If I could give an award for the most bewildering headline in recent months, it would be the story that the Wall Street Journal ran last week on top of a prominently positioned article about Pepsi and the shrinking cola market: "PepsiCo Wakes Up and Smells the Cola: Criticized for Taking Eye off Ball and Focusing on Healthy Food, Company Plans Summer Ad Splash"
Let me get this straight. PepsiCo, a company heavily identified with sugary soda, is criticized for focusing on healthy foods??
I was making the rounds at the Aspen Ideas Festival last week, where well-heeled folk pay thousands of dollars to get close to those influentials who seem to have solutions to the big problems of our day, chief among them economy, ecology, and the State of the Union.
One of the high profile topics this year was food -- restoring sanity to what we consume as a country, how food is procured and grown, and, of course, the skyrocketing rates of obesity, along with the alarming and costly rates of diabetes that follow.
Like most problems that concern citizens and fill conference rooms at the Aspen Institute, it turns out there may be no easy answers after all. If we are talking about obesity, however, it is hard to ignore some simple facts, like our diet -- especially sodas, high fat snacks, and triple-decker hamburgers of Super Size Me fame. So naturally, at least in the Real World, as opposed to the WallStreetJournalWorld, the decade-plus commitment to building a healthier product mix at PepsiCo by its leader, Indra Nooyi, should merit our praise, not scorn.
However, anything that reduces profits today, regardless of the long term value for consumers, employees, host communities and the rest of us, is likely to raise the ire of the short-term traders and gamblers who dominate the stock markets. The short end of the so-called "investor" spectrum, and the media that feeds the beast, has little interest in the big picture. Should you invest in research now to produce gains in ten years, or even twenty? Maybe that will satisfy investors in the oil and gas industry, but, apparently, in the what-have-you-done-for-me-lately world of consumer products and brand management, you might as well attempt to interest your teen in a summer of Faulkner rather than Facebook.
PepsiCo's sales derive from a portfolio of drinks and snacks -- brands like Tropicana and Gatorade, but also Lay's potato chips and Doritos and Quaker Oats. Last month, The New Yorker published an in-depth story about the company's commitment to healthier snacks and beverages, R&D in low-calorie natural sweeteners, and packaging to lure consumers to less, not more. The goal is to rebalance the product mix with more items the PepsiCo marketers call "good for you" vs. "fun for you" -- which Ms. Nooyi believes is reflected in consumer demand, and is the key to the company's long term success.
This may make perfect sense in Aspen, or even in the interconnected world of consumer behavior, community activists and federal watchdogs, but Wall Street fixates on The Number. The Journal's headline fragment: "Criticized for Taking Eye off Ball" can only mean one thing -- one game with one ball -- the proverbial "bottom line."
As bed-time reading for public company CEOs, I recommend Roger Martin's new book, Fixing the Game, which explores the demands of Wall Street vs. the common sense decisions of Main Street. Martin distinguishes between our fixation with the "Expectations Market" -- and the set of choices that drive the real market of goods and services. Martin is clear where successful CEOs and their Boards need to focus -- and that's on the actual game on the real field, not the one played by the bookies.
Pepsi bottlers are anxiously awaiting a beefed-up ad campaign to push Pepsi this summer and restore its proper place in the cola wars. CEOs like Ms. Nooyi, who manage in the middle of short-term market expectations, nervous suppliers, healthy-planet-healthy-society-common-sense and changing consumer expectations, have a tough job. The courageous ones, among them Ms. Nooyi and Paul Polman from Unilever, are willing to speak out about business in the context of critical social issues, like water scarcity, product quality, and environmental sustainability. And at times, yes, they do bob and weave, while balancing the short term with the long, in a never-ending attempt to satisfy the cravings of all.
Martin, as a business school dean who also sits on a few corporate boards, doesn't have to negotiate daily the balance between expectations and real business choices. But he brings us back to the only game that makes sense over the long haul, the one that serves us all.
As for PepsiCo, perhaps Ms. Nooyi's long-term focus on a healthier product mix is benefiting shareholders after all, Wall Street Journal headlines notwithstanding. It's trading today at about $70 per share, not far off its 52-week high.
Follow Judith Samuelson on Twitter: www.twitter.com/BizSociety
http://www.huffingtonpost.com/william-lazonick/how-maximizing-value-for-_b_892396.html
The Linked article details the concept, while this one is a perfect example of how Wall St.
(and the Financial Services Industry as a whole) drives the obsession towards 'maximizing shareholder
value'.
Diet soda may be a far larger culprit if you follow the science.
Not to mention what is eaten before and after.
Business is driven by only one factor -- the bottom line. That means that business has no responsibilities to society, its employees, the environment or the public. It is only constrained by regulation which it fights mercilessly.
That is why the "market" solution advocated by the right cannot work.
Charlie
People get to select their favorites from a host of unhealthy choices within their ability to pay, and the companies providing those choices make a lot of money.
Oh, you meant, work for all of us? Like, society in general? Over the long haul? Sorry, my mistake.
Bravo to all. But what are the chances people who have the power to make changes such as eliminating corn subsidies (Congress) or changing what's offered in school vending machines (local school administrators) actually think this one through?
It really depends on where you are an Corporations need to understand that the "One Size Fits All" mentality will never work.
You can't sell the same food in San Francisco as you can in Houston, you can't sell the same things in France as you do in India.
McDonald's, for example, works regionalism into all its food products. In italy I so a large amount of salads, in the Netherlands they had some really funky burgers with healthy buns and weird chesses, in Israel they had a burger that was put on the grill in front of your eyes, and in Montreal they had poutine (at least they used to, I think they removed it).
I refuse to invest my money in any way in companies that make their money off selling people junk food, hurting our environment drilling for oil, or any other business practice that I think is ethically wrong. Maybe I'm not gonna make as much money as most people, but I sleep much better at night.