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Competitive advantage: how to get ahead in business

Updated Thursday 14th June 2012

Competitive markets mean brands need to do more to gain advantage. PepsiCo chairman Richard Evans shares his ideas

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Richard Evans was talking to The Open University's Fiona Ellis-Chadwick after a recording of The Bottom Line.

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Richard Evans

I'm Richard Evans.  I'm the President of PepsiCo in the UK, Ireland and South Africa.  It’s probably more familiar to many of you as the brands that PepsiCo has.  Obviously the brand Pepsi as you'd well know, but brands that you might not be aware of that are part of the PepsiCo family are Tropicana, Quaker, our Copella juices made in Boxwood Farm in the East of England, and Quaker porridge.

Dr Fiona Ellis-Chadwick

Hello Richard.  PepsiCo is a legendary brand, but the soft drinks market is highly competitive.  How does the company ensure that the brand stands out?  How does it create its competitive advantage?

Richard Evans

I think for all of our brands, being able to simply say well, what is the, technical language, the positioning of it, what does it mean, what are you trying to get it to mean in people’s minds very simply?  You know, a good example of that would be Pepsi Max, you know, how do you get maximum taste but no sugar.  It’s very simple, but getting to that level of simplicity can often take an enormous amount of time.  But I think you’ve got to be able to talk around what does it mean to the person you want to buy it and who have you defined as the person who you want to buy it.

Dr Fiona Ellis-Chadwick

Okay, so what are the really important qualities about, say, Pepsi Max?

Richard Evans

Well, we would argue that it tastes better than any similar product that you're trying to compete against, and that would be competition in a very narrow sense, because I think if you make it too broad then it’s a ridiculous ambition.  But a good example would be porridge.  You know, we've spent an enormous amount of time trying to understand how do you cook oats and how do you cut them technically such that when you actually cook them at home, they don’t taste gloopy or all the other things that you can get wrong with an oat and, you know, we could bore people to death for talking for hours on the product, it has to start with the product.  And that goes all the way back to the fields where you farm it and what are you doing agriculturally to make sure the raw ingredients, because essentially PepsiCo’s pretty much an agricultural company, you know, it takes potatoes or oranges or apples or sugar and puts that through its kitchens and wherever and makes great products, and then seasons them, in the case of Walkers crisps for example, but you’ve got to have great ingredients.  And then the magic that you put on top of that is the marketing that helps you realise how good it is, and ultimately I hope you enjoy it too.

Dr Fiona Ellis-Chadwick

I do.  Many, many, many of your brands I certainly do.

Richard Evans

That’s good to hear.

Dr Fiona Ellis-Chadwick

We talk a lot in marketing education about brand personalities.  Are there any of your product portfolio that you feel have got a really exciting personality?

Richard Evans

Yeah, it’s a difficult one, that, because it’s a standard chart and it’s almost a caricature of an advertising agency, well, let’s talk about the brand as if it were a person, and I'm not sure really how helpful that is.  I much prefer personally to, I'm not saying it’s wrong, I just feel for me personally talking around what does it do for the consumer, what do you want it to do for the shopper or the end user, does it really work for them, how does it compare with nearing competitors, how does it compare as a substitute for many of the other things that you might do with that product.  And the quality of it is also broader to me than just the product specification is, what’s the totality of the experience, from the moment you pick it off the shelf, you store it in your larder, how fresh is it when you consume it, it’s got to be very broad and doesn’t necessarily have to be the narrow definition that some people sometimes look at.

Dr Fiona Ellis-Chadwick

That’s really interesting to know, actually, because teaching about brand personality sometimes gets very confusing, so it’s really good to hear your perspective, thank you.  How is PepsiCo positioned against Coca-Cola?  Coca-Cola’s mission is to refresh the world, what’s your mission?

Richard Evans

Well I would take it away from that in that I think you’ve got to, some people are often surprised to say that Tropicana’s actually bigger than our Pepsi brand in the UK.  Walkers Crisps is many times the size of our Pepsi business.  So I think it would be wrong to position or to try and say well what are you relative to Coca-Cola, I mean Coca-Cola’s a small, you know, the beverages are a smaller part of our portfolio.  I mean an important part, I'm not saying, and a piece that we’re very proud of, but there are many other parts of the portfolio.  So that kind of positioning doesn’t really work for us.  What we've tried to say is look, we see two sides to our business, one is performance and one is purpose, so we want to perform, and that’s to all the stakeholders that we represent, but that tends to be more in the financial performance criteria, ultimately we’re delivering returns for our shareholders, but we can't do that without performance.

What’s the result of all of our actions, how does that work for the broader society, the stakeholders that we have, and that goes everything from the sustainability work we do to the work with the communities that we have.  You know, I spend a lot of time working on that for example in South Africa where, you know, agricultural work that we do in the UK, we work with farmers but it tends to be on how do you produce your product more effectively, using less water, less fertilisers, less energy into that process, whereas in South Africa, our purpose agenda there is very much how do we address the imbalance economically as a result of apartheid over many, many years, so how do we get small, local farmers to play a part in what ultimately is a big agricultural business of growing potatoes, because if they're not economically effective at producing potatoes, they can never compete.

So it’s all very well to almost throw out the charity bowl, that’s not going to work and not be sustainable for them, you'll capture them in year one but they’ll fall off because they won't have money to buy seedlings to plant.  So how do you teach them how to grow very effectively?  So a lot of the work there is making sure that we've got a much broader base of suppliers which ultimately has a purpose agenda to it.

Dr Fiona Ellis-Chadwick

And sustainability’s obviously key to going forward in the future.

Richard Evans

Yeah, I mean in many cases it’s a win-win for business, i.e. you can reduce the cost which ultimately ends up in shoppers paying less for our products.  We've worked very aggressively in the UK in the last four years.  Today, we use about 40% less water than we did in 2007.  I guess a better way of putting that would be, I think somebody told me that that’s the equivalent of about 200 Olympic size swimming pools per year less.  We use tremendously less energy than we did four or five years ago, and interestingly none of our sites go to landfill anymore.  We've reduced that to absolutely zero in like a third of the time we thought it would, because everybody who’s got a family recognises the importance of conserving resources, so it’s incredibly motivating amongst a workforce, all of us in saying well okay how do we stop this amount of waste going?  So we've now got it, you know, we think about waste, it’s peelings of apples, it’s peelings on potatoes that are probably the primary ones, well how do you get them processed into either animal feed or use them in other forms.  People are looking at how do you make packaging out of them as well so that would be a kind of closed loop system if you were able to do that.

Dr Fiona Ellis-Chadwick

It’s really exciting times, thank you so much for giving us some greater insight into the PepsiCo brand.  Thank you so much.

Richard Evans

Thanks for the opportunity.

(7’21”)

 

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