Pepsico’s technology trends and innovation strategies: A brief walkthrough

A company as big as Pepsico needs no major introduction. It is one of the most popular and widely recognised food, snacks and beverages corporations that divides its products into five major categories: Pepsi-Cola, Frito-Lay, Tropicana, Quaker, and Gatorade, and each category has plenty of brands. Pepsico’s net revenue in the year 2014 was USD 66,683 millions of which the net revenue percentage of US was 51% against 49% of the countries outside US.

Ever since the inception of the company, Pepsico’s approach towards innovation has been quite holistic. It didn’t restrict its focus to beverages only. While most of the consumers picture Pepsico as a cola manufacturer predominantly, the surprising fact is that carbonated beverages now make up about 40% of its North American drinks business, down from more than 50% a decade ago as its snack business is offsetting weakness in company’s US soda market. Intriguingly, 53% of company’s net revenue came from food and 47% from beverages in the year 2014 despite being recognised as a beverage manufacturer in the first place than a food and snacks manufacturer.

Brief History

If we take a look at Pepsico’s patent portfolio, there are 2156 utility patents and patent applications and 970 design patents and design applications assigned to Pepsico till now (Source: Stellarix). Pepsico’s early patent filing trend portrays a very erratic approach. Intriguingly, they had patents that have nothing to do with what the company currently envisions – Foods and beverages! They had patents on sports rackets (US4389269 A) and golf clubs (US4471961 A).

Sports racket

Golf club

Perhaps, Pepsico had plans of venturing into the sports industry back then. But it seems as though they soon realised it may not reap them generous rewards in the future.

Current Trends

The present times show a very promising picture of the company. Pepsico has been successfully able to build a diverse brand portfolio that appeals to – 1. the masses like lays, pepsi, cheetos, doritos etc and 2. products that appeal to the more health conscious segment like baked lays, Tropicana, Quaker est. From a commercial perspective, protein rich foods are red hot right now. Proteins not only keep you satiated for longer hours but they also assist in repairing muscles and losing excessive body fat. Knowing that it’s a huge market that they could tap into, Pepsico has filed a patent US 20130230629 A1 for a method of manufacturing protein beverages to target female health-conscious audience. Similarly, one of their patent applications US20150110940 A1 talk about the inclusion of D-Psicose In Zero Or Low Calorie Frozen Beverages like slushes and Slurpees; and patent application US20140342043 A1 talks about Rebaudioside sweetener which could possibly be used as a alternative to aspartame, saccharine or sucralose which have been criticized lately for their side effects. One interesting patent application US20150017614 A1 that caught our attention talks about a method, grounded in sports science and sports nutrition, to assist individuals with managing their fuel consumption at different points during training and competition.

Here’s a look at the patent distribution trend of Pesico for last 5 years:

The above bar chart indicates the distribution of PepsiCo's utility patents on the basis of patent categorization. Source: Stellarix.   Jurisdiction: Global

The above bar chart indicates the distribution of PepsiCo’s utility patents for the last 5 years. Source: Stellarix. Jurisdiction: Global

The above pie chart indicates the distribution of patent based on the categorization of patents filed by PepsiCo. Source: Stellarix. Jurisdiction: Global

The above pie chart indicates the distribution of utility patents based on the categorization of patents filed by PepsiCo. Source: Stellarix. Jurisdiction: Global

The above pie chart indicates the distribution of design patents based on the categorization of patents filed by PepsiCo. Source: Stellarix. Jurisdiction: Global

The above pie chart indicates the distribution of design patents based on the categorization of patents filed by PepsiCo. Source: Stellarix. Jurisdiction: Global

Not only do they have patents for foods and beverages innovations, they have filed a lot of patents for dispensing devices. The two pie charts below show the categorization of pepsico’s patent portfolio.

The interesting fact to take notice of is the high number of display unit/system and dispenser/vending machine patents in both the pie charts. Pepsico definitely wants to counter Coca Cola’s recent moves of installing interactive vending machines by filing design patents. The company also announced a pilot rollout of its interactive vending machine (US20130106690 A1) to counter Coke’s interactive vending machines.

Pepsico’s interactive vending machine

This machine allows buyers to also compete in an on-screen random chance game to win a free 20-ounce bottled beverage that can be redeemed immediately or at a later date at any Pepsi Interactive Vending machine. They can also charge their mobile devices while enjoying a PepsiCo beverage by plugging into specially designed AC power outlets and USB ports directly from the machine.

Another new invention mentions US20150053715 A1 provides methods and systems for dispensing fluids, such as beverages, using wireless technology.

Pepsico heavily focuses on innovating their packaging technologies. It has made an interesting move by filing a patent for making paper bottles (WO2013192260). Making paper bottles is certainly not new. The UK company-GreenBottle introduced the world’s first paper milk bottle in 2007. Pepsico’s patent proposes a different method of manufacture.  You might not see your Pepsi served up in these bottles, as high levels of carbonation may prove problematic for the packaging design. However, Pepsico owns Gatorade, Sobe Lifewater, Naked Juice and Tropicana and is partners with Starbucks ready-to-drink beverages. These are all possible applications for the new paper bottles. Such a move will encourage other companies to manufacture innovative recyclable products to reduce the amount of plastics in the waste stream.One of their packaging patent applications WO2013032631 claims to make your drink more aromatic. This will make products smell more natural to the consumers rather than plastic-like or aluminium-like.

Being an F&B company, it’s apparent why Pepsico holds the maximum no. of patents in the foods and foods’ processing category. An interesting patent application US20140272009 A1 caught our attention which talks about chewy granola bars containing carbonated candy. If granola bars alone don’t appeal to kids much, a combination of granola bars with a Pop Rocks-like candy might just do the trick.

Unlike other big players, Pepsi is lagging behind in fully embracing open innovation. Though, few of their brilliant marketing initiatives focus on finding new innovation partners and achieving technology breakthroughs. Some of them are listed below:

  • The PepsiCo10 contest looked to match startups in fields like social media, communications, technology and mobile marketing with industry mentors and PepsiCo brands.
  • The “Break to Reset” contest asked for totally new snack ideas “designed specially to help working adults have a break, clear their mind, refuel, regain a positive attitude and get on with their day.
  • The “Munching Partner”contest was meant to get new ideas for snacks “that will help working men and women get through long working hours.
  • The “Friends and Couples” contest was asking for innovative ideas of “new snacks that will help adults succeed whenever they host a social reunion.

In a recent move Pepsico hired Luke Mansfield of Samsung Electronics as the VP of Global Innovation. Previously, PepsiCo had put less-senior executives over innovation or kept it at the brand level. But Brad Jakeman, president of PepsiCo’s Global Beverage Group, said “we decided to elevate this to a VP-level role because of the significance of our commitment to innovation and also the shifts that are taking place in consumer demand around beverages globally.”

In February 2011, Pepsico was accused of using carcinogenic additives in Pepsi and Diet Pepsi. Like most other food companies, Pepsico is also prone to controversies and allegations on the company’s flagship brands. Now that Maggi (a Nestle product) is under FSSAI (Food Safety And Standards Authority of India) scanner for containing excessive amounts of lead and other substances beyond the permissible limits, many other major brands maybe on the FSSAI radar posing a threat to Pepsi products as well. In current times where the consumers are being more aware of the ethical, social and health issues, such controversies may deeply dent the confidence of its consumers and shareholders in the company. The rising competition on the other hand poses a serious challenge to the company. Such competitions sometimes lead to legal battles. One such case involves the legal battle between Pepsico and Coca Cola for infringement of IP claiming Pepsico’s Trop50 brand of fruit juices copies the patented and trademarked look of Coca-Cola’s billion-dollar Simply juice line. Soon, another lawsuit came to haunt Pepsico where it was accused of patent infringement by an Oregon-based inventor for using his patented packaging designs in its Gatorade G series pouches.

What should we expect from Pepsico in the years to come?

There’s still scope for Pepsico to increase its spending on food in emerging markets. Developing and emerging markets have significant growth potential for Pepsico, thanks to an expanding middle class, which is fueling demand for convenience food and beverages. We could possibly see Pepsico expanding aggressively in countries such as China, Brazil and Africa and also developing markets such as Russia and Mexico.

We could witness changes in consumer preferences by creating opportunities in the health and nutrition space. We could probably see low or zero calorie beverages with new and innovative artificial sweeteners and healthy snack bars for kids and youngsters.

We could see bigger innovation teams within the company and witness an aggressive approach towards open innovation to achieve technology and innovation breakthroughs in the future.

By engaging with young consumers, keeping consumers’ desire for healthier beverages top-of-mind, using digital platforms to drive engagement, and making strategic new hires around innovation, we believe Pepsico will continue to be a relevant player in the future.

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