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Hi, I'm Mike del Pozo with PepsiCo and you're listening to the CPG Guys Podcast.
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Hello and welcome to the CPG Guys Podcast.
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Set at the intersection of commerce and.
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Tech, your hosts Sree Rajagopalan and Peter Vs. Vaughn explore how brands and retailers engage consumers in a digitally driven world. And now, here are the CPG Guys.
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Hello and welcome to the CPG Guys Podcast. I'm your indefatigable co host, pbsba. Also, moonlight is head of industry and client engagement at Flywheel, the commerce acceleration division of Omnicom. No, my daughter is not a pop star, but I do my best to hold ground when compared to the celebrity life my co host lives. You know him as the patriarch of the Raj family media empire. His daughters Ria and Lara are legitimate entertainment sensations. His wife Kavita, she runs her own podcast called Lights Camera Conversation. We'll ask for Papa Raj himself. That's what his daughter's fans like to call him. Well, in addition to podcasting, he's Chief Revenue Officer at Think Blue Consulting. He's also the former CCO at General Mills. Can't join us today because he's in the Motor City doing some work with fmi. He sends his regrets. Today's a really big episode. I know he is very sad he's missing it. I'll get to that in a second. Make sure you're subscribed to our podcast on your preferred listening platform, Apple Spotify, wherever you get our latest. And you can go back and consume some of the 530 plus episodes we've already published. Okay, so our guest today comes from one of the most iconic CPG manufacturers in the business. He spent 25 years at PepsiCo working his way through a number of different roles. He's coming to us today live from the NACS national association of Convenience Store show that's out in Chicago. We're going to have a really great conversation today about innovation. Innovation around product, around packaging, how we do make data driven decisions, how we create a culture of innovation. Please join me in welcoming straight from the NAC show in Chicago, Illinois, Mike Del Pozo. Mike, how you doing? Welcome.
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Hey, Peter. Good. Glad I finally got to be on here with y'.
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All. I know you and I have been going back and forth for it seems like a couple of years trying to make the conversation happen. I'm glad we finally got this scheduled. You know, we've had many of your colleagues. Colleagues joined us over the last five years since we launched that. So I'm glad we were Able to get you on. Before we get to the questions, would you mind sharing with our audience what your core responsibilities are at PepsiCo?
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Yeah, sure. I'm president of North America Business leading our commercial organization. So I have responsibility for our customer organization, the commercial agenda associated with our enterprise customers and then we also oversee some of the go to market transformation at PepsiCo Digital Commerce, some of the capabilities associated with that. So think about it as the commercial side of the business holistic across North America.
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C
That's terrific, Mike. We're going to include in the digital show notes this episode links to your LinkedIn profile and the PepsiCo's corporate site so our audience can explore as we carry on our conversation. Let's get to the questions. They're heavily focused today around innovation. So let me start with one of the biggest areas of innovation. PepsiCo recently announced Pepsi Prebiotic Cola. It's a major evolution in traditional cola. Would love to understand from you how you see functional ingredients like prebiotics shaping the future of the carbonated soft drink category.
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Yeah, first, thanks for focusing on innovation. I think, you know, I'm here at nacs and it's a big part of obviously what we're talking about and what we're showcasing. And it feels like a very different NACS for me as I look at PepsiCo and hopefully we get the same response from our media partners, our customers and all our stakeholders. Prebiotic Pepsi is a big one of it. You know, we're excited about it. It's actually the first traditional cola with prebiotic fiber. And so it has this kind of what we think is really bold answer to what consumers, next generation of consumers are asking for. So what what that means is you think about classic Pepsi and what that delivers that class crisp taste. This just has 5 grams of sugar, which is cane sugar, 30 calories is all, no artificial sweeteners. And then it has 3 grams of prebiotic fiber. So younger consumers are really looking for this functional ingredients for, you know, whether it's for health reasons or feel good reasons, but they don't want to sacrifice taste and we think this delivers both. So we believe it's a huge win for the category.
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C
Yeah, it's amazing to me how much prebiotic and probiotic are a part of the everyday conversation of consumers. Particularly as you mentioned, the younger generation. I remember back from my days working in purchase, the portfolio was organized into good for you, better for you and fun for you. In that light, Gatorade is introducing Gatorade lower sugar. From your perspective, what role does reduced sugar Innovation play in meeting the evolving consumer expectations, but at the same time not compromising the performance associated with such an iconic brand like Gatorade.
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Yeah, great question. As you know, I previous to this role, I led the Gatorade business for the last couple of years. And this has been one that's been in the works for a while. Like many of our, you know, our big portfolio transformations that hopefully we'll talk about on both sides of the business, foods and beverages. But to get Gatorade, you know, to that 75, less sugar but still not compromise on what consumers want, what athletes want, any users of the product want. So that Gatorade thirst quencher level electrolytes that it has, so it does hydrate better than water, but also the lower sugar was an R D breakthrough for us. And so this is launching, I think early part of 26. No artificial flavors, no artificial sweeteners or colors from any artificial sources. So again, similar to what I talked about on Pepsi, this does deliver on the bold color Gatorade's known for through this kind of world class R and D. But you know, consumers get it with no artificials and less sugar. So big breakthrough for us. As you can imagine, it's tough to get this natural color match and that's so important when you ask people kind of what their flavor choice is. The reduced sugar was really critical for us. But it only works if you can not compromise on, you know, the product greatness in the first place. And so we think we nailed it with this one and we really believe this is going to, you know, meet consumers needs that maybe weren't consuming Gatorade for one of those reasons.
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C
Brilliant. Let's move on to the coffee portfolio. Now. Anyone who knows me knows I don't drink coffee. I think this morning I counted though in my closet. Mike, this is going to shock you. I had 15 cases of Rockstar Recovery orange drink stock. 15 cases. I'm always stockpiling, but in any of them.
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So you're the one.
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I am the one. I'm the crazy one.
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Oh, it's a great product. Actually I was just over with the Celsius team at their booth here looking at great positioning on Rockstar. With Celsius and Aulani new, we couldn't be more excited about having them in the family as well.
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C
Yeah, what a great partnership. So let's talk. I know how important the Starbucks portfolio is in a ready to drink format for PepsiCo. Starbucks Coffee and protein is now launching nationally through your partnership. How important are joint ventures like this in accelerating PepsiCo's overall innovation agenda.
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Yeah, I think they're becoming increasingly important. You know, when you think about, you know, things that you sometimes say we got to build it here, we have to do everything here versus leveraging what makes these organizations great. In this case a joint venture in the NACP really makes a difference for us. So you know, obviously you're bringing together Starbucks coffee, their expertise, their premium brand equity with our distribution scale, our innovation capabilities, all the insights we bring to the organization. So these JVs, I think they really accelerate the innovation agenda when you think about the timeline it takes to kind of create, develop, test and then roll. And particularly when you get into new capabilities, new consumer segments, new growth platforms. So this particular product that we're launching with protein, incredible blend of, of Starbucks premium coffee with 22 grams of complete protein. So this is really we talk about as a coffee that does more, meets demands for protein, fastest growing functional benefits that consumers are looking for. But also has this, you know, this incredible Starbucks backing behind it. So we'll have this, I believe two flavors that'll be launching shortly across, you know, all grocery and convenience. And the overall partnership to your point, I mean we think it drives much more speed in the system versus kind of how you historically have to do things.
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Let's move from product innovation to packaging innovation. PepsiCo is moving into premium 12 ounce glass bottles. Would love your perspective on what this says about one, the importance of packaging as an innovation driver, especially with younger consumers. And also how do you think this is going to play in higher end food service where I think your competition has had a bit of an advantage with their glass bottle for quite a number of years.
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Absolutely. And appreciate you asking about that segment as well because I think this consumer is really what it's about. Right. And I think for us we're solving for where the consumer's going, what they expect to see and almost really format function agnostic look and say okay, whether it's away from home, food service, convenience, what are they looking for? So why glass matters? I mean packaging has been a huge innovation driver lately and we've been, we've nailed it in some of our businesses and others we've been slow and we're going to catch up quickly on this. So glass is a perfect example of really listening to consumer demand. Fastest growing CSD pack type with Gen Z is glass today. In fact I heard in one of our markets, I was with one of our division leaders today, a crazy number in terms of just percent of mix in that market of Innovation, it was like 15% of the growth coming from there. So it gives you that premium tasting experience. It's, you know, kind of got this elegant look to it, but it also can kind of, it can clamor to value in some case. So I mean, for younger consumers, packaging is just not functional. It's part of the overall experience. So the 12 ounce glass bottles we're launching will be in both retail and food service. So, you know, you can imagine I just had one a little while ago. This amazing Pepsi taste in this sleek premium packaging. It feels special. And to your point, on food service, it elevates the whole experience. When you think about if you're at a restaurant, if you're at a bar, any location, it really signals quality. And to your point, our competitors beat us in some markets. We feel good about our scale. We'll get out of this quickly and nailing the product. So. So we'll have this out in market next year in several of our flavors.
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Yeah. I have a lot of friends who operate high end restaurants in the New York City area. And what they tell me is packages like that enable them, you know, they're sales opportunities. Right. It's not just the automatic refill from a fountain beverage. It's an opportunity for them to, you know, upsize the ticket price. And so 100%, that's very important for the food service business.
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Yeah. And you know, I mean, you know, I've got a 13 and 11 year old, two daughters at home. I mean, it's interesting when you put those glass bottles in the fridge or Poppy or whatever Alani, whatever it may be, and then you kind of have other regular stuff they're used to, they want to try. It's this experiential element that's really starting to resonate. I think it's going to be really sticky.
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All right, let's move from the beverage portfolio to the food side of things. Lay's is actually undergoing its biggest brand refresh in 100 years. How do visual identity and packaging innovation play into consumer trust and loyalty as you look at servicing and refreshing this iconic brand?
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Well, listen, this is one of the brands. I mean, this is probably what I'm most excited about, having spent a good part of my career over at the Frito Lay business. And on the food side, visual identity and packaging has become increasingly important. I think it really helps reinforce what the brand stands for. When you think about a brand. You said it. I mean, you almost have to say it again. I mean, 100 years, biggest one, we reformulation and really packaging refresh we've done, it celebrates what made Late special forever. So you see this amazing essence of real farm grown potatoes and quality ingredients. And I think that's something that sometimes we take for granted in these products we have. And there's an education lack on kind of what's out there. So for us this will help do that. But it's not just about looking different. It's really about telling this story of transformation. So you'll see the bold, sun inspired visual style that really spots like the spotlights the potato. You'll see a matte package which I've been kind of, I mean, you know, in the sales I remember asking for that a lot. It's tough to do, it takes some time. You'll see this, this chip texture that really pop off the shelf, this ribbon quality that reinforces the commitment to real potatoes and real joy. And so, you know, our thought is really the visual identity communicates real changes to consumers. And obviously the big news is this coincides with removing artificial colors and flavors across the entire Lay's portfolio by the end of 2025, which you know, on our biggest brand is a massive transformation.
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Let me remind our audience that today we're speaking with Mike Del Pozo. He's head of PepsiCo North America, customer and commercial. So Mike, let's double click down on that. By the end of this year, both Lays and Tostitos will have no artificial colors or flavors. I want to understand how big a lift is that operational? And how do you define clean label innovation as you think about undertaking what seems like on the surface a herculean task?
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Yeah, I mean massive operational lift. This isn't just something that hey, somebody said you should do it. And so we're going to accelerate our timeline on this. This has been years in the making and really it's the right thing to do. I mean, when you think about it, for us, we're going to reformulate the entire core products of two of our biggest brands with Lays and Tostitas. And they're iconic in the Frito portfolio. So that's years of R and D work. Obviously it's supply chain adjustments. It's ensuring that every single SKU meets the new standard without compromising on taste. And that's like back to our comment on beverages too. If you do this and you compromise on taste, consumers will, I mean, reject immediately. So I think we absolutely nailed it on this one. And obviously by the end of 2025, so this year Lays and Tostitas will be made without artificial flavors or colors from any artificial sources. And then we'll be reformulating additional products across the portfolio. We'll hear about, you'll hear about soon. To your question on like what clean label means to us, it really, we feel like it's meeting consumer demand for these ingredients that they recognize, but again, delivering on the bold taste that they love. So it's not about chasing trends. This is really about making America's favorite snacks simpler, cleaner and better for the future. And I mean, that commitment that we've got will extend across our future innovation as well. So you're going to see this new standard really being set in the industry and we're incredibly excited about it.
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C
Well, Mike, I am too though. I am going to give you a warning if you, the minute you focus on the Cheetos brand, if you tell me I'm not going to get some iconic cheetah accumulating on my fingers when I'm meeting, then we're going to have an issue. I'm just going to warn you there.
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I promise you'll still be able to have that iconic Cheeto on your finger. But we may be doing something as well on that brand that's going to be exciting for people as well.
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Ooh, ooh. We'll keep our audience in anticipation. That's great. All right, let's talk about the digital shelf and working with retailers. What is PDP vis and how is PepsiCo using it to connect innovation with retailer success and shopper behavior?
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Yeah, I actually just got to go through the demo here a couple hours ago at nacs. If you come by our booth, we've got this incredible like hands on experience with our insights team and a lot of our, I saw big C store customers coming through playing with it. It really is our approach to building stronger retailer partnerships to drive kind of food and beverage growth, but through the power of data and insights. And I'd say the biggest thing is innovation as you know, begins with the insight. So, you know, in this particular case, you'll be able to touch the screen and talk about a specific trip mission, a retailer that's solving for maybe lower traffic in many of these C Store outlets, but a specific cohort and then we can talk about that cohorts, what they buy, what the solutions for them are. So petviz really helps us identify these insights from a retailer problem to solve and it uncovers solutions that are tailored to location, to product offerings, shopper behavior, whatever it may be. And so for us, if you think about how it drives innovation, you know Consumers might be asking for zero sugar or functional benefits or portable pack sizes and our retailers just aren't quite sure what the specific need is. And I think, you know, I was just talking to one of our retailers today. You know the granularity matters. You really have to de aggregate a lot of these averages and get down into understanding what products matter in this case like we talked about today, products like Pepsi, Prebiotic Cola, Gatorade, lower sugar, new packaging, all the stuff we talked about. It's basically responding to feedback from these consumers. So the biggest thing with retailers now is much more of a co creation on some of the innovation and every launch that we have reflects really what they're asking for, what the consumer ultimately needs.
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C
So you mentioned pack sizes. That triggers the thought of me around price pack architecture. So that's no more relevant than certainly when we get into E commerce and Omni channel shopping accelerating would love to understand how PepsiCo is thinking about innovating where products show up, not just what those products are.
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100% listen, our, I mean our E commerce, our digital commerce business has. I remember early days when we were just building this team. We had an amazing, we went out and brought incredible talent from different places and created this, this organization that was really focused on E commerce channels and segments. Now I mean we've got a business that's growing to be $10 billion soon, consistent growth but it's doing it through meeting consumers in different places. So for us as we continue to reinvent digital it's really transforming to meet the consumer where they are. So as you know it's not enough to just have great products. I think we're thinking about the entire experience of how consumers discover how they purchase and where they enjoy it. And you'll hear us talk about something we say always everywhere. We want to be always everywhere and frankly it shouldn't matter. We're more looking at that from a format, channel, segment go to market agnostic look. And you know I always think about what E commerce that that purchase is less about, you know, where somebody gets it or you know, how it got there. They want it in a specific time and place and they want grab and go options, they want curbside pickup, they want delivery. The personalization really matters. So we're going to tailor a lot of our pack sizes and innovations specifically. And I think historically we wouldn't have done that. We'd say oh no, this is for that channel or that segment. Consumers don't care anymore. So I think we're getting much better about really those Blurred lines between the occasions.
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C
Well said. I absolutely agree. You want to get products to consumers in the moments that matter to them. And if you do that, then you achieve your objective. As we talked about all of this innovation across your portfolio, there's always the thought that innovation does come with an element of risk. So how do you as a leader personally create a culture within PepsiCo North America where teams feel empowered that they can test things out, they will fail on occasion, but then scale new ideas that are actually working?
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Yeah, I think, listen, I think we've gotten a lot better at this. I mean, sometimes I think that you're like, we're a big company so we can't afford to have those misfires. I think we've actually gotten much better about saying we need to be, if it's insight and data driven like we talked about, we need to start with listening. Listening to the consumer, what they're saying, creating this culture of innovation that really starts with listening, whether that's consumers, customers, our retailers and our own team. So I think it really starts there and that kind of manifests itself into encouraging these bold ideas. And I think, you know, I try to create an environment where teams feel empowered to bring bold ideas forward. We test them in market, we learn from the results. We've gotten way better. We have this incredible system. We've got a DSD system, we have businesses that are warehouse, we have, you know, so we can test a lot. And I think we're getting better at start with listening, encourage these big bold ideas and test quickly. And frankly, some things you're like, we just know they're going to work and we don't have to, you know, continue to over test. We also want to be really disciplined about innovation. So use data and insights to inform the decisions and really, I think, build momentum on it. I mean, for us, it's important to celebrate these wins publicly and create momentum around our transformation. And that's kind of what, what this is about really. When teams, I think see things like Pepsi Prebiotic or lay's refresh come to life, I mean it creates this flywheel where people want to just keep pushing boundaries. So I think you're seeing us get much better at creating this kind of culture of innovation. Understanding we can fail fast, but making sure that it's consumer driven and it's not just on a gut reaction.
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C
Yeah, absolutely. Putting the customer at the center of your business decisions, making sure the product meets their functional, their experiential needs is always what's going to drive the success of Your business. So let me finish off looking out into the future. If we were to go out five years. Mike, what do you hope that PepsiCo North America's innovation legacy will look like after you've had a chance to really put your, your imprint on it?
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That's a heavy question. I, I think a couple things I'd say. I guess first and foremost I think that we're a more resilient and future focused company. And that's a lot of what we talked about today. I think it's not just about innovation, but it really is about the entire value chain end to end. How do we become more resilient, how we ensure we're focused on the future and where consumers are going and not be wed to an old legacy system or ways we used to do things. I mean that's the common kind of, kind of traps of these big organizations like ours. And so I hope the legacy is that we transform this company, company into one that really meets consumers needs, where they're going. The other thing I think is, you know, we want to look back and say that it's, it's, I mean not just about the big innovation stuff. We talked about obviously removal of artificial ingredients from our favorite snacks, bringing functional benefits. Obviously we brought new partners into our portfolio like Poppy and Siete. All those are about new growth spaces. And so I think we want to make sure that we're delivering on this transformation. It's not just about creating or building these brands or bringing new brands into the family, but we need to actually deliver on the, on the transformation. And lastly, I think probably this idea of really building partnerships with much more purpose, I mean as I, as I look ahead, I think we want the legacy to be that we did this in partnership with customers, communities we serve. You talked about it not trying to do everything ourself. And I think that drives this mutual growth between, between retailers, you know, creating long term value and staying committed to sustainable sustainability and what's right. I think, you know, sometimes we look at things and we say, okay, you know, this is a transformation. It's in this period of time. We don't see it that way. We see this as an ongoing transformation across the entire value chain and this is really just the beginning. So you know, we feel like we're building this for the long haul and hopefully our partners would say, say that as well.
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C
Mike, I have an opportunity to speak with a lot of customers of yours in my role and what I can say consistently is that PepsiCo leads in terms of moving away from just joint business planning to joint value creation. So I think you're you're already hitting it there and I wish you continued success in that area. Thanks for taking time out of the NAC show to share with us the innovation journey that PepsiCo is bringing to market. We really appreciate your time today, Mike. Thanks.
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Oh thank you. Appreciate you putting a spotlight on it and I hope to come back again soon and chat and be sharing kind of the results of some of this transformation to our audience.
- [25:42]
C
Thank you for joining us three times each week for our podcast conversations and our weekly riff. We do greatly appreciate that we have almost 40,000 followers on LinkedIn who like to share and consume our content. Please do follow us on your preferred listening platform. We look forward to seeing you in person at one of the many conferences we are attending. Very frequently we kick it all off again in January at CES and then it gets a little crazy. What a great takeaway I have. Mike did such a tremendous job articulating how innovation permeates everything that PepsiCo is doing across its entire portfolio to our audience. Thanks again. We look to forward to speaking with you on the next episode of Wait for it. The CPU Guys Podcast. Goodbye.
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The content in this podcast episode is provided for general informational purposes only. By listening to our episode, you understand that no information contained in this episode should be construed as advice from CPG Guys, LLC or the individual author, hosts, or guests, nor is it intended to be a substitute for research on any subject matter. Reference to any specific product or entity does not constitute an endorsement or recommendation by CPGuys LLC. The views expressed by Guests are their own, and their appearance on the program does not imply an endorsement of them or any entity they represent. The views expressed by CPTGuys LLC do not represent the views of their employers or the entity they represent. CPT Guys LLC expressly disclaims any and all liability or responsibility for any direct, indirect, incidental, special, consequential, or other damages arising out of any individual's use of, reference to, or inability to use this podcast or the information we present in this podcast.