Interview with Krista Pilot, VP PEPSICO: Pakistan one of the largest markets in AMENA for PepsiCo

BR Research recently sat down with Krista Pilot, Vice President, Corporate Affairs for PepsiCo Asia Middle East & North Africa, where she is responsible for media, consumer and public relations as well as internal and crisis communications. Krista is an honours graduate from Colgate University and received her MBA from the Smith School of Business at the University of Maryland. She was named the Academy of Women Leaders by the YWCA of New York City in 2004. We discuss the importance of Pakistan for PEPSICO, the CSR initiatives the company has been pursuing, and the future strategy of the company in Pakistan.
Below are edited excerpts of the interview.
BR Research: Let's start off with your role at PEPSICO. Please walk us through it.
Krista Pilot: I head Corporate Affairs for PEPSICO AMENA, which for us is Asia, Middle East and North Africa. This sector has more than 40 countries and 26 thousand employees, and I have a team that looks after external communications, engagement with key stakeholders, CSR activities as well as our internal communications to keep everyone aligned.
I have been with PEPSICO for six years now. Prior to that and with a background originally in government affairs, I worked for the US Senate in Washington D.C. I have been in various corporate affairs roles since then.
BRR: Developed markets across the world have become saturated with low growth potential. There is nothing exciting. Regional markets such as the AMENA region have higher potential for growth. What kind of importance does Pakistan hold in PEPSICO's global portfolio of countries?
KP: Pakistan is one of the top markets in the PepsiCo world in terms of volume; so for us there is enormous potential. We have more than 15,000 employees here across our entire system, which includes our franchise bottlers as well as our company owned snacks business. We have 150 Pakistani farmers that we work with who grow more than 150,000 tons of potatoes each year for our Lay's snacks business.
So it is really quite a scale business. Factors that the company keeps in mind when it comes to growth potential include urbanisation, modernisation and of course, the population. We consider the country's young population as a real opportunity who are coming into the economic sphere and are available to buy top quality global products such as Pepsi, 7UP, Mountain Dew, Sting, Lay's, Aquafina, Cheetos, Kurkure and Quaker, among others.
BRR: Do you still see high growth potential in Pakistan market?
KP: Yes, absolutely. Currently, we have our major beverage and snack brands in Pakistan. If you look at PEPSICO's global portfolio, there are a lot of other products that we can potentially bring to Pakistan at the right time. However, it would be pertinent to note that per capita consumption of carbonated drinks is ten times lower than the U.S., and still much lower than related markets in Asia. We see a lot of opportunity to bring in more parts of our portfolio as well as continue to develop penetration.
BRR: What is the size of Pakistan market in terms of the AMENA region as well as PEPSICO's global operations?
KP: We don't reveal our individual countries revenues. However, to give you some scale, the AMENA region is 10 percent of our global revenues, which amount to $63 billion. Out of AMENA region's roughly $6.3 billion share, Pakistan is one of the top seven focus markets, which would also include India, China, Egypt, Saudi Arabia and Australia.
BRR: What is the share of beverages and food in PEPSICO's global portfolio?
KP: Approximately 52 percent of our net revenue is food and 48 percent is beverages. In geographic terms, it's 58 percent from the US and the remaining from outside the US. I think what that speaks to is the fact that while our name is PEPSICO, we are actually much more a food company than a beverage company.
BRR: In terms of future strategy, how do you see PEPSICO's future portfolio in Pakistan being transformed in the next say 15 years?
KP: It has been a big part of our stated strategy starting back from 1998 when we started with acquisitions like Tropicana, and then Quaker and Gatorade in 2001 that we wanted to diversify our portfolio. We wanted to be food and beverage because we did not want to be solely reliant on carbonated beverages. We do feel very good that we have an advantaged portfolio over our other competitors.
We have been very clear that we see the health and wellness trends coming. We see the concerns about sugar, obesity and diabetes. We want to be part of the solution rather than being considered a part of the problem.
So, for us it's been looking at how we can use globally recognized sweeteners in combination with one another, since the prevalent regulatory regimes do not allow for this.
We closely monitor consumer preferences and are committed to providing healthier food and beverage options in Pakistan, just as we have done in many countries across the AMENA region. In fact, if you noticed, presently, the business in Pakistan is offering a diverse, exciting array of products over and above carbonated soda drinks, such as Aquafina and Slice.
BRR: Could you please elaborate on the regulatory hurdles the company is facing in Pakistan?
KP: While PEPSICO is trying to work towards a healthier and more nutritious portfolio, majority of the governments and regulatory agencies in developing markets don't have their laws and regulations aligned with global best practices.
For example, after the 18th Amendment in Pakistan, certain subjects like food became provincialized. Now for a multi-provincial body like PEPSICO, which produces one product for all the consumers in Pakistan, the question arises if there are different provincial food authorities, would there be a different product catering to different regulations in each province?
We are working very closely with both the federal and provincial governments and are encouraging them to adopt global best practices, which have been established after a lot of scientific research.
The other issue that needs attention is the illicit trade of our products. You can see both International Transit Brands (ITBs) and counterfeits prevalent in both urban and rural markets. These ITBs products are inferior in quality and are being sold at a higher premium in comparison to our original products, while the counterfeit products are certainly not manufactured as per credible standards or quality control. There needs to be an awareness and sensitization at the government level to eradicate this illicit trade.
BRR: Please tell us about the corporate social responsibility (CSR) initiatives PEPSICO is undertaking in Pakistan.
KP: PEPSICO has been focusing a lot internally as well as externally on women empowerment. We were one of the first multi-nationals in Pakistan to start a day-care centre for our female employees.
Then there is the I Am PepsiCo program, which was conceived in 2014 with the unique thought of creating a sustainable mentoring relationship between staff members from PepsiCo Pakistan and young girls attending schools managed by a non-profit institution called CARE Foundation.
In the Pakistani context, the CARE Foundation was the most appropriate partner for such an endeavour, since its founder shared PepsiCo Pakistan's vision of nurturing a new generation of women who are smart and committed to uplifting their communities.
Under this project, volunteers from PepsiCo Pakistan went through some training and then conducted confidence building workshops at various CARE Foundation schools, followed by mentoring sessions. In 2015, over 300 students went through the confidence building workshops, whereas we connected with over 1,000 girls in 2016.
PEPSICO has also been involved in stepwise implementation of Sustainable Farming Initiative, which was rolled out in 2016. In 2017, water saving of nearly 900 million litres took place as a result of implementing water resource conservation techniques, including drip irrigation. We expect the number to go up to approximately 1,900 million litres.
Then of course there's the Pepsi Liter of Light initiative, which aims to bring light to the countless Pakistanis who are still living in off-grid areas. Through this campaign, multi-serve bottles of Pepsi are transformed into solar lights that illuminate the night. Pepsi initiated this program in 2015 and has taken it onwards to a bigger scale every year, lighting up lives of close to100,000 people and 50+ villages in far flung corners of Pakistan.
BRR: Are there any expansion plans in the pipeline for Pakistan?
KP: Pakistan, for PepsiCo, is a priority market. The company continues to enjoy market leadership in the snacks and beverage categories, and is the largest FMCG Company in Pakistan, in terms of retail sales.
The company and its bottling partners combined are among the top five revenue generators for the country, and have invested heavily in new industrial infrastructure and up-gradation over the last five years. Furthermore, it is constructing a new snacks manufacturing facility in light of growing demand for high quality snacks.
BRR: The World Health Organisation has been a big proponent for imposing "sugary taxes" on carbonated soft drinks and reducing the amount of calorie intake. How is PEPISCO responding to this potential challenge?
KP: As I said earlier in our discussion, we absolutely support sensible regulation and changing consumer preferences. I would also like to make reference to our Performance with Purpose Goals for 2025, where we publicly commit to reduce added-sugars in our beverages. That goal is in line with the WHO recommendations on daily allowance for sugar.
In terms of taxation, our leadership has been coming out and saying that no one loves to be taxed. Whether it's individuals or companies. However, PEPSICO wants to be part of the solution and we don't believe in taxes that discriminate against a certain segment of products, such as carbonated beverages.
So the question really is, is it fair to just go after one industry and one product when really it's a holistic perspective that includes diet, exercise and lifestyle. If it's simply about revenue, we understand that the governments need revenue.
But if it's about coming up with a solution for obesity and over-nutrition, then a more holistic approach bringing together industry, government and civil society is needed.