• Rushed to market

• No advantage versus competition

New Realities Are Challenging Our New Realities Are Challenging Our InnovationInnovation

Factors Contributing To Innovation Misses

1. Low risk tolerance and lack of patience

2. Amount of innovation beyond sales / system capacity to execute

3. Algorithm constraints

Structural and Cultural Enablers


External Development / M&A

Expand OutMostly Niche Initially, With

Intent To Scale

Internal Development / Organic

Fuel the CoreMostly Scale, Some Niche

In This New Environment, Innovation Has To In This New Environment, Innovation Has To Achieve A Better Balancing ActAchieve A Better Balancing Act


And We Need To Find New Ways To And We Need To Find New Ways To “Expand Out”“Expand Out”

• Few available

• Scale vs. timing

• Sky-high valuation

M&A

$ $ $

• Create future advantaged growth in emerging categories

• Required when no competitive advantage in category

• But more difficult and requiring more patience

Greenfield

• When can leverage existing assets or competitive advantage

• Does not address blurring/fragmentation

• Challenging in image-driven categories

Fast Follower

“EXPAND OUT”“Fuel The Core”


Incubation approach

Partner with key Customers

Prove it out in a region or a series

of targeted markets

Pre-seed in a specific channel where we have

advantaged reach

Warehouse/ Distributors

DSD

GT

M O

ptio

nDevelop More Nimble CommercializationDevelop More Nimble CommercializationAnd IncubationAnd Incubation


0

50

100

150

200

250

300

350

400

1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16

MM cs (8 oz)

Years from launch

Aquafina

Snapple

Red Bull

Gatorade

Propel

Monster

Vitamin Water

Patience And Sustained Investment CulturePatience And Sustained Investment Culture


Case StudyCase Study

14

Show. Don’t Tell

Discovery: Provide Stimuli To Targeted Discovery: Provide Stimuli To Targeted Consumers For Their InterpretationConsumers For Their Interpretation

1) Anchor in a ‘backed-up’ proposition – Product: Delicious, Natural/GFY, Unique, Stylish Design– Company With a Conscience: Global Education Fund– Company With a story (entrepreneurial, Boulder)

15

16

Anchor in a ‘backed-up’ proposition – Product: Delicious, Natural/GFY, Unique – Company With a Conscience and a Story

2) Present a premium, impeccable appearance

3) At the right places…2) High-profile events3) Culture-driving locations4) Hip, premium venues5) Retail

4) In the right hands2) Influencers and celebrities3) Culturally creative, discerning adults

Discovery 2, 3, 4: Provide Stimuli To Targeted Discovery 2, 3, 4: Provide Stimuli To Targeted Consumers For Their InterpretationConsumers For Their Interpretation

Show. Don’t Tell

17

IMPECCABLE APPEARANCE: consistency in Field Force creative and presentation – always beautiful, premiumIMPECCABLE APPEARANCE: consistency in Field Force creative and presentation – always beautiful, premium

18

IMPECCABLE APPEARANCE: consistency in Field Force creative and presentation – always beautiful, premiumIMPECCABLE APPEARANCE: consistency in Field Force creative and presentation – always beautiful, premium

19

PREMIUM APPEARANCE: present the ‘art’ of IZZEPREMIUM APPEARANCE: present the ‘art’ of IZZE

20

RIGHT PLACES. RIGHT WAY – Retail demos are keyRIGHT PLACES. RIGHT WAY – Retail demos are key

21

INFLUENTIAL EVENTS & ASSOCIATIONS INFLUENTIAL EVENTS & ASSOCIATIONS

Celebrity Events

Victoria Secret Gibson Guitar Lounges

Natural Food Trade Shows

Tribeca Film Festival After Parties

Guess Co-Promotion Event

Spa Event

22

RIGHT HANDS: (celebs and influencers)RIGHT HANDS: (celebs and influencers)


Separated structures within Corporate culture!

Protected resources – people / funds

Aspirational leader reporting to the top

Outward orientation

Great set of external partners

Different type of matrix

The Structure: PepsiCo’s Innovation The Structure: PepsiCo’s Innovation RepublicRepublic


FRITO LAYNORTH

AMERICA

QUAKERTROPICANAGATORADE

PEPSI COLANORTH

AMERICA

PEPSICOINTERNATIONAL

CORPORATE, Chief

Innovation Officer

Confederation of Decentralized "States"


Dedicated resources

Top management oversight

Quarterly forum for cross-divisional opportunities

Share best practices

Drive innovation agenda

Aligned vision

CMO Split: Chief Marketing Officer/Chief Innovation OfficerCMO Split: Chief Marketing Officer/Chief Innovation Officer

Chief Marketing Officer/Chief Innovation Officer RoundtableChief Marketing Officer/Chief Innovation Officer Roundtable

Mar

keti

ng

Inn

ova

tio

n

Dedicated StructuresDedicated Structures


Not Only Marketers:Not Only Marketers: Proven problem-solvers

Strong analytical minds

Leveraging of external resources & partners

Cultural bilingualism – balanced brain

Self-motivated / creators

Non-Traditional Executive ProfileNon-Traditional Executive Profile


New Best-In-Class PartnersNew Best-In-Class Partners Developing breakthrough innovation with best-

in-class partners that challenge our thinking

• New capabilities

• New mindset

• New insights

Challenging Our Thinking With Best-In-Class Challenging Our Thinking With Best-In-Class Partners “The Dudes”Partners “The Dudes”


Different Set of MatrixDifferent Set of Matrix

Complexity

New Benefits New Markets

Risk

C

Return

A

B

Pushing The Innovation EnvelopePushing The Innovation Envelope


Historian Ethnographer Storyteller

Marketer Of The FutureMarketer Of The Future

Documents

KIN Summit 2007 Innovation For Marketplace Success Albert Manzone President, PepsiCo Shelf Stable Juices PepsiCo, Inc June 18-19, 2007