It is said that a CEO of a publicly traded company has two customers: those who buy its product and those who buy its stock. The challenges faced by PepsiCo CEO Indra K. Nooyi clearly exemplify this notion. Since becoming CEO in 2006, she has been working to tilt the company towards healthier, more nutritious product offerings. Unfortunately, the stock market is not buying this. PepsiCo stock has remained relatively flat throughout her years at the helm.
An article in yesterday’s New York Times reports that in response to pressures from key shareholders, she is making certain management changes by elevating people to senior positions whose background is more with the selling of PepsiCo’s core products of salty snacks and carbonated soft drinks, i.e. Frito-Lay and Pepsi.
At the end of the month, Pepsi will launch its biggest new carbonated soft drink product in years: “Pepsi Next.” This product is described as a “mid-caloric drink made with a combination of artificial sweeteners and high fructose corn syrup." CEO Nooyi also announced that the company will be spending about $500 - $600 million in additional marketing, most of which will be for its core brands.
It is sometimes said that strategy is “where you put your money.” Based on this news, it appears that there is a shift in PepsiCo’s strategy back towards its core business. “Healthy and nutritious” may be better for you as a consumer, but not for you as a shareholder.
