PepsiCo was ranked 63rd in the 2007 Fortune 500 list of the largest companies (ranked by revenues) and is number 1 in the Food and Consumer Products category (ahead of Kraft Foods, Sara Lee, Conagra Foods, and General Mills).1 Its two primary lines of business are snack foods (Frito-Lay—-its largest unit) and beverages (Pepsi, Tropicana, Gatorade),2 with some cereal products (Quaker Oats). Although Coca-Cola sells more carbonated soft drinks than Pepsi, PepsiCo moved into the noncarbonated beverages (bottled water, sports drinks, and teas) market before Coke and it now commands half the U.S. market share, about twice as much as Coke.3 Coca-Cola was ranked lower (94th) than PepsiCo in the 2007 Fortune 500 list.4 Indra K. Nooyi is Chairman and Chief Executive Officer of PepsiCo, and according to Fortune, Nooyi is ranked as the most powerful woman.5 Beginning in the mid-1990s, Nooyi was the chief strategist that dramatically reshaped PepsiCo.6 The company got out of the restaurant business by selling Pizza Hut, Taco Bell, and KFC in 1997. It got into the juice business by buying the world’s largest brand juice producer Tropicana in 1998. PepsiCo entered the sports drink business in 2001 by acquiring the bestseller Gatorade, through the purchase of its maker Quaker Oats, which also gave PepsiCo a line of cereal products, including breakfast and other types of granola bars that complement its snacks. PepsiCo also acquired Izze sparkling juice drinks in 2006 and Naked Juice smoothies and other fruit drinks in 2007.7 PepsiCo also has joint ventures with partners, including Lipton (ice teas) and Starbucks (frappuccino). Nooyi expects to continue to expand PepsiCo through acquisitions.8 Nooyi is a different kind of CEO. She says her approach boils down to balancing the profit motive with making healthier snacks (in a speech to the food industry, she pushed the group to tackle obesity), striving for a net-zero impact on the environment, and taking care of your workforce. She was one of the first executives to realize that the health and green movements were not just fads, and she demanded true innovation. As stated earlier, PepsiCo is now the leading seller of noncarbonated beverages. It is gradually shifting its percentage of “better for you” and “good for you” snacks and widening its product portifolio with grains, nuts, and fruits. The company was one of the first to invest in green capital expenditures for water- and heat-related conservation projects. Executives originally questioned Nooyi’s spending, but not today with $55 million in annual savings. Her new motto, “Performance with Purpose,” is both a means of herding the organization and of presenting PepsiCo globally. So far Nooyi has been a great success at PepsiCo, but cola wars, higher energy costs, and rising ingredient costs will test her leadership.9
Opening Case Questions:
- What does climbing the corporate ladder to CEO of PepsiCo have to do with contingency leadership? What life, educational, and job experiences qualified Indra Nooyi for her job as CEO?
- What do colleagues say about Indra Nooyi’s leadership—-is it task or relationship, does she have a life outside of PepsiCo, and does she have any future career plans?
- Which continuum leadership style does Indra Nooyi tend to use in making acquisitions at PepsiCo?
- Which path-goal leadership styles does Indra Nooyi tend to use at PepsiCo?
- Which normative leadership styles does Indra Nooyi tend to use at PepsiCo? Can you answer any of these questions? You’ll find answers to these questions about PepsiCo and Indra Nooyi throughout the chapter. To learn more about PepsiCo, visit the company’s Web site at http://www.pepsico.com.