PepsiCo CEO Indra Nooyi knows that ongoing innovation is the key to the company’s global success that triggers and helps retain brand loyalty.
“Our innovation success today is the result of significant investments in and changes to our innovation research and development capabilities and processes that began about eight years ago,” Noooyi said during the company’s July 9 second-quarter earnings conference call, according to Seeking Alpha. “At that time, we were in an extremely decentralized organization, operating as a loose confederation of geographic business units, with each largely driving its own development agenda and establishing their own processes. Development is focused largely on product line extension, and that structure, while effective in its time, led to less efficient use of resources with redundant projects often being undertaken in different parts of the world and suboptimal resource allocation to the most promising ideas.”
As a result, Nooyi added: “Much of our innovation lacked staying power. In part, this had to do with the quality of our innovation, but it also had to do with our inability to appropriately incubate innovation in the marketplace. And to address these opportunities, we undertook a major transformation to improve our R&D function and innovation capabilities. Specifically, we established global category groups charged with coordinating global innovation. This resulted in a more focused innovation agenda, a greater emphasis on development platforms, rather than product line extensions only, and more efficient allocation of development resources, as we have significantly reduced redundant efforts through better coordination.”
What’s more, Pepsi continues to innovate through its packaging.
“We are also innovating in packaging, capitalizing on the success of our consumer engaging, Lay’s Do Us A Flavor campaign,” Nooyi said. “We launched Lay’s Summer Days campaign, encouraging fans to create custom digital packs of Lay’s potato chips, featuring photos of your favorite summer moments to share with friends and family on social media. Adding excitement to this experience, 10,000 lucky fans will receive a real life customized bag of Lay’s Classic Potato Chips, featuring the photo they digitally submitted, offering consumers personalized packaging for the first time in the brand’s history.”
Pepsi also adopted the proprietary Demand Moments framework, originally developed at Frito-Lay North America.
“The framework focuses on the triggers of consumption by examining consumer needs based on the context of the occasion,” Nooyi explained. “This created much stronger linkage between consumer and shopper insights in the R&D functions, and has led to our innovation being more incremental to top line growth.”
PepsiCo products received the 2015 Nielsen Breakthrough Innovation Awards. This award recognizes the most successful and enduring new CPG products launched in the U.S. in 2013. PepsiCo was the only company to receive multiple awards this year. And over the past three years, we have introduced a number of new products that have achieved or are on pace to achieve more than $100 million each in annual retail sales, including Tostitos Cantina, Mountain Dew Kickstart, Doritos-Cheetos fun multipack mix, and Gatorade Fierce Blue Cherry and Frost Glacier Cherry.