Ramon over thirty years of life is food, and most of his career – 23 years – was spent at PepsiCo. In 2018 he headed the company. Almost immediately over thirty years has decided to accelerate its growth in order to maintain and increase market share – it’s better than endlessly cutting costs, he said.
In Russia the history of PepsiCo can be counted since 1938, when it was a registered trademark of Pepsi-Cola in the USSR. In 1974, opened the first franchise bottling line for Pepsi in Novorossiysk, and in 1997 the first plant for the production of Pepsi and other beverage companies. And what would be known in Russia, the company’s competitors (such as Coca-Cola), but in the 1990s, its advertising slogan “the New generation chooses Pepsi” has become a volatile phrase.
On account of PepsiCo one of the largest deals in the Russian consumer market: the company for $5.2 billion bought “Wimm-bill-Dann” (VBD), a manufacturer of dairy products “little house in the village” “Cheerful Molochnik”, “Chudo” and other popular brands. Some experts mentioned the over thirty years as one of the ideologists of the transaction.
– is it True that you were the one who came up with the idea to buy IAP?
I then led Eastern Europe were thus, I would say, one of the key stakeholders. Us it was important to be visible in Russia and the former Soviet Union, where, as we believe, was and is a great opportunity for growth. The dairy category is a significant part of the diet in these countries, in this sector it is important to be present, with growth potential, attractive margins, good reputation among consumers. VBD was the obvious solution – strong brands, good management, excellent production infrastructure. We are very happy with the results purchase, what brands now in our portfolio, so, what people joined us.
is the Consumption of certain types of dairy products in Russia after the crisis of 2014 began to fall, and you see the growth potential. Due to what can grow?
– milk and dairy products is a category which continues to grow well. For example, children’s meals: there’s good growth and we have a strong brand leader – “Agusha”. There are sub-categories of the modern dairy products that grow, drinking yoghurts, desserts. The main challenges we see in traditional dairy products – milk or yogurt, they are stagnating. So we try to focus on the development of those segments where higher growth: dairy products with added value, modern milk, baby food. In General, dairy production is a strategically important category.
– When I make a transaction for the purchase of Wimm-bill-Dann, Zane Abdullah, who was then head of PepsiCo Europe, said that one of the brands in IAP become a brand-a billionaire and to be displayed outside Russia and the CIS. This did not happen, and in the future is this possible?
– to Develop brands outside of Russia and the CIS we do not plan. Brands VBD very well represented in the countries of the former USSR – Ukraine, Georgia and Kazakhstan. Strong brands – “Miracle”, “Agusha” and “Domik V derevne” – continue to grow well. However, their recipes and formulas are used in other markets, but under local names. For example, we have a good dairy business in Brazil, there are local brands and development of Russian.
Five areas for growth – Leading the company in the past year, have you engaged in accelerated growth. However, to your coming she was already a successful and stable growing: since 2005, revenues have doubled, profits have tripled. What was the need to accelerate, you decided to show the effect of a new leader?
Ramon over thirty years
CEO, Chairman of the Board Directortori PepsiCo was Born in 1963 in Spain. Has a master’s degree in business administration (business school in Barcelona ESADE), a master’s degree in international management from Thunderbird School of Global Management in Glendale (USA) 1987 regional Director, Chupa Chups, since 1992 General Manager branch Chupa Chups in the US came in 1996, PepsiCo (Spain) Vice-President, business development at snacks, since 1998 Vice-President, marketing category snacks since 1999, the General Manager of PepsiCo in Greece and Cyprus, since 2001 the General Manager for snacks category in Spain, since 2003, the General Manager of the categories of snacks and juices at PepsiCo Iberia 2006 commercial Director of PepsiCo Europe, since 2010 President of PepsiCo Eastern Europe 2015 the CEO of PepsiCo ESSA (Europe and Africa South of the Sahara) 2017 President of PepsiCo, in 2018 appointed CEO, in 2019, led the Board of Directors
We have always been a very successful company, but we have the opportunity to grow even faster. This is not the decision of one Ramona LaGuerta. It took the group top managers, around 30 people from different countries and divisions, which is 3-4 months worked to determine what will be the next Chapter in the annals of PepsiCo. Successful companies are those that can grow more rapidly than the market.
the concept of acceleration, which we define as becoming “faster, stronger and better” is a very simple reason: we want to provide a sustainable way to create value for our employees, shareholders and everyone who is involved with us. The better growth of permanent spending cuts, what do many FMCG companies the last five years. The worst thing that can happen to a company if it begins to lose market share. The oxygen comes from the growth of market share. Therefore, we adopted the concept of “win holrespectively”.
What’s that mean?
the Concept implies that there are two key areas of value creation for many years to come. The first is to win, i.e. to increase market share and accelerate. The second is responsibility, i.e. the belief that we create value for society, employees and customers. It is two column business.
First was the number of the accelerated growth of 3-3,5 to 4% in 2019, at the end of the third quarter you are already growing faster than 4%. How much is ready to accelerate?
I’m sure we could aim for more, to build a steadily growing company which creates more jobs and more value for people and society. If, historically, we grew on average by 3-3,5% per year, in the future can reach 4-6% per year. We will invest in the business in order to attract more consumers, in marketing, GTM, innovation, design, etc. It’s ambitious enough – on average, consumer companies are growing at 3-4% per year. Thus, we want to be one of the fastest growing companies in the consumer sector in the world.
Recently within the company’s Africa and China is allocated in separate divisions. You see in these regions with the greatest growth potential?
For us, no doubt, a very important home market – the United States. One of the strategic objectives of the company is to increase our international business. We are very strong in Eastern Europe, and Latin America. With this large growth opportunities we see in Africa and China. We expect to strongly increase its presence in Africa, the middle East, in China and surrounding countries. In China and Africa, the penetration of our category is still low. With our investment and innovation, these markets can grow 2-3 times faster than the company average. Highlight them in separate regions will help boostit focus on them and will eventually lead to an increase in the growth of the company.
– what are the growth rates in Russia?
Russia and ex-USSR countries are growing double-digit pace – more than 2 times faster than the company as a whole. That is a big and important market.
Acceleration of growth requires investment, and you said that the company is ready to invest in it. What’s your plan?
– Most important management decision is not whether to invest or not, and where will go to funds for investment and would make the company more disciplined in terms of cost, in order to simplify the business, reduce costs and one position to increase investment on the other – in the direction that will make the company more successful. We have determined that there are five areas where we want to be the best. “Potrebitelskie” – we have a very good understanding of the trends, knowing the needs and demands of customers. Innovation in R&D and design. Build unbreakable brands. Through simple and agile supply chain. And the fifth is a very well-crafted retail business. This requires investment in data and technology. I can say that we will always invest, because the bar market is going higher and higher.
– As the plans for rapid growth combined with the fact that the heads 181 of the American company (Wal-Mart, PepsiCo, Apple, Amazon, Coca Cola, etc.) signed a statement of corporate goals? There they abandoned its priority of profit maximization in favor of working for the benefit of Americans.
– Meaning a signed statement is not quite in it. Its essence is in following: to create sustainable growth, we must take into account numerous components in addition to short-term profit. But the question that profit is not our priority, is not. We goverim that sustainable profit should be much wider to look at how we manage the business. We need to take care of employees, local residents, the impact on the environment. And this, as we now understand, the only way to long-term prosperity and profitability. This is the philosophy of the signed statement. PepsiCo for many years that way and conducts its business.
Where you will get plastic In the context of sustainable development often mention the use of recycled plastic for packaging products. Your company only by 2025 will bring its share to 35%. Coca-Cola already recycles plastic from the ocean. It seems that PepsiCo is a little in this issue from them is lagging behind. What do you think?
I do not agree that we are behind. Now all the manufacturers of FMCG focused a lot on the subject of recycled plastic, we store a lot of cooperation to find solutions. Important for us in two directions. First – reducing the use of plastic. To do this, we reduce the weight of bottles, the amount of plastic in packaging as well as converting part of beverages in containers without plastic, for example in banks. The second area is recycling plastic. It depends not only on us – here we need the joint efforts of the entire industry to build the infrastructure chain. In this direction needs a lot of work – collecting, sorting and recycling, as well as training of customers, separate collection.
of Course, we would like to move faster and to achieve 50% recycled plastic in our bottles, but recycled plastic is not enough. To solve this problem, more intensely involving buyers, to work more effectively up the chain of processing. For this we cooperate with the authorities, with retailers, with science, with each other as participants of the market to more and more plastic was recycled.
in addition, this topic has esche and the third – reusing packaging, this new business model. And here, I think we are ahead of all.
– do You mean your business of manufacturing machines and syrups for homemade SodaStream, which the company bought last year?
Yes, it also helps reduce the consumption of plastic. It is a completely different business model, where simply there is no turnover of plastic containers, consumers may opt out of plastic bottles and create your own drinks at home. The business is growing rapidly. These products are especially popular in Europe, Canada and the United States. We plan to launch sales in Eastern Europe and then in Asia.
Useful soda – PepsiCo, as well as any major company that invests in innovation. What is the latest own developments become part of your product?
Now one of the challenges for our developments is the reduction of sugar, if we talk about the drinks. That is, we need to make a very tasty product, but without the calories. So in the United States appeared bubly – carbonated beverage with natural flavors, but no calories. Another example is we launched the sports drink Gatorade Zero, maintaining the necessary to restore balance after exercise minerals, but removing calories. The product had a huge success: revenue – $700 million in retail prices since the launch, in particular over $600 million in 2019 Products without sugar are launched in the segment of tea and coffee, and also sell very well. We use stevia and other natural sweeteners. Pure Leaf, a very successful brand in the US contains stevia, some flavors of Lipton in Russia, too. Pepsi Max without sugar (Takes a SIP from the jar.) very successful globally. Almost no sense that there is no sugar.
– And sneko?
In sneko we are working on multiple tasks. Onthe bottom of them – to build not just the taste but also the whole complex of sensations from the product. This so-called consumer experience. In Lay’s and other snacks, we are creating a new generation of flavors, when a buyer enlists the whole range of senses: taste, consistency as a product crunches what his scent. A second major field in sneko is baking instead of frying. When baking is a less nutritious product, it contains less fat, but taste and aroma are retained.
Another large field for development is a new attractive flavors for SodaStream. Now we are working to recreate some of our usual flavors for the SodaStream home machine. In Europe it will be 10 flavors: Pepsi, Pepsi Max, 7UP, 7UP Free, Mirinda, Diet Mirinda, Mountain Dew, Diet Mountain Dew, Schwip Schwap, Schwip Schwap Zero. They are already available in Norway and Sweden in 2020 will be the launch in Germany and France. In Breakfast foods Quaker experimenting with adding Chia, gluten-free products, in General, work on what is important to consumers. In Russia, a significant part of our business is dairy products, this is also a great field for innovation and development: how to decrease sugar how to find new tastes. Of course, we are working on new packaging solutions and designs, but details tell I can not yet.
You said a year and a half ago that PepsiCo is perceived as a manufacturer of harmful products, although about half of your range – products with reduced sugar or no calories. Do you like to fight for the image of the company, so less claims from the who and other organizations?
– of Course, we work on the image of PepsiCo to our stakeholders that they understood that we represented in the cuts, we have dairy business, we have water, we have many categories of products. I think that our Ambassadornie hear in terms that our customers understand who we are, the regulators know who we are, our employees are proud of the products that we produce, they understand what we’re doing and where to move the company. There is progress in this direction.
What to expect from the officials – this year you visited Russia on the Advisory Council for foreign investments (FIAC). At that time you were as the top Manager of PepsiCo?
I worked in Eastern Europe since 2007, and then for many years headed the region in PepsiCo. So I have been to Russia many times – and not only in Moscow, in Siberia, in the South, in the North, in large cities and small.
I like culture, I like growing a business here, and I believe that we are creating here for the company’s strategic value. It fascinates me that every time I go, Moscow is getting better and better.
– FIAC – useful event for business or it is rather social gathering? That the promise of the Russian government to foreign businesses?
Is an important and useful exercise, it gives an opportunity for direct and open dialogue between investors and the government. This is the most effective format for discussion of vital problems in comparison with other countries. Its main idea – to discuss how to make Russia a better place for doing business. At the meeting in October we received confirmation of the government’s commitment to basic macroeconomic decisions: the stability of the ruble, low inflation is something that helps long-term planning in business and gives predictability. As far as I can tell, the government aims to simplify regulation, reduce barriers for businesses, to intensify the attraction of investment, we as investors have created new jobs and ensured further growth.
tooncrete you can simplify?
– Can only designate topics: discussed issues of sewage treatment plants, the topic of traceability of goods, sustainable development and waste management – in General talked about how to develop the country and make it better, but the issues I mentioned, strategically important for business and need to find them simple and affordable solutions. About the decisions taken will be report to the government.
One of the challenging topics for the beverage is excise tax. This idea was discussed and in Russia. Such a tax, for example, is in Mexico. As for the company it’s a big burden from the point of view of Finance and how this reflects on the activity in a particular market?
– Taxes – not the best method of regulation. We support regulation based on research, and still not one independent study did not prove that these taxes somehow reduce the prevalence of obesity or indeed affect consumer behavior. We are sure that there are more effective ways to influence consumers, for example to promote balanced nutrition and physical activity. But if I go by taxes, the most sophisticated version offered in the UK. For products with a high content of added sugar tax was higher, with moderate to below, and if sugar was less than 5 g per 100 ml, were not taxes in General.
Is a good example, and what failed?
– there are Such examples in different countries, especially in the middle East, where these initiatives were introduced quite dramatically both in terms of implementation and in terms of rates, and of course it has damaged the business and consumers.
In Russia on the initiative PepsiCo and other soda manufacturers are commitments from the industry on the consistent reduction in sugar – has already signed a voluntary code. As it will affect the company and that will give the consumer?
It is a voluntary commitment to reduce by 10% the content of added sugar in beverages assumed by the members of the Union of manufacturers of soft drinks. For this there are different ways, including, of course, change the formulas, innovations in low-calorie categories. We are also thinking about how to encourage consumers in favor of more low-calorie drinks. We have done this in many countries, and it works. Industry accepts the obligation and responsibility is working to reduce added sugar. In my opinion, with a long-term point of view it is more efficient than the introduction of taxes or pressure on the consumer. There’s no pressure, but we are gradually building up a portfolio towards a smaller calorific value.
And it will help you somehow in the future to protect against the risk of imposition of taxes?
I think it’s just a more correct way. For example, Russia is a very developed category of water, it is huge. Very strong teas, and this is a low-calorie category. Consumption of carbonated drinks without sugar is increasing. 4-5 years ago it was near zero, and now began to grow. The consumer has a choice.
In 2017 gained fame history that the leadership of PepsiCo coming to IAP, found violations that the company’s lawyers described as corruption: embezzlement, irregularities in the conduct of land transactions, questionable contracts. Why it happened and how quickly did you manage such practices in the company eradicated?
I can’t talk about the details, but I will say that we have a very strict code of conduct – PepsiCo all ratings is among the most ethical companies in the world. When we acquire any company, it happens that we find out that previously there could be unacceptable according to our code things. My responsibility and my liabilitythe government – that since the acquisition, nothing like this has happened. We pay much attention to transfer our values to employees.