Sustainability Watch – PepsiCo finds health drive hard going
PepsiCo's UK and Irish arm has made slower progress in its bid to boost sales of healthier products than it might have hoped. Ben Cooper examines how the company has reported its performance against the 27 commitments announced last year and the reaction it has received.
The candid and contrite admission of failure is generally viewed as a laudable personal trait. Don't attempt to conceal your shortcomings, say you’ll do better, get a pat on the back for being honest, and move on.
Does the same apply in the sphere of corporate responsibility? PepsiCo is finding out.
PepsiCo UK & Ireland published its Health Update 2011 this month, in which it reported that it had achieved or was on track to achieve some targets in its drive to make its product range healthier, but had made no progress or was off the pace on others.
For example, while it has successfully reduced salt levels in Walkers crisps and boosted wholegrain servings, it has failed to launch and take to scale new children’s lunchbox and breakfast ranges which meet Ofcom nutrient standards, increase the proportion of baked savoury snacks or boost total servings of fruits and vegetables.
As part of PepsiCo’s global aim of boosting sales of ‘Good-for-You’ products to US$30bn by 2020, the company’s UK arm unveiled 27 commitments last year relating to reformulating core products, reshaping its portfolio in favour of healthier options and widening the availability of healthier products.
PepsiCo UK president Richard Evans said in the 2011 report: "We have not met all of our short-term targets and in the spirit of openness have chosen to be transparent about the setbacks, the challenges we have faced and how we propose to address them."
In truth, the company had little option but to be open. Having been fairly voluble in declaring its aims, any obfuscation would surely have been unwise. It also committed to reporting annually on its progress and it is already 16 months since the first report.
Sceptics are indeed suggesting PepsiCo has been less vocal in reporting its progress than when announcing the targets. Accusations of such disparity are not uncommon in the corporate responsibility arena, and the suggestion that 'talk is cheap' is never far away. Such scepticism can only be fuelled by the fact that the company would not put anyone forward for an interview on this subject, nor even respond via email to specific questions.
Christine Haigh, coordinator of the Children’s Food Campaign, says the publication of this report has been given "much less fanfare".
Haigh remains sceptical about PepsiCo's change of tack. "They’ve chosen their own targets; and I think some of those aren’t particularly ambitious," she says, adding that the salt target had already been set out both in the Food Standards Agency salt strategy and the Responsibility Deal with government. "They are getting three lots of credit for this."
Haigh continues: "I think some of the pledges are not that impressive and some of the progress isn’t really that substantial."
So has PepsiCo underestimated the challenge? Was it too keen to make an impact last year and in doing so has set itself ambitions it will find hard to achieve?
Haigh believes the report represents a "reality check" for PepsiCo, an indication of how difficult it is for one company to make a difference on its own.
"Realistically even if they really do have the best interests of public health at heart, how much do they really think they can do on their own? They can’t change the entire commercial environment that they operate in."
This is a critical observation. Campaigners make the point to emphasise the need for regulation to create a level playing-field, but for the companies it has other implications that go to the heart of the corporate sustainability challenge.
Companies prefer to talk in terms of 'sustainability' because implicit in that term is the 'people, profit, planet' balance whereby ethical criteria are seen in the context of the company's raison d'être, to make money.
This may lower the expectations of campaigners. "Setting themselves targets to improve the healthiness of their products is great PR for them," Haigh says. "But we shouldn’t lose sight of the fact that they’re a business and their purpose is to deliver value to their shareholders, not to deliver worldwide public health."
However, for PepsiCo itself it speaks to a different and delicate issue, namely just how thrilled shareholders are about the company’s Damascene conversion.
Late last month, the Wall Street Journal wrote: "Hailed as a strategic visionary since taking PepsiCo's reins nearly five years ago, Mrs Nooyi is facing doubts from investors and industry insiders concerned that her push into healthier brands have [sic] distracted the company from some core products."
The article went on to observe that PepsiCo’s Good-for-You products only represent around 20% of revenue, with the majority coming from the snacks and drinks the company refers to as "Fun-for-You".
Nooyi would no doubt say this underlines the growth potential for healthier offerings. But her aspiration of "delivering sustainable growth by investing in a healthier future for people and our planet" may not be striking a chord with all investors. The implication is clear. "Fun-for-You" products make us more money so concentrate on that.
Whether anxiety over shareholder qualms has contributed to PepsiCo’s rather low-key publication of its UK health update is not clear.
Certainly, the news that the company is finding it difficult to make the vision a reality could reduce shareholder confidence in the strategy further, while supporting the counter-argument that the salty snacks and sugared drinks that have long been its staples are what consumers want and PepsiCo should be sticking to what historically has made most of its money.
Nooyi presents her strategy as enlightened, innovative thinking and who is to say that it will not only turn out to be 'the right thing to do' but also sound business. Nevertheless, 2020 seems to be a long way off to some investors, and she could perhaps have done with some better news from the UK push.
As for PepsiCo UK & Ireland "choosing" to be transparent, the company seems to want credit for being open about reporting both its successes and failures.
Unfortunately, in a sceptical world that has only limited faith in corporations acting in the public interest, expecting plaudits for simply being truthful about progress in implementing a more socially responsible and sustainable agenda seems a little optimistic.
The public should surely expect nothing else than total candour. And they also know that by trumpeting its aims PepsiCo sought and most probably gained a PR advantage. Doing so also raised the stakes and increased the likelihood of opprobrium if it fails to deliver.
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