STRATEGY FOR DECISION MAKING

PROF. JUSTIN F KEOGAN

ASSIGNMENT ON

INDIVIDUAL CASE STUDY: PEPSICO INDIA

WORD COUNT:
3215

DATE:
13/06/2018

NAME:
SHUBHAM DHAKATE

STUDENT ID:
x17157501

TABLE OF CONTENTS

Page 1 of 17
1. INTRODUCTION:.............................................................................................................................4

2. ANALYSIS AND ASSESSMENT: PEPSICO INDIA’S CSR.............................................................7

2.1 Extent of Obligation for Social and Ethical Responsibility.....................................................................7

2.2 Challenge of resolving tension between Profitability and Social Responsibility.....................................9

2.3 Extent of compromise between two different purposes of Profitability and Social Responsibility and

Extent of conflict between Short-term Profitability and Long-term Corporate Citizenship......................10

2.4 Is there a business case for PepsiCo’s “Performance with Purpose” mission?...................................11

2.5 Is “Performance with Purpose” mission a genuine commitment or a ‘PR stunt’?................................12

3. CONCLUSION................................................................................................................................14

4. RECOMMEDATIONS.....................................................................................................................15

REFERENCES......................................................................................................................................16

TABLE OF FIGURES

Page 2 of 17
FIGURE 1: PEPSICO’S GLOBAL ORGANISATIONAL PRESENCE 5

FIGURE 2: PEPSICO INDIA’S CSR PARTNERS 5

FIGURE 3: CARROLL’S PYRAMID OF CSR 8

FIGURE 4: TENSION OF ORGANIZATIONAL PURPOSE BETWEEN PROFITABILITY

RESPONSIBILITY 9

FIGURE 5: TENSION AS PARADOX 10

FIGURE 6: CRADLE-TO-CRADLE CERTIFICATION 13

LIST OF ABBREVIATIONS
Page 3 of 17
CSR CORPORATE SOCIAL RESPONSIBILITY

PR PUBLIC RELATIONS

TERI THE ENERGY AND RESOURCES INSTITUTE

CAF INDIA CHARITIES AID FOUNDATION INDIA

ILO INTERNATIONAL LABOR ORGANISATION

1. INTRODUCTION:
“PepsiCo products are enjoyed by consumers one billion times a day in more than 200 countries
and territories around the world. PepsiCo entered India in 1989 and in a short period, has grown

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into one of the largest MNC food and beverage businesses in the country. PepsiCo’s growth in
India has been guided by “Performance with Purpose”, its goal to deliver top-tier financial
performance while creating sustainable growth and shareholder value” (PepsiCo India, 2018).
PepsiCo India is one of the major arm of PepsiCo Asia, Middle East & Africa division.

FIG 1: PepsiCo’s Global Organisational Presence

According to PepsiCo India, through the mission of “Performance

with Purpose”, “the company will strive to deliver top-tier financial CAF
TERI ILO
INDIA
performance while creating sustainable growth and shareholder
value. In practice, “Performance with Purpose” means providing a
wide range of foods and beverages from treats to healthy eats;
AKSHAY PATRA EXNOR
finding innovative ways to minimize our impact on the environment FOUNDATION A
and reduce our operating costs; providing a safe and inclusive
workplace for our employees globally; and respecting, supporting,
and investing in the local communities where we operate” (PepsiCo ALTERNATIVE
DEVELOPMENT INITIATIVE
India, 2018). To effective implement the “Purpose” section of
mission, it entered in partnerships with numerous NGOs and
institutes.

FIG 2: PepsiCo India’s

CSR Partners

TABLE 1: PepsiCo India’s CSR initiatives

Sr.No Category of CSR initiative Implementation

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Human Sustainability
1.
(Kanter et al., 2011)
2. Environmental Sustainability
(Kanter et al., 2011)
Replacing Palm Oil with Rice-Bran oil in snacks
(Reduced saturated fat by 40%)
Classified products in three segments viz. “Good-for-
You”, “Better-for-You” and “Fun-for-You” which helps in
catering to diverse Indian population
Launched products which address issues of growing
Indian Middle Class and persistent large number of
bottom-of-pyramid populace.
Introducing global healthy brands like Tropicana and
Gatorade to Indian markets
Developed whole grain and vitamin fortified version of
Cheetos
Premature launch of Diet Pepsi in India despite
consumer awareness for the product
Developed low-cost, nutrient-rich foods and beverages
for underprivileged and malnourished people under
“Project Asha”
Collaborating with small-less farmers and incorporating
their produce
Stress on increasing sales of healthy brands from 30% in
2010 to 50% in five years
Cultivation of Barley and Oats by PepsiCo India
Investment in Manufacturing Efficiencies
Conserving more water than consuming – Positive water
balance – first beverage company in the world
Promotion of waste collection in communities
26% energy from renewable sources
To launch pilot project of plant-based packaging in India
-  first-ever 100% compostable, plant-based packaging
for Lay’s and Kurkure snacks products (The Times of
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Talent Sustainability
3.
(Kanter et al., 2011)
India, 2018)
Cut plastic usage in bottle caps by 200 metric tons
between 2008 and 2010
50% weightage for talent sustainability in manager’s
performance development review
“Purpose” related questions in interviews while hiring
new prospective employees and performance evaluation
of existing employees
HIV/AIDS prevention and support program

2. ANALYSIS AND ASSESSMENT: PEPSICO INDIA’S CSR

This section aims to answer various questions raised concerning PepsiCo India’s initiatives to
address social issues viz. How much it should get involved in CSR? Towards whom their principle
responsibility is? Is there a business case for contributing to society? etc.

2.1 Extent of Obligation for Social and Ethical Responsibility

Social Responsibility – It is company’s commitment to maximize its positive impact and curtail its
adverse bearing on society. It emphases on the level to which industries meet the legal, ethical,
economic, and voluntary responsibilities placed on them by their stakeholders. However, there is
still no consensus on how the organizations should approach the social responsibility in
appropriate manner and how much they are obligated. The two most dominant but contrasting
theories regarding this topic were put forth by Milton Friedman and by Carroll.

a) Milton Friedman’s theory

“The Business of Business is Business”

-Milton Friedman
According to Friedman, the firms do not have any responsibilities towards society but instead
towards their shareholders. The chief duty of the organization is to generate profits by abiding
laws. Only Individuals can be held morally liable for the actions and thus it absolves
organization’s role. Social issues and problems are the proper province of the state rather than
corporate managers. It is manager’s / employee’s responsibility to act solely in the interests of
shareholders. “The stockholders or the customers or the employees could separately spend

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 their own money on the particular action if they wished to do so” (Friedman, 1970). According
to Friedman’s theory, social responsibility stops at law and thus there is no further obligation to
act morally beyond that stage.

b) Carroll’s theory
According to Carroll, Ethical motivations and issues plays a vital role in the of Corporate Social
Responsibility and it thus gets subsumed in all four of the Corporate Social Responsibility
categories of Carroll’s Pyramid of Social Responsibility. This pyramid laid down four
responsibilities which create a foundation or infrastructure that elaborates in detail and helps
to understand the nature of businesses’ responsibilities to the society of which it is a part.

FIG 1: Carroll’s Pyramid of CSR

According to Carroll’s theory, responsibility doesn’t stop at law rather it extends all the way till
social giving. This theory accommodates view that “Business don’t work in isolation” as there
exists certain degree of interdependency between the businesses and the society.

Going through PepsiCo’s CSR activities as highlighted in Section 1, we can clearly infer that
they are not just limiting themselves to Economic and Legal responsibilities but rather are
following Carroll’s model. Furthermore, it can be posited that, they are right in the sense as
their stakeholders are millions of consumers, thousands of farmers (who provide raw material
in enormous quantities) and environment (as they consume millions of litres of water). Thus,
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 they ought to be held liable for any harm caused to them. PepsiCo India cannot be just
answerable to shareholders. According to Ha-Joon Chang, Ease-of-exit make shareholders
are unreliable guardians of company’s long-term future. They lookout for short-term profits at
expense of long-term future. Hence, PepsiCo should be accountable to stakeholders too.
PepsiCo India can leverage its position of global giant, years of experience, and robust
finances to contribute to social giving. Thus, PepsiCo has rightfully crafted its extent of role in
social responsibility and is adhering to it with presented circumstances.

2.2 Challenge of resolving tension between Profitability and Social Responsibility

FIG 2: Tension of Organizational Purpose between Profitability and Responsibility

PepsiCo India has been investing heavily in sustainable practices since 2006. It is striving to
transform its portfolio of product offerings, optimizing its production process to be efficient and
partnering with farmers to uplift their livelihood. But in recent years PepsiCo India is facing
challenges on multiple fronts with falling sales, revenue and market share. “Not only has the
company lost considerable market share in aerated beverages, it has also been toppled from its
numero uno position in the Rs 21,600 crore snacks market by regional brands such as Haldiram
and Balaji”(Shashidhar, 2018). “Squeezed from all sides, American food and beverage giant
PepsiCo Inc. is struggling to find its feet in India, 28 years after it first stepped into the country.
PepsiCo India Holdings Pvt. Ltd, maker of Kurkure, Quaker Oats, Pepsi and Gatorade, ended
fiscal year 2017 (FY17) with a revenue of Rs 6,540 crore, its filings with Registrar of Companies
(RoC) show, less than its 2012-13 figure of Rs 6,994.8 crore” (Mitra, 2018).

This figures naturally tempt CEOs to cut operational costs, curtail spending and withdraw from
social responsibility initiatives. For example, substituting rice-bran oil for palm oil cost $5 million
and reduced its margin on some brands (Kanter et al., 2011). Still the organization remained
committed to this initiative and decided to bear the cost of replacing oil in anticipation of changing
consumer preferences in future. Also, PepsiCo India invested heavily in Diet Pepsi to contribute

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 for its human sustainability program when the market was in nascent stage for such products and
naturally sales were weak.

“Putting profits after people and products was magical at Ford”

-Don Petersen, Former CEO, Ford, 1994

This proves that, despite challenges of strained balance sheet and stiff competition, PepsiCo
remains steadfast for its “Performance with Purpose” mission.

2.3 Extent of compromise between two different purposes of Profitability and Social
Responsibility and Extent of conflict between Short-term Profitability and Long-term
Corporate Citizenship
No doubt, there would be times when trade-offs to be
made up between social giving and desire for strong
financial performances. But according to Collins and
Porras (2002), companies need not brutalize
“Tyranny of the OR”—the purely rational view that
says you can have either A OR B, but not both.
Visionary companies like PepsiCo India can instead
embrace the “Genius of the AND”—the paradoxical
view that allows them to pursue both A AND B at the
FIG 3: Tension as Paradox
same time.

However, Carroll’s theory states that a company

should prioritise economic responsibility over other obligations during challenging times. “ Profit is
like oxygen, food, water, and blood for the body; they are not the point of life, but without them,
there is no life” (Collins and Porras, 2002). Thus, absolving PepsiCo India of any CSR during its
bad phase.

PepsiCo is reconciling its dual objectives of Profitability and Responsibility. It is linking CSR
initiatives with core business objectives to benefit by best of both. For example, PepsiCo India is
now replenishing more water than consuming due to introduction of series of water management
practices. This not only conserves water but also guarantees water supply to the production in the
advent of water scarcity. Thus, it achieves both goals of CSR and Profitability.

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 TABLE 2: CSR initiatives contributing to both Profitability and Responsibility

Sr.No. Initiatives CSR Long-term Profitability

1 Collaborative farming (Direct seeding, Yes Yes – Guaranteed food supply at pre-
training) agreed price. Gives operational
certainty
2 100% Recycling and Reuse of Plastic Yes Yes – Avoiding future environmental
by 2025 regulation
3 26% power from renewable energy Yes Yes
4 Human sustainability program Yes Yes – Consumer preference for safe
and healthy food
5 Water Management Yes Yes – Assured water supply and
savings in water bill

“Profitability is a necessary condition for existence and a means to more important ends, but it is
not the end in itself for many of the visionary companies” (Collins and Porras, 2002). The shortest
way to maximise profits is to cut costs. But cutting costs also means curtailing investment on long-
term productive assets which undermines future profitability. PepsiCo India is aiming at BHAG
(Big Hairy Audacious Goal) of 100% plastic recycling by 2025. By doing this, it will certainly have
to give up short-term on margins or on product sales and even market share, but it aims for value
creation which will pay-off in future. It is adopting mantra of “Clock Building”, seniors executives
are transforming PepsiCo India into a company which will continue prosper beyond the tenure of
single chief executive.

Thus, PepsiCo India is partly successful marrying two concepts of short-term profitability and
long-term social responsibility like Yin and Yang without necessarily blending the two divergent
purposes.

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2.4 Is there a business case for PepsiCo’s “Performance with Purpose” mission?

“Be good in the way you make money, not just the way you give it away.”

- Alain De Botton

Yes, there is business case for PepsiCo’s mission. According to Reputation Institute, “92% want
to do business with brands that share their beliefs. 87% believe business should place at least
equal weight on business and society. 71% of people think large companies should be actively
involved in solving social problems”.

CSR which encompasses sustainability, corporate foundations, employee volunteerism, social

giving, etc. helps organizations in managing risk and reputation, consumer demand, Talent
retention, avoiding regulation and convincing stakeholders of doing good business. In recent
years, increasing number of companies are treating CSR as mainstream stream function of the
Organization. According to Tonello (2011), CSR is a viable business choice as it is a tool to:

Implement cost and risk reductions

Gain competitive advantage
Develop corporate reputation and legitimacy
Seek win-win outcomes through synergistic value creation

However, the trend of talent retention due to CSR is not being observed in PepsiCo India. Instead,
there growing number of executives leaving the organization in recent years. Hence, the claim that
CSR can win-win situation can be disputed depending upon the circumstances and challenges
faced by the company and cannot be generalized across the corporate sector.

2.5 Is “Performance with Purpose” mission a genuine commitment or a ‘PR stunt’?

Yes, it is genuine commitment and cannot be labelled just a PR stunt as it mostly satisfies to 5
goods by William McDonough.

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 Good Materials Reduced sugar and sodium content. Rice-bran oil in snacks

26% energy from renewable sources. Still, much room for

Good Energy
improvement

Good Water More water replenished than consumed

Good Economy Collaborative farming to develop shared and circular economy.

Good Lives Involvement in local community development

PepsiCo India’s CSR activities encompasses comprehensive contribution to society. It satisfies all
5 parameters for ‘being good rather being just less bad’.

Instead, it can be said that the PR management of PepsiCo is weak. When the organization made
healthy changes in their beverages and snacks viz. substituting rice-bran oil for palm oil and
reducing sugar / sodium content, they didn’t advertise them publicly and chose to do noble deeds
without much fanfare. Also, when the company was falsely accused for Pesticides in Pepsi drink
and Plastic in Kurkure snack, they could not counter malicious rumors and took hit on brand
credibility. Hence, it also cannot be accused for public relations exercise or mere ethical washing.

Is it doing enough to resolve tension between Profitability and

Responsibility? Overall Yes, but there are some few failures too.
PepsiCo India is currently facing talent crunch at senior management.
Many executives have chosen to opt for resignation from PepsiCo due
to growing revenue and sales generation pressure. This contradicts
claim that CSR initiative can make employees feel good in working in
firm and help in talent retention

Furthermore, there is much room for improvement in CSR. According to

McDonough and Braungart (2002), companies must develop production
process which is not only sustainable but also regenerative – technical
and biological nutrients regenerate back to existence. There should be
FIG 4: Cradle-to-
emphasis on system which is akin to cradle-to-cradle and rather than
Cradle Certification
like cradle-to-grave. For example, when technical nutrients like plastic is

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 recycled, it should be upcycled and not downcycled (Recycled product of lower quality than that
of original product). Also, companies should avoid hybridization of biological and technical
nutrients to exclude unwanted add-ons.

PepsiCo India has opportunity to develop regenerative system and attain cradle-to-cradle
certification which can help the business to be rightfully called as “socially responsible”.

3. CONCLUSION
Inarguably, shareholders are most exposed to performance of the company and thus their
decisions and interests should be prioritized. However, as we know that businesses don’t work in
isolation from society, firms should also be held liable by their stakeholders. PepsiCo India, by
adhering to Carroll’s theory is harmonizing relationship with the society which is critically linked to
sustainable business growth and long-term success.

Business Ethics and Corporate Social Responsibility should be part of organizational strategy
rather than just an add-on. No doubt, it will create tension in aspects of profitability – which will be
perceived going against self interest of the company. But by systematic planning and
orchestrating a “win – win” strategy addressing both profitability and social responsibility, PepsiCo
India can accomplish contrasting goals simultaneously.

Companies should be pragmatic and follow consequentialist approach to emphasize short-

profitability as it is vital to maintain operations and reduce exposure to debt. Also, burdening
corporate organizations with social and ethical responsibilities can divert from their primary
domain goal. That being said, firms can invest for long-term in production efficiencies, sustainable
productive assets and technologies with consume less natural resource – all which is considered
as contribution to CSR, as it will create value in the future and pay-off for itself.

It is essential that PepsiCo India’s CSR is not perceived by public as mere ethical washing despite
putting genuine efforts. False rumors in past about deceptive product quality had damaged
PepsiCo India’s brand reputation. Additionally, with recent advent of social media such rumors
spread rapidly.

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 By obtaining Cradle-to-Cradle certification, PepsiCo India can not only boast about its product
quality and up-to-date regenerative practices but will also have verifiable proof to project its
genuine intention for making difference in the society.

4. RECOMMEDATIONS
PepsiCo India can take some clues from Coco-Cola India with respect to social responsibility.
According to Coca-Cola India, some their notable initiatives are as follows:

a) Training about 50,000 small food vendors in doing smart business.

b) Help distributors and retailers in digital transactions.
c) Upskilling Micro-entrepreneurs under “Parivartan” and “Pragati” Schemes.
d) Involvement in making slums open defecation free
e) Contribution for clean schools
f) Coca-Cola in partnership with TERI university has started offering MSc and M.Tech in
Water Science. Even the department in TERI university is named as Coca-Cola
Department of Water Studies.
g) Coca-Cola India has introduced Reverse Vending Machines in India for recycling plastic
waste.

Thus, PepsiCo India can follow foot-steps of Coca-Cola India to make its “Performance with
Purpose” more socially effective.

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REFERENCES

Coca-Cola India (2017) message in the bottle – Sustainability Update 2016/2017

[Online] Available at: https://www.coca-colaindia.com/content/dam/journey/in/en/private/sustainability-
report-2016/water/SR-29-Aug--17.pdf
[Accessed 07 June 2018]

Collins, J. C. and Porras, J. I. (2002) Built to Last: Successful Habits of Visionary Companies. New
York: Harper Business.

Collins, J. (1995) Jim Collins - Articles - Building Companies to Last

[Online] Available at: https://www.jimcollins.com/article_topics/articles/building-companies.html
[Accessed 10 June 2018]

de Wit, B. and Meyer, R. (2005) Strategy synthesis: resolving strategy paradoxes to create
competitive advantage. 2nd ed. London [etc.]: Thomson.

Dudovskiy, J. (2012) Carroll’s CSR Pyramid - Research Methodology

[Online] Available at:

https://research-methodology.net/carrolls-csr-pyramid-and-its-applications-to-small-and-medium-
sized-businesses/
[Accessed 10 June 2018]

Kanter et al. (2011) PepsiCo India: Performance with Purpose

[Online] Available at: https://moodle.ncirl.ie/pluginfile.php/708744/mod_resource/content/1/PepsiCo
%20India%20-%20MSc%20IBM%20Case%20Study.pdf
[Accessed 25 May 2018]

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McDonough, W. and Braungart, M. (2002) Cradle to Cradle: remaking the way we make things. 1st
ed. New York: North Point Press.

Mitra, S. (2018) PepsiCo’s midlife crisis in India

[Online] Available at: https://www.livemint.com/Companies/V5SxXWA0oicnJFmAXNZaqJ/PepsiCos-
midlife-crisis-in-India.html
[Accessed 06 June 2018]

PepsiCo India (2018) PepsiCo India - About PepsiCo

[Online] Available at: http://www.pepsicoindia.co.in/Company/about-Pepsico.html
[Accessed 05 June 2018]

PepsiCo India (2018) PepsiCo India - Partners in CSR

[Online] Available at: http://www.pepsicoindia.co.in/purpose/partnersincsr.html
[Accessed 05 June 2018]

Shashidhar, A. (2018) Is PepsiCo really serious about India?- Business News

[Online] Available at: https://www.businesstoday.in/current/corporate/is-pepsico-really-serious-about-
india/story/274738.html
[Accessed 06 June 2018]

The Times of India (2018) PepsiCo to launch plant-based packaging

[Online] Available at: https://timesofindia.indiatimes.com/business/india-business/pepsico-to-launch-
plant-based-packaging/articleshow/64456745.cms
[Accessed 06 June 2018]

Tonello, M. (2011) The Business Case for Corporate Social Responsibility

[Online] Available at: https://corpgov.law.harvard.edu/2011/06/26/the-business-case-for-corporate-
social-responsibility/
[Accessed 10 June 2018]

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