In today's competitive consumer packaged goods market, achieving sustained growth requires innovative strategies. This article explores PepsiCo's Advanced Analytics for Growth, detailing how the company leveraged data and technology to unlock new opportunities and strengthen its market position. We'll delve into the creation of the PepsiCo Demand Accelerator, its advanced analytics platform, and the groundbreaking PEPWORX℠ suite.
PepsiCo: Advanced Analytics for Growth - The Challenge and Solution
By 2019, PepsiCo was a $65 billion global consumer packaged goods company, a giant in the industry with brands like Pepsi, Lay's, and Gatorade. However, in the 2010s, achieving growth became increasingly complex. The market faced an explosion of private labels, new consumer demands for fresh brands, and more diverse sales channels.
Michael Lindsey, Frito-Lay Chief Transformation and Strategy Officer, noted the challenge: "How do you continue to grow at the pace you've been accustomed to, and do it in a non-dilutive way?" PepsiCo sought to use its vast size and product variety as a competitive advantage. The goal was to identify latent consumer demand and niche opportunities using data and advanced analytics to inform product placement and targeted communication with shoppers.
The PepsiCo Demand Accelerator's Role in Growth
In 2015, PepsiCo established the PepsiCo Demand Accelerator (DX), a centralized unit designed to produce innovative data-driven marketing services. This unit aimed to connect fragmented data analytics strengths across the company, scale them, and gain more leverage. Jeff Swearingen, Senior Vice President of the Demand Accelerator, highlighted the motivation: "Many of our retail partners were moving quickly and making significant multibillion-dollar investments in the space. We knew we needed to build our own capability to ensure we had a strategic seat at the table."
Initially staffed with around 180 people, the DX had three main goals:
- Drive change in internal brand and commercial strategies.
- Elevate PepsiCo's position with retailers in terms of partnership and data analytics reputation.
- Motivate PepsiCo retail partners to make better business decisions based on new shopper insights.
Establishing Advanced Analytics Capabilities: The Platform
The DX quickly grappled with the technical demands of advanced data analytics. This included standardizing PepsiCo product data across divisions and integrating reliable, often unstructured, external shopper data. The team needed the ability to process massive and diverse data sets to support advanced analytics, including artificial intelligence.
Michael Cleavinger, Senior Director of Data Science and Advanced Analytics for the DX, stated: "We had to change the way we were getting the data. We realized very quickly that we couldn't rely on the technology we had right then." Two significant PepsiCo IT efforts were crucial:
- Enterprise Data Efforts: Since 2012, PepsiCo Information Management had been building an enterprise data warehouse. As demand for advanced analytics grew, they moved towards creating a data lake to complement the warehouse, supporting exploration and predictive analytics.
- Enhanced Digital Services: PepsiCo Enterprise Architecture partnered with the DX on an "anchor project" to build a next-generation advanced analytics platform.
Together, they established the Next-Generation Advanced Analytics Platform (NGAA). This cloud-based platform allowed PepsiCo to source and manage larger, more diverse data from both internal and external sources. Its cloud infrastructure also enabled secure access for retail partners.
Most Valuable Shopper Data and Machine Learning at PepsiCo
Core to the DX's activities was access to "Most Valuable Shopper" data. The NGAA platform housed a 20-terabyte database with 106 million shopper records, each with over 1,800 attributes. This data, amassed from US census data, anonymized shopper profiles, weather data, and product shipments, built a rich profile of demographic, behavioral, and psychographic attributes.
Jennifer Saenz, President, PepsiCo Global Foods, emphasized the granularity: "We could even differentiate between stores on opposite sides of the street." This level of detail allowed the DX to develop insights into latent shopper demand, identifying underperforming stores or categories. They could then suggest specific changes to assortment, merchandising, marketing, or pricing to boost shopper engagement.
Moving to Machine Learning for Deeper Insights
As the Most Valuable Shopper data grew, so did the need for more sophisticated analysis. Michael Cleavinger's team evolved from business intelligence and statistical modeling to using machine learning to create complex predictive models. This was essential for tackling challenging retail and category problems.
One example involved a convenience store and gas (C&G) retailer wanting to maximize fountain drink sales. Since scan data only reflected cup purchases, not contents, the DX combined syrup usage data (PepsiCo's and other providers'). They then developed an ensemble of machine learning models to identify store and shopper attributes influencing syrup usage, creating ranked lists for different C&G store profiles. This allowed the retailer to implement targeted recommendations in over 1,000 stores.
Advanced Analytics Solutions: Custom, Turnkey, and Partnerships
The DX initially worked with PepsiCo's Marketing and Sales teams, acting as internal consultants or in matrixed roles. They emphasized delivering successful internal programs to build sustained growth and support. Ellen Webb, Senior Director, Shopper Insights and Strategy, noted, "Those internal stakeholders who can be advocates for us and our work are incredibly important."
Expanding Pepsi Zero Sugar: A Case Study
For Pepsi Zero Sugar, the DX identified "Loyals" – 10% of drinkers accounting for 60% of soda sales. Leveraging Most Valuable Shopper data, they identified households with a high propensity for adoption and selected key stores where these potential Loyals shopped. Shopper Marketing then tailored displays, coupons, and sampling, experimenting with messaging and pricing. This precise engagement significantly improved product sales, household penetration, and purchase frequency.
Developing Custom Solutions for Retail Partners
Large retail partners often presented complex problems requiring custom solutions. The DX designed marketing programs tailored to specific retailer needs, sometimes even down to the store level. Kent Montgomery, Vice President and General Manager, Global Customer Team, explained that retailers often lacked visibility into broader shopper behavior: "We were able to offer a data-based approach that systematically identified items that were selling outside [but in the area] of their stores."
Before undertaking custom work, the DX assessed the retailer's "will and skill" – their willingness and ability to implement proposed changes. Evan Shaver, Vice President, Shopper Analytics and Insights, noted: "We began to model ourselves like a consulting firm... It was imperative to understand the retailers who were eager and able to take action."
Creating Turnkey Applications from Custom Successes
When a custom solution proved scalable and cost-effective for other retailers, the DX converted it into a turnkey application, often with a user interface. A notable example was the Quaker Overnight Oats launch. Initially, a custom project identified "Most Valuable Stores" for the product. The process was then automated, reducing analysis time from three weeks to three days, and finally into a user interface delivering results in 30 minutes. This allowed hundreds of people to run analyses for various product launches. These turnkey solutions also enabled the DX to efficiently serve smaller retail players.
Engaging in Joint Business Planning (JBP)
The DX integrated its capabilities into PepsiCo's formal annual Joint Business Planning (JBP) process with its largest retailers. This process allowed PepsiCo and its partners to collaboratively plan activities to drive mutual growth. DX capabilities became central to the JBP value proposition, transforming retail relationships from transactional to collaborative.
Bryan Santee, Vice President, National Sales, PepsiCo Beverages North America, used a clock metaphor: "1:00 to 3:00 on that clock is a very transactional relationship... As you move around the clock, the relationship becomes more collaborative and cohesive... With the help of the DX team, we've shifted with many of these customers much farther into the collaborative side of the clock."
This shift, and a focus on a "three-audience win" (shopper, retailer, PepsiCo), positively influenced PepsiCo's reputation as a partner. Kantar's PoweRanking, which surveys retailers, named PepsiCo the #1 partner in North America for four straight years, reflecting retailers seeing better solutions from a unified PepsiCo.
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PEPWORX℠: A Suite of Data Analytics Capabilities for Retail Growth
By 2019, the DX formally packaged ten of its solutions into PEPWORX℠, a comprehensive suite of data analytics capabilities. PEPWORX℠ was offered as a complimentary service to help PepsiCo and its retail partners:
- Personalize and tailor product assortments for specific retail outlets.
- Optimize total store space.
- Manage marketing dollars more effectively.
- Successfully launch and manage innovative marketing programs.
Brand Accelerator: Cheetos Asteroids Relaunch
An example of PEPWORX℠ in action is the relaunch of Cheetos Asteroids. Despite being discontinued, social media demand existed. The DX Media and Data team used social media and shopper data to identify convenience stores most likely to serve this niche audience. Targeted messaging and precise product placement led to overwhelming success, with Jennifer Saenz remarking, "Cheetos Asteroids did far better than our expectation. We could not keep them in stock."
Space Optimization: Granular Planograms
PEPWORX℠ also tackled space optimization. Traditionally, retailers used uniform assortment across regions. The DX, however, realized assortment decisions should be more granular. They tagged individual stores with identifiers reflecting local shopper bases and created planograms for about seven distinct store profiles. Ankur Meghani, Senior Director, Space Optimization and Transformation, explained: "In many cases, we're advising retailers on the entire category. Can shoppers find what they want? Can they find other commonly co-purchased items? Can they find new items?" This granular approach drives revenue growth for both PepsiCo and the retailers.
A Drive Toward Deeper Partnerships and Future Potential
By its fifth anniversary, the DX was thriving. Leaders adopted a "Year One" mentality, akin to Amazon's "Day One," to encourage continued innovation and growth. They focused on expanding shopper insights' influence and integrating demand-side capabilities with PepsiCo's supply chain.
John S. Philips, Senior Vice President, PepsiCo Customer Supply Chain and Go-To-Market, highlighted the impact: "These efforts have created a connected supply chain with our customers that allows us to partner to drive store-level execution and topline sales." This deepened customer partnerships. Kirk Tanner, CEO, PepsiCo Beverages North America, envisioned the DX making "increasingly local impacts based on granular insights," supporting the vision to be "nationally great, locally even better."
The DX also invested in educating a wider audience within PepsiCo through forums, webinars, a DX portal, and DX University courses, sharing knowledge on machine learning and other advanced analytics concepts. Its success has led to replication in European and Latin American markets, fostering a global exchange of best practices.
Frequently Asked Questions About PepsiCo's Advanced Analytics
What is the PepsiCo Demand Accelerator (DX)?
The PepsiCo Demand Accelerator (DX) is a centralized unit established in 2015 to create and deliver data-driven marketing services across PepsiCo. Its primary goal is to use advanced analytics and shopper insights to drive granular sales growth and transform retail customer relationships from transactional to collaborative.
How did PepsiCo use data to understand shoppers better?
PepsiCo utilized its Next-Generation Advanced Analytics Platform to compile "Most Valuable Shopper" data. This vast database contained anonymized shopper-level profiles, US census data, weather data, and product shipment information. By analyzing over 1,800 attributes per shopper record, PepsiCo could gain granular insights into consumer behavior, preferences, and latent demand.
What is PEPWORX℠ and its key capabilities?
PEPWORX℠ is a suite of ten data analytics capabilities developed by PepsiCo's Demand Accelerator by 2019. It helps PepsiCo and its retail partners optimize store-level assortment and total store space, manage marketing dollars more effectively, and successfully launch and manage innovative marketing programs. It aims to differentiate PepsiCo in the marketplace through data-driven insights.
How did advanced analytics transform PepsiCo's relationships with retailers?
Advanced analytics, particularly through the DX and PEPWORX℠, helped PepsiCo transform its retail relationships from purely transactional to highly collaborative. By offering data-driven solutions that benefited retailers (e.g., increased margins, better assortment), PepsiCo earned trust and became a more consultative partner, engaging in joint business planning to achieve mutual growth.
What are some examples of PepsiCo's advanced analytics in action?
Key examples include the successful, targeted relaunch of Cheetos Asteroids using social media and shopper data to identify optimal store placements, and the implementation of granular, store-profile-specific planograms to optimize product assortment and space. The expansion of Pepsi Zero Sugar also leveraged shopper data to identify and engage potential loyal customers with tailored marketing efforts.