PepsiCo Channels Apple as Drink Makers Grab Design Ethos
Stock Chart for PepsiCo Inc (PEP)
PepsiCo Inc. (PEP) and MillerCoors are looking for some Steve Jobs magic.
In an effort to stave off competition from nimbler upstarts, the world’s largest snack-food maker has added a chief design officer to its c-suite. MillerCoors, battling craft beer makers, poached its innovation chief from Dyson Ltd., which re- invented the vacuum cleaner and commercial hand dryer.
Companies have tried to emulate Apple Inc.’s (AAPL) emphasis on style for years. After all, Samsung Electronics Inc. in August lost a patent suit over similarities to the iPhone. What’s different now is that more companies, even large ones, are trying to bake innovation and free-thinking into their corporate cultures. That’s why PepsiCo recruited a chief design officer, Mauro Porcini, from 3M Co., and MillerCoors snatched Dyson’s David Kroll as its new vice president of innovation.
Grafting a design ethos onto a company with 300,000 employees such as PepsiCo won’t be easy, said Bruce Hannah, who co-invented the Nerf football and teaches art and design at the Pratt Institute in New York.
“You can say, ‘Let’s create a design culture. Everybody wear blue hats today,’” Hannah said. “That’s lovely, but that doesn’t change the culture. What changes the culture is when people become engaged with their own ideas.”
Investors have rewarded Apple for its design prowess. The company has traded, on average, at a 32 percent premium to the Standard & Poor’s 500 Index during the past five years, according to data compiled by Bloomberg.
In recent years, some of the most successful beverage innovations have emanated from startups and small companies.
The Bobble water bottle, which comes with a filter built into the cap, was created by a New York couple who teamed with an industrial designer. The $10 eco-friendly bottle is sold in 40,000 stores from American Apparel Inc. to Macy’s Inc. and in 32 counties. SodaStream International Ltd. (SODA), an industry minnow, has built a $400 million business selling sleek carbonation machines that turn tap water into soda.
Technology makes it easier than ever for startups to bring a great idea to market and reach a profitable scale, said Brad Jakeman, President of PepsiCo’s Global Beverages Group. Large companies can no longer count on having an edge when it comes to manufacturing and distribution.
“Ideas have become more important than ever before,” said Jakeman, pointing out that Red Bull, the largest energy drink in the U.S. by retail dollar share, was turned into a global blockbuster by Austrian entrepreneur Dietrich Mateschitz.
Porcini, PepsiCo’s new chief design officer, held the same role at St. Paul, Minnesota-based 3M since 2002. He turned pedestrian Scotch tape and Post-it note dispensers into desk art, created sleek multimedia projectors and oversaw design of an LED ceiling Hoop Light that seems to float.
His unit’s designs were credited with boosting sales in an office-supply market with little differentiation. Just how much is hard to say, even for him. “It’s always tricky to take full credit with design for growth,” he said in an e-mail.
MillerCoors, a joint venture between SABMiller Plc. (SAB) and Molson Coors Brewing Co. (TAP), wants Kroll to bring some of the Dyson mojo to such brands as Coors Lite, Miller Lite and Blue Moon. Founder James Dyson spent 15 years and went through 5,000 prototypes designing a bagless vacuum cleaner that became the U.K.’s best-selling within 22 months of its debut.
“When you see everything that’s going on around you, it becomes clearer that design is a powerful thing,” MillerCoors Chief Marketing Officer Andy England said.
Beverage companies didn’t just discover design. Atlanta- based Coca-Cola (KO) hired a vice president of design, David Butler, in 2004. He laid out a 30-page design strategy for the world’s largest beverage maker that helped guide such innovations as the 120-flavor Freestyle fountain machine and the 2-liter contour bottle. PepsiCo, based in Purchase, New York, and MillerCoors, based in Chicago, already have several design-led projects under way that they declined to disclose.
PepsiCo hired Porcini largely because he created a design- led culture from scratch at a major company, 3M, Jakeman said. He has been asked to help rethink everything PepsiCo does. The effort is about more than simply jazzing up package graphics for brands including Pepsi-Cola, Mountain Dew, Gatorade, Lay’s, Doritos and Quaker.
“Innovation doesn’t necessarily need to start from a new science, or a new formula or a new product idea,” Jakeman said.
Jakeman wonders, for example, whether a plastic bottle in its original shape could have an alternative use after the beverage is consumed. Shapes of packages are up for grabs. Digital innovations will be reimagined. Do beverages and snacks have to be trucked from factory to warehouse to store, he wonders. Do they even have to be manufactured in a factory?
“It’s not what’s needed now but what might be needed in five years,” said Percy Hooper, who has taught design for 20 years at North Carolina State University following 10 years as a design consultant.
Porcini will work closely with PepsiCo’s research and development teams, as well as digital marketers. Such an approach has worked before. Nike Inc. (NKE) expanded its digital presence with Nike Plus, a transmitter runners can put in specially designed shoes to track workouts online. It’s the kind of thinking Jakeman wants to foster.
“Consumers search more and more for tailored, unique experiences,” Porcini said in an e-mail. “Retailers love differentiation, and new and up-to-date offerings.”
Kroll, who started this month, and was unavailable for an interview, most recently spent more than a year at Dyson, as a vice president for the U.S. and Mexico. He wrote the company’s five-year plan to double U.S. sales. Dyson’s team of designers have added bladeless fans that double as heaters to its product offerings.
MillerCoors already found success with its aluminum pint bottle, which is colder to the touch than glass. Now the company wants to make more use of plastic. England takes inspiration from ketchup companies that turned to plastic to prevent breakage, put the cap on the bottom to make the product easier for consumers and experimented with new shapes.
“Delivering elegant solutions is always the way to win and that’s our challenge,” England said. “We’re limited by our own imagination.”
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