As one of the leading multinational food and beverage companies, PepsiCo continuously strives to provide its consumers with delicious, affordable, convenient, and complementary food and beverages. Being a global company within the food processing sector, PepsiCo overlooks six global divisions which operate both independently and in conjunction with other parties to make, market, distribute and sell a variety of differentiating food and beverage products. Some of their well-known worldwide brands include Pepsi, Lays, Tropicana, Quaker and Gatorade. They are included in a portfolio of 22 brands that each generate more than $1 billion in estimated annual retail sales, as stated on the PepsiCo website.
As a company established in 1965 through the merger of Pepsi-Cola and Frito-Lay, PepsiCo has grown to be a global food and beverage leader now operating in 200 countries and employs 264,000 workers. To put PepsiCo’s operating size into perspective, competing industry players such as The Coca-Cola Company, and Nestlé only employ 123,200 and 335,000 workers respectively. Although the company’s main headquarters are based out of Purchase, New York, United States, PepsiCo strives to connect business with culture globally through all its employment opportunities to exceed consumer expectations. This effort has been noticed by numerous organizations which have recognized the company’s dedication, progress and achievements by naming PepsiCo among Fortune’s World’s Most Admired Companies (2017), ranking the company 28th on Barron’s World’s Most Respected Companies list (2016), and received an Ethical Corporation Responsible Business Award for their Food for Good program (2016). These awards are reflective of how PepsiCo has been redefining new standards and directions for businesses while being recognized for having a meaningful impact on business society, and the environment.
Moreover, PepsiCo’s 2016 financial statement reflects how the company operated in good financial standing that year, achieving revenues of $62.8 billion USD. This number demonstrates the company’s growing ability to generate attractive returns for shareholders while creating value for their stakeholders. It represents a 3.7% growth in revenue, a 9% growth in earnings per share and finally, an attractive statistic of cost savings amounting of $600M since 2011, from environmental and sustainability initiatives. Much of PepsiCo’s environmental and sustainability initiatives stem from the company’s “Performance with Purpose” efforts where the long-term goal includes positioning PepsiCo with sustainable growth by aligning the good of the business, with the good of society and the planet. The actions to achieve this goal are represented through the company’s 2025 Agenda, through which progress has already been made delivering change across PepsiCo’s value chain, the food processing industry, and the world. This initiative will be further discussed in this paper as an in-depth analysis on PepsiCo’s creation of shared value.
Performing with Purpose: What PepsiCo Claims to Achieve
As clearly stated on PepsiCo’s website, their mission is to “deliver top financial performance over the long-term through integrating sustainability into business strategy- while leaving a positive imprint on society and the environment”. They have defined this mission as Performing with Purpose and claim to approach everything they do with this mindset. This ultimately suggests that the company believes they foster a CSV approach to business. A critical evaluation of the company will determine if their actions are reflective of this.
To begin, PepsiCo’s Global Reporting Initiative (GRI) report states that they are working towards reconceiving products through transforming their portfolio by meeting the changing taste preferences of their consumers. This is representative of how the company is aiming to create shared value. It is evident that society is becoming more health conscious and PepsiCo responded by expanding their Everyday Nutrition business to reflect their consumer’s interests. This would result in further profits for the company through satisfying consumers. The specific societal need that PepsiCo has addressed, was to create a healthier product that aligns with the WHO’s Dietary Recommendation for Intakes. This involved reducing added sugars by reformulating carbonated drinks and launching smaller pack sizes for full-sugar drinks, reducing saturated fat levels by employing new cooking methods with lower saturated fats such as high oleic sunflower, reducing salt by creating new recipes and exploring new technologies that allow products to become healthier while maintaining taste, and finally to increase positive nutrition. PepsiCo has been working towards balancing each of these factors and has made it a goal to incorporate such into their products by 2025. Reformulating their products in such ways has allowed PepsiCo to enhance their offerings to consumers by increasing the availability of convenient, affordable and enjoyable nutrition. This creates shared value as society is given a healthier alternative to food and beverage options, while thus allowing PepsiCo to benefit from the profit.
As previously mentioned, PepsiCo has received multiple awards for their various initiatives to better society, such as Food for Good. Food for Good was inspired by the Performing with Purpose vision and aimed to create a meaningful impact in urban communities, by making healthy food accessible for low-income families through enabling sustainable, business-driven solutions. Operating numerous locations in the United States, Food for Good creates healthy pre-packed meals and supports farm stands stocked with affordably-priced produce in underserved communities. In my opinion, this initiative reflects how PepsiCo creates social value through supporting local communities with healthy, low-priced food, while working with local nonprofit organizations and government agencies. Moving forward, although both initiatives examined thus far illustrate PepsiCo as a CSV modeled company, I believe it does not perfectly satisfy this model since not everything they have done reflects supporting the good of society.
Outside View of Initiatives
To determine whether PepsiCo is a company that creates shared value, a thorough analysis of how the company claims to operate versus how they realistically operate needed to be examined. To begin, Oxfam’s GROW campaign, Behind the Brands, has scored PepsiCo a 49% with regards to their progress of improving a global food system that works and is beneficial for everyone. They have been given this score as a result of being analyzed on their progress through seven themes, ultimately being placed below their main competitors such as Nestlé who scored a progress rate of 69% and Coca-Cola 57%. With their highest score being a 7/10 for two of the seven themes, it has been identified that most of PepsiCo’s progress has been recognized through their initiatives to respect communities’ land rights and establishing a zero-tolerance policy on deforestation. Both factors are significant towards enabling and respecting a healthy environment and stronger community. Oppositely, PepsiCo fell short when being scored for making credible commitments toward supporting the small-scale farmers from whom it sources, and their management of labour rights risks. Both themes scored a low 3/10, suggesting that much of PepsiCo’s improvement should go towards developing better management of their workers and farmers. In my opinion, for PepsiCo to fully adopt a CSV approach to business, they need to balance their commitment to these factors.
Through the process of learning about what various companies have done to reflect successful CSV models, I believe that a perfect CSV company is a one that can leverage their resources in a way that enables the creation of company and community value, while deriving economic and societal benefits relative to cost. In a recent advertising campaign, PepsiCo was accused for the mockery of black people faced by police oppression in the US, when Kendall Jenner appeared to stop a protest by handing a Police Officer a can of Pepsi. I believe this campaign disagrees with PepsiCo’s values. Although they were attempting to display how people of different backgrounds may come together with their product, there are many other ways to portray this message that would not have offended numerous consumers in the way they did. The commercial attempted to inform people of their product which would have driven profits through showing the unique way Pepsi can bring people together, yet it caused conflict within society by undermining important social issues. In this way, a perfect CSV business approach was not demonstrated by PepsiCo.
In previous years, PepsiCo has also been accused of child labour and worker exploitation, where children as young as 13 years old were reported to be seen working on plantations supplying palm oil to the major company. It has been reported that these conditions are reflective of how the company fails to respect workers’ rights through enabling an unideal work environment for involved players. In recognition and response to these conditions, PepsiCo launched a Palm Oil Action Plan where its palm oil suppliers were to satisfy human rights standards, ultimately eliminating child labour from their plantations. Unfortunately, it is evident that despite PepsiCo’s statement of being committed to resolving this issue, they were recently reported as still being linked to conflict and exploitation in spite of the established palm oil policy. An article published in February 2017 claims that “workers on IndoAgri plantations continue to suffer a multitude of labour abuses, including toiling under an unfair wage system where workers must reach high targets to earn low wages” (Lierley, February 2017), suggesting that PepsiCo’s management of labour rights has not improved as they claimed they would. This further illustrates how PepsiCo does not display a perfect CSV business approach.
Recommendations for Improvement
Through analyzing PepsiCo’s current operating model, I have concluded that the company fosters a CSV approach to business, however it is not a perfect CSV company and there is definite room for improvement to further enhance the good of PepsiCo itself, along with the good of society. To begin, they can do so by redefining productivity in their value chain. This report has examined the company’s ongoing issues with labour risk management. PepsiCo needs to develop a system for identifying high-risk countries through which forced labour or low wages are more apparent, while working towards the improvement of workers’ rights. I believe that the company should start by developing a strategy for raising low wages, while setting the goal of paying workers at living wage benchmarks. With PepsiCo being as large as it is and an employer to 264,000 workers, it is important that they are rewarding their workers for their hard work and to the standards of what labour laws set out. This includes committing to a living wage for all workers within their supply chain. Seeing as though PepsiCo has experienced issues with supplying its workers with minimum wage in the past, working towards a goal of living wage will be a big process for the company. With that said, transitioning towards working forced labour for low wages to legal labour for living wages will not be a simple initiative for PepsiCo. A push-back that may be evident when providing the company’s board with this recommendation may include that they believe it is acceptable to pay workers for lower wages in undeveloped communities. Using a GVV approach within this situation to address the arguments against my proposed initiative, I would selectively recruit educated colleagues and experts to aid me in reframing the situation to help the company see the importance of workers’ rights and commit to solid approach towards resolving the issue.
Although I have concluded that PepsiCo is a CSV company with room for improvement, implementing the above-mentioned initiative alone is not enough to make it a perfect CSV company. PepsiCo should continue to operate under their current mission of Performing with Purpose, and use that ideology to make improvements for small-scale farmers within their supply chain as well as their labour rights management. Through balancing the focus of the company’s growth between PepsiCo itself, and society – including the people who contribute to their success, PepsiCo will be able to work towards the achievement of being a company with an attractive CSV model while fostering healthy, successful communities.