PepsiCo's Nanny State Product Strategy Fizzles

Matthew Sheffield
By Matthew Sheffield | February 6, 2012 | 4:58 PM EST

One of America's most prominent corporate CEOs - and outspoken supporters of Barack Obama - is facing up to the reality that you can't make Americans want something just because you think it's good for them.

PepsiCo CEO Indra Nooyi several years ago put environmental sustainability and "corporate social responsibility" at the core of PepsiCo's mission and the results are in: After years of pushing "healthy" snacks and drinks, Pepsi has lost market share in the cola wars, and, now, Nooyi is changing direction.

Business Week reports:

"Since becoming chief executive officer of PepsiCo five years ago, Indra Nooyi has accelerated the snacks-and-cola company’s move into healthier fare: yogurt drinks, hummus, oatmeal bars, etc. While the strategy makes sense, given America’s obesity epidemic, the change in focus has taken a toll on the company’s sugary namesake, Pepsi-Cola. In the U.S. soda market, the company lost share to arch-rival Coca-Cola from 2008 through 2010, according to Beverage Digest, an industry newsletter. Two years ago, Diet Coke, a regular advertiser on high-profile TV programs including the Academy Awards, overtook full-calorie Pepsi-Cola to become the second-best-selling soft drink in the U.S., behind Coca-Cola. PepsiCo’s stock has risen about 2 percent during Nooyi’s tenure, while Coke has gained more than 50 percent over the same period."

The magazine reports that, two years ago, "Nooyi set a goal of tripling sales of what the company calls 'nutrition products,' including Gatorade, Tropicana juices, and Quaker whole-grain goodies, to $30 billion by 2020. To that end, she has spent almost $6 billion in acquisitions, snapping up a Los Angeles-based coconut-water company, a Russian dairy and juicemaker, and a fortified water company in the U.K. At the same time, PepsiCo scaled back spending on television ads pitching specific products. Instead, Nooyi spent about $100 million on the “Pepsi Refresh Project,” a heavily digital campaign where people compete to win grants for community endeavors - everything from building an animal rescue shelter to buying new instruments for a high school marching band."

The result: declining market share for its signature Pepsi-brand drink products - and the possibility the company may have to fire several thousand employees this year to shore

Business Week says PepsiCo is about to make a shift, however, and announce a major investment in advertising and marketing to shore up their core beverage brands.

PepsiCo isn't going to stop selling "nutrition products," it's just going to stop talking about them so much, and focus instead on the products that its customers have already shown they want to buy.

PepsiCo's situation is familiar to anyone who watched the Obama presidential campaign in 2008 and his presidency since.

Obama the candidate shied away from specifics and offered up empty feel-good rhetoric. "Hope and Change." At Nooyi's direction, PepsiCo shifted its advertising away from specific products, and offered up instead its feel-good community service grants.

As president, Obama is pushing America to accept the liberal fantasy worldview on energy, the environment, healthcare, electric cars, nutrition and more. Billions of dollars are being wasted on feel-good projects like Solyndra. As CEO of PepsiCo, Nooyi decided America's "obesity crisis" meant she should shift away from the core of Pepsi's business - soft drinks - and sell America on her agenda of healthier snacks and beverages.

Under Obama, the overall economy continues to lose "market share" among the American workforce as millions of Americans, unable to find a job, drop out of the workforce.

Under Nooyi, PepsiCo has lost market share to Coca Cola, which kept its focus on selling customers what they want to buy.

Now, Nooyi is changing direction.

The PepsiCo CEO has been one of President Obama's most prominent business CEO backers and part of his "business brain trust."Named by Time magazine  one of the "100 Most Influential People in The World" in both 2007 and 2008, and ranked by Fortuneranked her the #1 most powerful woman in business in 2009 and 2010. In 2010, she was one of a select group of American business leaders invited to accompany President Obama on a trip to India.

Nooyi, who earned $16.1 million in 2010, has shilled for the Obama administration by declaring him to be a "pro-business leader," and echoed the president's rhetoric by casting Republican opposition to Obama's policies as "wanting him to fail," rather than principled opposition to policies they believe will fail, or cause harm.

In other words, she's a good, loyal, Obama Democrat, and there's no sign that's going to change.

But Nooyi is changing course in business, away from the politically correct agenda that has damaged Pepsi economically. Will Obama follow Nooyi's example and change course, away from trying to impose his economically destructive leftwing agenda?

Doubtful - though it would be great if he did, for Nooyi has realized, belatedly, that just because you believe the liberal agenda is "right" for America, that doesn't mean it will work, or that Americans want it. She has realized that pursuing the liberal agenda has cost her company market share and millions of dollars.

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