2. Entering new Company,
I often face a paradigm
Decisions were
determined on base
of logic and facts
I could see
another facts
And basing on the same logic
come to
another decisions
3. What is PepsiCo?
Pepsi’s mission is “we sell
soda”. Also Pepsi is a part
of Pepsico company.
While Pepsico mission is to
make money and investments.
It possesses a huge variety
of businesses all over the world.
Even shipping is among them.
In Russia, for example, Pizza-Hut
4. Separately all over the world
Lays and Pepsi-Cola are sold separately
by different companies all over the world
5. The same way in Russia, but…
There was a crisis in Russia in 1998
and many companies lost their sales
The sales of meat and bread were fine,
but all the extra-goods sales dropped
As the sales dropped the companies had
to reduce its staff
6. What did Lays do?
New-York HQ decided to give away
a part of the Lays business to Pepsi
and then after a period of 3 years make
the final decision — either Pepsi will
possesses all the Lays business or Lays
take it back
While in Moscow region Lays continued
its business operations, all the Russian
regions (the biggest part of the sales)
were transferred to Pepsi
7. So how did Lays give away regions?
They reduced staff, some
of the personnel trans-
ferred to Pepsi and Lays
business continued
Part of the time there
was a conversion period
and then started the
field work
…and Pepsi’s chips busi-
ness started to grow
and everything was fine
8. The “potato chips” crisis
Potato chips manufactures were located in Poland
A unique polish promo «money in a pack» blew
up the market and the manufacturing resources
were highly utilized
Most of the chips stocks were sold in Poland,
while the leftover exported to other countries
9. How did it influence Russia?
The market share dropped twice!
After the “potato chips” crisis both companies
(Lays in Moscow and Pepsi in regions)
started to get their market shares back
10. But the come back
wasn’t 100% successful
While Lays (Moscow region) reached
the same sales’ levels as it had got
before the “potato chips” crisis,
the Pepsi’s sales were a way too low
and nobody knew why
Both companies used the same
business operations and principles
as they had used before the crisis.
But only one of them was successful
11. The situation was getting worse
Lays couldn’t take the business back from Pepsi, because it lacked
its own business operations. While Pepsi understood that with
such poor results the Lays’ business would be taken away soon
12. There was no silver bullet
In such cases, when everything is done
according to the rules and procedures which
once have been successful and are success-
ful now (even with the other goods) — there
is not a single problem, which you can kill
with a “silver” bullet
13. In the same time at Pepsi…
— We need a volunteer
to get the $100M
business back on its tracks
14. That was a real challenge
So I had left Lays for Pepsi, where I become
responsible for all the chips operations
15. So what did I find?
Devil is in the details –
there was an urgent need
for a team work between
many business units
16. Those units were
1. Logistics
2. Stocks
3. HR
4. Distribution
5. Sales
6. Sales marketing
7. Procurement
17. Stocks
During the crisis Pepsi’s stocks had become empty
and chips were shipped directly to distributors
18. That led to stocks closing
Stocks were closed and there
was no place for the goods
19. In regions it looked like this
Distributors bought chips only once a month,
while soda was bought every day
Unstable shipment = permanent out of stock
Trucks with Pepsi-Cola were underloaded —
there was only 19,5 tons of water pallets
and the rest of the truck space was free
1
20. So I proposed the next approach*
*in the central region
Chips
We built a warehouse for the chips and loaded 500 kg
of them into each truck with Pepsi-Cola. That was
a usual one day of sales for a client
500 kg of chips19,5 tons of soda
21. That allowed us to save money
Because of the proposed approach
the chips shipment became free and
we invested the saved money into
the development . Everything was
achieved using existing resources only
22. Logistics
Planning managers receive a bonus when
there are no delays and out of stock cases
simultaneously
After the crisis in a case with a short supply
of chips Pepsi overestimated the demand.
The shipped goods weren’t sold and had to
be discarded
The managers had been fined and were
afraid to order more goods
23. Despite the former fines
By taking the responsibility for any consequences I was able to convince
the planning managers to order more goods when it was necessary
Due to my good understanding of the key distributors I was always able
to keep my promises
24. Procurement department
Lays had its own order processing system
and Pepsi had its own “making order”
principles — the business processes didn’t
meet each other and orders from Pepsi
were not always proceeded as needed
Due to my knowledge of the “Lays’ inside
kitchen” I was able to organize effective
cooperation
25. Distribution
Overestimated market demand led to
huge amount of leftover goods at stores,
which started to go bad
The wholesalers could not buy more
goods (they had got full stocks already)
So the leftover goods were sold with
a huge discount to the retail outlets
26. The stagnation was getting worse
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The wholesalers couldn’t sell their stocks to the retail
shops with a price higher than what Pepsi had offered
when it sold the leftover goods
Wholesalers’ goods expired and they didn’t order more
27. How did we fix it?
I hold several personal meetings with the biggest
wholesalers and assured them in a stable pricing
policy of Pepsi company
Then I coached Pepsi employees to make such
negotiations by themselves and they successfully
did that with the rest of the wholesalers
Thereby the problem of resumption of the
shipments to the wholesalers was solved
28. Sales
Pepsi goods are cheap and heavy
Distributors don’t move it from one
region in to another
At the shops the business is protected
with a cooler
29. How does a cooler help?
If you set up a cooler the shops will
always make orders. It means that
a cooler increases sales several times
You allow to put in the cooler only
those goods you sell
30. But it is different with the chips
Chips are cheap and lightweight goods
When a truck drives between cities with
a cargo of sunflower oil the chips are
moved for free, just putted on top of the oil
pallets with bottles
Retail shops don’t consider potato chips as
one of the most profitable goods to sale and
also you can’t protect your business (as a
supplier) with cooler
31. It’s easier for the others to enter the market
There are such distributors which
ship different kinds of chips, as it
is profitable and convenient for
the shop
32. The consequences were dreadful
After the chips crisis such distributors
won the competition with Pepsi
33. So I made a knight’s move
Russia has become the first country
with two distributors on the same
territory simultaneously
The first one delivered
water and chips
The other one —
only chips
34. How did we do that?
I hold several meetings with the biggest
distributors and developed negotiation
methodology for such cases
Then I coached Pepsi employees to make
such negotiations by themselves and they
successfully did that with the rest of the
distributors
35. How did we do that?
We built a model where Pepsi sold chips to some part of the retail
shops, while the other distributor (multi-chips) sold its goods to
the rest of the retail shops in region, but due to a signed contract
with Pepsi, that distributor promoted and sold Lays most of all
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36. The model’s details
Pepsi signed a contract with a multi-
chips distributor and allowed to make
business on its own
At the retail outlets both distributors
sale goods with the same prices without
dumping
At the key points sales were performed
only by a Pepsi distributor
37. Sales marketing department
Such department did not exist before
There were trade marketing budgets
which accounted as a pure margin
every year, because they weren’t spent
I created trade marketing department,
where I deployed policies and prin-
ciples which fit the chips market
$
38. What were the final results?
In one year the Pepsi team successfully
took away the Lays business in Moscow
And still it sells the Lays products using
it is own resources
Nowadays Pepsi includes WimBilDan,
Lebedyan and many other brands
39. If told in numbers…
It was the first
successful sales
experience of the
non-water products
Central region market
increased by 50%
Regions market
increased by 25%
Chips market
increased by 15%
40. What happened to me after the case?
I was promoted to the next
challenging position inside
the Pepsi company while
my former post was given
to another Pepsi employee
