How far would you be willing to go to remain a leader in your field?
For PepsiCo, anticipating and staying ahead of changing consumer demands for healthier and great tasting products is an unwavering commitment.
Remaining a food and beverage powerhouse takes investments to expand research, engineering, science capabilities, and new technologies to understand consumer preferences and develop high-quality, great-tasting products that consumers trust.
Sometimes it takes going to the “ends of the Earth.”
Traveling to highly bio-diverse areas like the forests and jungles of Brazil, Peru, Malaysia, China, and Taiwan, PepsiCo is discovering indigenous ingredients, thousand-year-old recipes, and their possible applications in new and existing products.
For example, visits to local markets in these regions have allowed PepsiCo to find ingredients like exotic antioxidant grape-like fruits, ruby-red yumberries and ginseng, betel nuts, seaweed, and sweet tropical longans, and allowed the company to observe how they are being incorporated into regional cooking. These insights and discoveries help PepsiCo anticipate, rather than react to, an ever-changing consumer landscape. It’s all part of a longer-term PepsiCo plan to broaden its portfolio through science-based research and development.
During the last three years, PepsiCo’s investments in R&D increased by an impressive 25%. And research and development facilities in the United States, United Kingdom, Shanghai, Germany and Mexico — to name a few — are engines of innovation, driving topline growth. The new Shanghai location, the largest outside of North America, serves as a hub for new food and beverage products, flavors, packaging, and equipment throughout Asia.
The investments in science-based R&D are paying dividends. In the United States, PepsiCo has debuted nine of the top 50 new food and beverage products across all measured U.S. retail channels in 2013. They are Mountain Dew Kickstart, made with 5% real fruit juice; Starbucks ready-to-drink Iced Coffee; Tropicana Farmstand beverage that’s 100% juice, which includes one serving of fruit plus one serving of vegetable per 8 oz. serving; the fresh-brewed Lipton Pure Leaf Tea; Muller Quaker Greek-style yogurt; Tostitos Cantina Tortilla Chips, Doritos Locos Taco Chips, Ruffles MAX, and Cheetos Mix-Ups.
Work on science-based strategies includes a focus on enhanced consumer experiences and preference drivers such as taste, texture, aroma, and convenience.
“There are a lot of clues that nature gives you,” says Dr. Mehmood Khan, executive vice president of PepsiCo and chief scientific officer, who oversees the food and beverage company’s global R&D organization. “What’s interesting to me in the past couple of years is the merging of biology and chemistry and analytical technology that has opened up more applications with the potential to create more new products in our innovation pipeline. It’s exciting.” He likens the rapid-fire changes underway to the difference between black and white or color TV and high-definition technology: “We can see things now we didn’t see a year ago because the technology wasn’t available.”
Less Is More
For decades, consumers generally only cared about taste and price. Now better informed, they want to know about the sustainability of a product and its packaging; where and how an ingredient is sourced; exactly what is in a product, and how it fits their specific functional needs. Not only do they want more information from manufacturers producing their foods and beverages, but consumers are also more inclined than ever before to share information and recommendations with each other. And they also expect those products to remain affordable and taste great.
PepsiCo’s science-based R&D capabilities are helping the company anticipate and meet the consumer needs on a global scale. For example, PepsiCo eliminated approximately 402,000 metric tons of added sugar from its beverage portfolio in North America in 2013 as compared to 2006, and has introduced low- and zero-calorie beverages to that end.
Within the same timeframe, nearly 3,900 metric tons of sodium was removed from PepsiCo’s food portfolio, and the company continues to invest in new technologies and recipes that even further reduce salt levels.
Working with scientific and technology partners to create, what R&D calls a more efficient salt, PepsiCo R&D scientists recently discovered how the size and shape of salt actually affects taste perception. A couple of years ago at a forum, says Dr. Khan, “we taught medium-to-small companies some of this technology so they could utilize it in their products. We believe it was good for the industry to adopt some of this as well.” Of course, it was also good for the consumer.
The Transformation Journey
How did this transformation happen? PepsiCo recruited scientific talent and a leadership team with backgrounds and credentials that were unusual for a traditional food and beverage company. Experts hailed from disciplines such as agronomy, exercise physiology, endocrinology, metabolomics, and rheology, among others. Dr. Khan was previously a faculty member at the Mayo Clinic serving as director of the Diabetes, Endocrine, and Nutritional Trials unit, and oversaw worldwide R&D efforts at the Takeda Pharmaceutical Company as the president of the Takeda Global Research & Development Center.
With the transformation, a message of commitment was sent to the industry regarding their new approach to product development, innovation, deep consumer insights, and product design.
The R&D team is combing remote regions like the Amazon in South America and parts of Asia and even Iceland, both on land and in the sea. The mission? To find various indigenous plants that are inherently sweet or salty, have fatty characteristics, are naturally sourced preservatives and could be useful in many product categories. According to Dr. Khan, PepsiCo has not only taken the lead in the industry in finding ways to reduce salt and fats, introduced lower-sugar orange juice, uncovered new oat-based benefits for consumers, and delivered high-protein beverages, it was also one of the first companies to come out with high-intensity, non-nutritive natural sweeteners like Stevia in its beverages. Part of that, Dr. Khan says, was a direct result of the global trekking PepsiCo is doing. “We’re finding other ingredients similar to Stevia that we believe might unlock further great-tasting products in the future.”
With more than 5,000 different species and plants R&D looks at on a yearly basis, PepsiCo has at its disposal digitized tasting technology, which was first used by the pharmaceutical industry for new product discovery. Says Dr. Khan, “once we discover a plant, we can ‘fractionate’ it in order to look at it a little more closely; each one of those fractions has eight to ten natural flavor ingredients. Then as we drill down, our screening technology will tell us if an ingredient is inherently sweet, salty, fatty, or could be used for another purpose such as preservatives or energy applications.” Incorporating taste biology and sensory biology, the technology is helping to decipher hundreds of thousands of molecules to go further into human tasting applications along the road to yielding a new product. The now-efficient process “once took a month by former means and now actually takes a day,” says Dr. Khan.
“When we go out into the field, we have high, rapid analytical methods where we can actually see inside the plants or molecules and send that information directly to a cloud and central database in New York,” he says, referring to a technology that has only been in place for the last two years. “The final piece is our sensory science, where once we narrow it down to a few molecules that have been validated for tasting going through our protocols, we have R&D experts that can say ‘yes, this is sweet or salty or fatty and can be used in our offerings.’ That methodology,” says Dr. Khan, “is PepsiCo’s newest. Because these ingredients are so new, we need new methodologies just to evaluate them. It’s not like evaluating vanilla extract, because some of these things represent the first time humans are actually tasting these ingredients.” Or, he says, they were only used previously in ancient recipes and “it’s the first time we brought it back to the United States to be able to taste. The whole idea is, of course, to ultimately explore how we can use these ingredients in potential new products that have a tangible consumer benefit.”
Another strategy has included PepsiCo’s collaboration with chefs both in the United States and globally who, for example, might prepare desserts that, while sweet, are made without sugar. “We recently held an exposition at the Culinary Institute of America in Napa, California, and as a result our internal PepsiCo chefs recreated the same dishes these chefs did in order to capture the flavor ingredients before, during, and after the cooking and plating process. The idea was to identify what they are and apply them to different snacks, beverages, and foods. “This,” says Dr. Khan, “is a way for us to explore ways to get these flavorful ingredients into products, and offer more uniqueness and realistic flavor in seasonings for a snack chip.” These insights also help PepsiCo continue to expand its nutrition business, which represented approximately 20 percent of its net revenue in 2013. It’s a portfolio of good-for-you offerings that include drinkable oats with dairy, 100 percent juice, yogurt, humus and protein shakes to name a few.
A Global Focus
As R&D helps to drive PepsiCo’s business with state-of-the-art technology, its solutions are offering more consumers enjoyable and nutritious food and beverage options, while making them available to more places across the globe. What tastes great to an American consumer may not be what folks in China or India would choose to eat or drink. To that end, PepsiCo adapts different global brands with products customized for specific markets. Two culturally relevant examples are Tropicana Frutz Sparkling Drink in the Middle East and Quaker Inner Smile in China, a dairy and oat beverage. Likewise, the company’s iconic potato chip offerings worldwide are customized to suit local palates—from Walkers Pickled Onion crisps in England and MAXX seafood-flavored chips in Thailand to shrimp-flavored chips in Egypt and salad chips in China. Without reinventing the wheel, PepsiCo is able to leverage its global scale by creating the opportunity for great ideas to be adapted from one market to another across the world; efficiencies that allow the company to further invest in innovation that ultimately benefits the consumer worldwide.
For a company that began 50 years ago, PepsiCo has successfully transformed itself into a global and diversified organization, with a portfolio providing a considerable range of food and beverages around the world. As it grows and continues to innovate, PepsiCo also remains committed to offering consumers everywhere more choice and better nutrition to meet and exceed their needs while it works to minimize its environmental impact. PepsiCo’s stated mission of “performance with purpose” not only fuels its growth but allows the industry leader to stay ahead of trends as it helps to sustainably shape the world in which it operates.
For more information, visit pepsico.com.
