‘Do what’s right’ and economic reward will follow, says Frito-Lay CMO Kumar

4/17/2008 - For Frito-Lay, doing business is no small potatoes. A $12 billion company within PepsiCo., it has been the fastest-growing snack food company in the United States for the last several decades. But over the past few years, Frito-Lay has faced serious challenges as consumers across the globe have been seeking ways to put their personal health, and the health of the planet, before satisfying their taste buds.

Although the company was the first to remove trans fats from its products and indicated this news on 11 billion of its packages, 85 percent of consumers were unaware of this change, said Frito-Lay CMO Jaya Kumar during an April 15 visit to the Kellogg School. How the brand is working to overcome misperceptions such as these was the subject of “Debunking the Junk Food Myth,” a lecture Kumar delivered to Kellogg students.

He explained that for Frito-Lay to continue growing by 8 to 10 percent over the next three to five years, required a significant change in its business model. The CMO’s visit, which was sponsored by the Kellogg School’s student-led Marketing Club, examined how the company has reinvented itself in the snack food industry, in part by using input from its 48,000 employees. Through ideas generated by its staff, Frito-Lay has shifted its strategy to focus on four elements: products, partners, the planet and people.

The company has improved communication with its consumers, beginning with its products. By changing its packaging and advertising on bags of Lay’s potato chips and Fritos corn chips, the snack food giant has begun to challenge the junk food perception. Lay’s, for example, has no preservatives and only three ingredients — potatoes, sunflower and/or corn oil and salt — Kumar pointed out. And those “farm-fresh” ingredients are highlighted on new packaging and in its advertising campaign. At the same time, Frito-Lay has been acquiring other snack food companies, such as TrueNorth nuts, and inventing new products, like Flat Earth veggie and fruit crisps, in an effort to provide healthful snack choices.

“One thing we’ve found is the intersection of health and wellness in sustainability is turning out to be a very big idea,” Kumar said. “If a product is made with the intention of being good for the earth, odds are it’s not junk.”

This perspective connects with Frito-Lay’s efforts to reduce its environmental impact. The company began recycling water in 1999, said Kumar, and has reduced the amount of water used to make its potato and corn products by 35 to 50 percent. Kumar detailed other Frito-Lay practices, such as waste reduction (by reusing its shipping cartons an average of five times before they are recycled), its invention of biodegradable food packaging, and the use of alternative energy sources, such as solar and wind energy in its plants, as proof of its promise to deliver on environmental sustainability. Many of these initiatives, Kumar added, came from frontline employees.

He emphasized the importance of trusting in an inverted pyramid to stay engaged with the consumer and to retain top employees, which is how people and partners fit into the Frito-Lay strategic plan. Kumar gave examples of how the company has empowered its consumers, by engaging them in the creation of its advertising for brands like Doritos and Cheetos, and he discussed the importance of its partnerships to deliver its products. Internally, Frito-Lay engages employees by treating them as a whole. He said that people become more engaged when they are able to bring their full selves to work, including their mind, body, spirit and heart, because it creates an environment for success.

Many of Kumar’s points were summed up with a statement he made during a question-and-answer session following the lecture: “If you have a choice between what’s right and what’s economical, do what’s right and the economics will follow.”