Update: Why are layoffs the first resort for Pepsi?

Update 3-24-12:

Meanwhile, CEO Indra Nooyi’s compensation increased about six percent in 2011 over 2010, according to the Wall Street Journal today.

PepsiCo Inc. PEP -0.14% Chairman and Chief Executive Indra Nooyi received 2011 compensation valued at $17.1 million, according to a Securities and Exchange Commission filing released Friday, a 5.8% increase from the prior year driven primarily by an increase in the value of pension benefits.

Nooyi’s 2011 compensation included $1.6 million in base salary, up from $1.3 million, her first increase in base pay since becoming CEO in 2006. Stock and option awards totaled $9.5 million, roughly equal to year-ago levels, while her incentive plan compensation fell to $2.5 million from $3 million last year.

Nooyi’s pension value and non-qualified deferred compensation earnings was about $3 million, up from $2.1 million in 2010.

PepsiCo is undertaking a turnaround this year that will try to boost the company’s performance, especially in its Americas beverage division where sales have been lackluster. PepsiCo is slashing 8,700 jobs and boosting its marketing budget this year by up to $600 million that it will invest mostly behind a dozen global brands.

Update 2-9-12:

PepsiCo Inc. plans to spend up to $600 million more on marketing this year to try improve sales in North America and will lay off about 3% of its global work force to pay for it as part of a much-anticipated strategic overhaul to try to catch up to global rivalCoca-Cola Co.

PepsiCo’s job cuts will affect some 8,700 employees in 30 countries, and are part of a broader productivity program to slice $1.5 billion in annual costs from the global drinks-and-snacks giant by 2014.

Update:  1/13/12

Despite Pepsi’s move to cut costs and resurrect the Pepsi Cola brand, the board says it will stand by it’s CEO, Indra Nooyi.  It sounds as if everyone agrees that Pepsi needs to be more aggressive in advertising its flagship brand, to compete with Coke.  Once again, I don’t see a reason to layoff people to achieve that goal.  Why not enlist those employees in helping transform the company, to once again improve the profitability and market share of the Pepsi brand?


Due to a stagnant stock price over the past three years, Pepsi feels it needs to do something to demonstrate its commitment to earnings growth and to move in a positive direction by laying of 1% of its workforce, or 4,000 people.

Why are layoffs always the first response to distress?  Pepsi has an abundance of products; maybe they have just spread themselves out to thin with their acquisitions and focus on the Frito-Lay snack division.  Plus, this focus on “better-for-you” products at the expense of good ole’ Pepsi advertising and head-to-head competition with Coke will not keep Pepsi in the top of mind with consumers.

Consumers don’t eat soda and snack food because they are good for them–they eat them because they taste good and want a snack (and not always a healthy one!).  In addition, consumers like the head-to-head competition between Coke and Pepsi; it forces them each to bring their best advertising, packaging, and new products to the table for consumers; it brings out the best in both of them.

Because of our research on downsizing, which you can download for free here, and my former work as Account Executive for the Pepsi Cola account, I don’t think downsizing is the answer.  I think that getting back to basics and remembering what makes Pepsi exciting for its consumers is what will bring that stock price back up.  When I would call on Coke, they would never utter the “P” word.  Maybe it was arrogance, or maybe it was a total devotion to dominating the market.  Maybe Pepsi needs to take on that same mind-set.

Just my two cents.


Coke: There’s A Fungus Amungus (Actually, Fungicide)

Update 1-13-12:

Coca-Cola Co. said Thursday it has been contacted by a “relatively small number” of consumers with questions about an unapproved fungicide the company reported finding in orange juice sold by it and competitors in the U.S.

Brazilian orange juice producers say the use of the fungicide carbendazim, which was discovered in some major U.S. orange juice brands, is widespread in Brazil, raising concerns that most deliveries to the U.S. could contain the substance. “The juice will definitely have carbendazim,” Christian Lohbauer, president of the Brazilian Association of Citrus Exporters, said earlier this week, referring to exports from the most recent crop.

Carbendazim isn’t approved for use in citrus in the U.S., but other countries allow certain levels of the substance in juice imports.


ReutersWorkers load a truck with crates of oranges on a farm in Limeira, Brazil, on Thursday.

Coca-Cola’s Simply Orange and Minute Maid, along with PepsiCo Inc.’s Tropicana, are the major U.S. brands currently made in part with Brazilian orange juice. The discovery of low levels of carbendazim in U.S. orange juice stocks has prompted U.S. federal authorities to begin screening juice on supermarket shelves and roiled prices of orange-juice futures.

Food and Drug Administration officials have vowed to pull juice with higher than trace elements of the potentially harmful fungicide, which is 80 parts per billion or higher. But consumer concern thus far seems muted.

representative of PepsiCo’s Tropicana unit said in an email late Thursday that the company is “testing every shipment of imported orange juice in our possession and all future shipments for this specific fungicide.”

The representative declined to comment on whether the company has found the fungicide in its Tropicana or Dole juice products, despite the fact that the Brazilian producers asserted that virtually all juice exported to the U.S. contains the substance. The representative said Tropicana is “safe,” that PepsiCo has a “food safety system designed to ensure the safety of our products,” and reiterated that the company will follow the FDA’s guidance.

Tropicana also said it is in the process of moving to use only Florida orange juice in its Tropicana Pure Premium juice. “This transition to production for Tropicana Pure Premium is well underway and will be completed by the end of the month,” the representative said in a statement.

Original Post 1-12-12:

I’ll credit my friend Dr. John Gordon for the phrase following the colon in this blog post title.  Here’s the story from today’s Wall Street Journal:

Coca-Cola Co. said it found an unapproved fungicide in orange juice made by Coke and its competitors, and alerted federal regulators that some Brazilian growers had sprayed trees with the substance.

The beverage giant, which makes Simply Orange and Minute Maid, wouldn’t say which brands had shown the fungicide. Both brands contain juice from Brazil.

The Food and Drug Administration said Monday an unnamed juice company had detected low levels of the fungicide in “its and competitors currently marketed finished products.” Those products include some that were on store shelves, according to a person familiar with the matter.


Bloomberg NewsCoca-Cola, which makes Minute Maid, wouldn’t say which brands had shown the fungicide.

Coca-Cola’s disclosure came after the FDA gave more details about how it is testing to block or remove any potentially contaminated orange juice from the U.S. market.

The agency said it is testing orange juice sold in supermarkets for the potentially harmful fungicide. Concern that the fungicide could damp demand for orange juice sent futures prices for the commodity plunging on Wednesday. The Environmental Protection Agency said consumption of orange juice with the fungicide at the low levels that have been reported doesn’t raise safety concerns.

Coca-Cola and PepsiCo Inc., which makes Tropicana and Dole, combined held almost a two-thirds share of the U.S. orange-juice market in the past year, according to Sanford C. Bernstein & Co.

A spokesman for PepsiCo’s Tropicana declined to comment on whether the company has found the fungicide in its products but said, “we take this matter seriously and will follow the FDA’s guidance.”

I love Coke (Diet Coke now) and orange juice, but I don’t like fungi in my drinks, period.  Let’s hope Coke does everything it can to remove the contaminated products from store shelves, and ensure that of its juice products are perfectly safe.