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Appearance of PepsiCo's Ram Krishnan at Beverage Digest's Future Smarts conference yesterday was fortuitous in coupla ways. For one, N Amer bevs chief had just gotten bump to CEO of entire biz, including food/snacks. And this has happened at time of uncommon flux at soda giant, which has set bunch of new or accelerated initiatives as it thrashed thru its performance issues of recent years with activist investor demanding fresh thinking. Chatting with Bev Digest owner/editor Duane Stanford, Ram was happy to delve into range of areas where he expects PEP to be doing better soon. "Possibilities are limitless," he vowed as he touched on key areas where co needs to improve. One is a broad brand rethink for portfolio "which was not oriented to vectors of growth." So role of each brand is being analyzed as to its strengths and target consumers. Related to that, co needs to systematically address portfolio gaps. One is "functional soda," a gap filled with acquisition of Poppi brand and launch of Pepsi-branded Prebiotic Soda. And while PEP has played in protein for a long time via acquired Muscle Milk brand, it has lost relevance in burgeoning segment. That's being solved, initially, with trio of new products: revamped Muscle Milk that's dropped artificials in formula, Propel-branded protein water and Starbucks Coffee & Protein. Then there's energy, where after tying to Celsius brand, Pepsi just onboarded high-flyin' Alani Nu brand that Celsius acquired even as it shunted its long-declining Rockstar brand to Celsius as energy captain for needed rehabilitation.Operations: No Massive Refranchising, but Lotsa Tinkering Bunch of changes are happening on ops front too. One is reengineering go-to-market process in manner that's given frontline workers 60% more time to devote to value-creating sales and execution chores. And it's winnowing bloated supply chain consisting of 61plants and 350 warehouses. Third, is culture shift to restore challenger mentality that was always present during PepsiCo's best years.But Krishnan was emphatic in essentially shutting down one avenue that Elliott and some on Wall Street have proposed: national refranchising on order of effort Coca-Cola undertook a decade ago. That's a non-starter, Ram said. It would be "complex and time-consuming" undertaking and is "off the table," he declared.Even before the activist investor, Elliott Management, showed up, PepsiCo was undertaking some key experiments that might unlock better execution and efficiencies. For years in past PEP had touted the "power of one" of its complementary bev and snacks portfolio, but it's only lately testing whether those items might prove a snug fit in same warehouses and delivery trucks. After all, "both are calling on the same retail landscape." Ground zero for test has been Texas/Okla, a stronghold for Frito snacks but low-share market for its CSDs. (Recall, Texas mainstay Dr Pepper has leapfrogged Pepsi into #2 position among CSDs, behind only Coca-Cola.) So PEP is exploring benefits of those portfolios sharing middle mile or final delivery and will glean lessons that might apply elsewhere in US.Other changes have been afoot over past 20 mos or so. First co's casepack water brands like Aquafina moved off the blue trucks to warehouse delivery mode. After all, those are high-volume segments dominated by private-label that retail customers actually prefer to come thru their warehouses. So PEP enlisted an "incredible partner in the room today," Ram said, nodding at Niagara contingent in room. After all, Niagara already plays deeply on the private-label side in segment. Next to follow that path was Bubly canned flavored sparklers, slightly higher up value chain but still lending itself to warehouse delivery, thereby freeing up valuable slots for higher-value entries like acquired Poppi brand. With Poppi on way to hitting 22% household penetration by year-end, it's ready for more DSD muscle from Pepsi. Among other moves, this month Pepsi took over Alani distribution from beer networks, as noted. And Pepsi unwound Blue Cloud alcohol distribution arm and switched to more conventional licensing model followed by other NA brands playing in alc space, reducing complexity.Revamped Celsius Partnership Tho Celsius Holdings has explained its revamped energy partnership from its own perspective, Krishnan q&a at Future Smarts offered chance to learn more about energy strategy from Pepsi viewpoint. Sep deal was "not a simple transaction" in encompassing future paths for Celsius, Alani and Rockstar brands. But it consolidates in Celsius' hands trio of brands together holding close to 20 share in category that's growing at 4X rate of LRBs in general."Now Celsius is the brand company and we're focused on operation and execution," as he summarized logic. It's Celsius' job to find complementary roles for the 3 marques, with Rockstar focused on traditional energy category, Celsius offering clean/fitness play and Alani more of a lifestyle brand. Brands can't help but benefit from being managed by Celsius field sales force that's focused on nothing but energy category, Krishnan observed, tho PEP's CCO Bryan Santee is very much in the mix.Innovation: Spreading Protein Consumption Across Multiple Dayparts Innovation will be "key driver" for 2026, as NACS Expo showed this fall. At center of activity is push to augment traditional emotional and flavor cues with more functional elements. That means getting R&D involved at inception, not once a concept has been formulated. Co's new chief science officer Tara Glasgow, who stepped into role just in Sep, is aiming to take rigorous approach, Krishnan said. In burgeoning protein space, for instance, that means not joining arms race of stuffing more grams of protein into drinks, given body's inability to process substantial amount in single sitting, but spreading needed intake across bevs suited to different dayparts.Among core CSDs, Pepsi aims to ride latest trends to bring people to category. With its multicultural identity, Mountain Dew's Baja Blast will be a billion-dollar brand by year-end in retail and foodservice combined, Krishnan noted. Meanwhile, Dirty Dew entry "is very focused on the indulgent space."Gatorade Issue: Scientific Underpinning Has Become 'Best-Kept Secret' Gatorade brand, and sports drink category in general, has weathered quite a few challenges in recent years. In Ram's view, consumer trust has been eroded by misrepresentation of performance claims that have spawned flock of lawsuits. It's been difficult category to shop, with people seeking out flavors and colors rather than specific functionality. Another issue: value proposition has been eroded relative to tap water alternative. Not least, new consumer cohorts didn't grow up in category and may have no sense of Gatorade's storied history going back to Florida Gators days in 1960s.So Gatorade has adopted new visual identity that more directly talks about its product superiority given scientific studies proving it hydrates better than water. Decades of scientific research behind brand "is a best-kept secret," Krishnan lamented. Restoring value means not just pricing moves but removing sugar and artificial colors.Then there's that "modern soda" category, terminology Krishnan readily adopted in discussion despite implicit assumption that phrase means brands like Coke and Pepsi are old-fashioned. "Sky's the limit" for acquired Poppi brand, which PEP wants to build to multibillion-$$ brand. But what's role of Pepsi Prebiotic then? For PEP marketers, gut pop trend offered way to revitalize core category. "Over the past decades there has not been any meaningful innovation in the cola category" aside from zero-sugar entries and pack/price architecture, CEO said. So "some modern consumers never go into the soda set" at retail. With no artificial sweeteners and less than 30 calories, he's hoping Pepsi Prebiotic will "re-engage people who're drinking less cola."

FUTURE SMARTS: PepsiCo's Newly Elevated Krishnan Recites Playbook for Celsius, Poppi, Gatorade; Lotsa Distribution Tinkering but Major Refranchising 'Off the Table'

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