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Food and Drink Innovation Network - Ethics seminar Andrew Smith Head of Corporate Responsibility PepsiCo UK & Ireland Health and Environment Health and.

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Presentation on theme: "Food and Drink Innovation Network - Ethics seminar Andrew Smith Head of Corporate Responsibility PepsiCo UK & Ireland Health and Environment Health and."— Presentation transcript:

1 Food and Drink Innovation Network - Ethics seminar Andrew Smith Head of Corporate Responsibility PepsiCo UK & Ireland Health and Environment Health and Environment: risks, opportunities and dilemmas

2 Health and environment challenges facing food manufacturers PepsiCo responses Risks, opportunities and win-wins Dilemmas Public policy gaps Food and Drink Innovation Network - Ethics seminar What about ethical trade, community impact, poverty footprint, responsible procurement…..?

3 Health and environment challenges facing food manufacturers PepsiCo responses Risks, opportunities and win-wins Dilemmas Public policy gaps Food and Drink Innovation Network - Ethics seminar What about ethical trade, community impact, poverty footprint, responsible procurement…..?

4 Environmental challenges and our business UK & IRELAND

5 Each challenge is profound

6 Environmental risks and opportunities Environmental risks, opportunities and impacts (Source: Carbon Trust and PIUK)

7 Climate change risks and opportunities

8 We have past experience…

9 …and weather disruptions are here right now

10 Responding to the risks

11 Measuring the carbon footprint of Walkers crisps Agriculture Processing - cooking Packaging supply chain Transport Packaging disposal

12 The Carbon Trust carbon reduction label

13 Climate change risks and opportunities

14 March 2007 – launch of the Carbon Label

15 Carbon Label is positively received, and driving awareness of the environmental impact of everyday products Source: Populus

16 In September 2007, with Carbon Disclosure Project and other global companies, new Supply Chain Leadership Collaboration launched to develop:  one single standardized approach to gather carbon information throughout supply chains.  data-sharing systems so that multiple retailers and brands can view carbon emissions and strategies of shared suppliers  awareness through supply chains that carbon and climate change impact will grow in business decision-making importance. It will eventually bring tens of thousands of new suppliers into the carbon disclosure for the first time PIUK selected 14 suppliers to take part in 2008, with focus on Walkers supply chain After the label: engaging our supply chain

17 In December 2007 Walkers Supplier Summit brought together key suppliers of raw materials and packaging. The summit looked at:  progress against carbon reduction targets, and future projections  common risks and opportunities  where carbon minimisation approaches could be shared  barriers to progress Explicit goal to move towards shared carbon management and targets, across our supply chain.

18 After the label: within our business In August 2007 Walkers announced that they would switch to sourcing 100% British potatoes for all their crisps. The move meant that Walkers would be buying an additional 40,000 tonnes of potatoes per year from the UK, on top of the existing 420,000 tonnes Small carbon reduction (<1%) Future packaging developments judged through carbon lens for first time Future carbon projections used to introduce rudimentary carbon governance

19 Carbon governance

20 Dilemmas and challenges Is there a case for shared supply-chain carbon-reduction strategies and targets? (e.g. or should companies act alone / by diktat?) What would they look like? (e.g. joint plans owned between multiple corporate stakeholders) What are the barriers? (e.g. short-term trading/contractual relationships, restricting corporate purchasing freedoms, disclosure/confidentiality, fear of public profile etc) How could the barriers be overcome?

21 Responding to confused priorities Agriculture Processing - cooking Packaging supply chain Transport Packaging disposal Consumer focus

22 Obesity is a critical global challenge WHO’s latest projections indicate that globally: approximately 1.6 billion adults (age 15+) were overweight; at least 400 million adults were obese WHO further projects that by 2015, approximately 2.3 billion adults will be overweight and more than 700 million will be obese.

23 Public policy is responding, and reputational risks are huge

24 Our response Transforming our portfolio  Product reformulation  New product development  Acquisitions and mergers Access and affordability Stakeholder engagement and partnership Staff engagement

25 PepsiCo Corporate Values “To deliver SUSTAINED GROWTH…. …(selling) only products we can be proud of” Source : PepsiCo Internal Values Statement Performance with Purpose Human Sustainability “we have a fundamental belief that humans need to be nourished in multiple dimensions, ranging from simple treats to healthier eats…we’re continuously transforming our portfolio of products to meet consumer needs” Source : PepsiCo Annual Report 2006 Source: PIUK Internal TFY BFY ITFY GFY GFY – ‘absolute’ nutritional standards BFY – strong relative nutritional improvement and/or positive nutrition enhancement ITFY – nutrition improvement/enhancement or natural/organic claim PIUK Portfolio Evolution Transforming the shape of our portfolio

26 Transforming our business PIUK Foods Total PIUK (Food and Juice) TFY BFY ITFY GFY TFY BFY ITFY GFY 81% 76%

27 Annual Per Cap ’ 07 ‘ 08 ’ 07- ’ 08 ServingXX X% Added Sugar(g) XX X% Fibre (g)XX X% Vitamin A (mg) XX X% Vitamin C (g) XX X% ’ 08 ’ 09 ‘ 10 CAGR ’ 08 - ’ 11 XX X% XX X% XX X% XX X% XX X% Category Forecast Strong governance to monitor and manage strategy PIUK Beverage nutrient scorecard

28 Dilemmas and challenges How best to build trust around what we are doing? How to report more transparently in a potentially cynical and hostile environment? How best to structure the gathering, and then actioning, of stakeholder feedback on our forward plans and strategies?

29 Transforming our food and drink portfolio Children’s cracker without artificial flavours or colours Children’s crisp with less fat, less saturated fat, less salt Saturated Fat Reduction Baked Walkers Sunbites Granola Lower fat crisps 2008

30 Transforming our food and drink portfolio Lower fat crisps 2008 New product development Reformulation New product development Acquiring new businesses

31 Transforming our portfolio - reformulation Renovation of core Walkers New healthier SunSeed oil 75-80% reductions in saturated fat 25-50% reductions in salt levels Now expanded to full snacks range

32 Progress comes at a cost Learning with third parties was sometimes complex, but it brought new skills, insight and experience A public-facing climate commitment is helping business decisions be focussed through an environmental lense. Working with one partner highlighted the opportunities to engage with others, especially our own supply chain. £360 per tonne, April 2007 £950 per tonne, April 2008

33 Health and environment challenges can be connected

34 Dilemmas and challenges How best to build trust around what we are doing? How to predict the long-term costs of product improvements or reformulations, when agricultural prices are in dramatic flux ?

35 Transforming our portfolio - new product development Tropicana smoothies (Feb 2008) Sunbites (Sep 2007)

36 There is convincing epidemiological evidence that people who eat more whole grains have: LOWER risk of heart disease LOWER risk of developing some cancers LOWER risk of developing Type 2 diabetes BETTER intestinal health Source: Slavin, J. Nutrition Research Reviews, 2004 Understand and reflect the science

37 Source:* Thane et al, British Journal of Nutrition 2007 ** Dietary Guidelines for Americans (2005). US Department of Health and Human Services. US Department of Agriculture Suggested Daily Amount Average UK daily intake (Adults) 48g** 23g* We’re not eating enough wholegrain “Daily intake of wholegrain in the UK is very low, and with 3 out of 10 adults classified as non-consumers, it is clear that new wholegrain-rich foods are needed if we are to encourage increased intakes across the whole population.“ Dr Susan Jebb, Head of Nutrition and Health Research at the Medical Research Council

38 Develop solutions that meet nutritional needs Enabling consumers to increase their Wholegrain in-take.. 23g 16g SDA Amount per 25g pack Average UK daily intake (Adults) 48g More than 1/3rd of the suggested daily amount of wholegrains 67% wholegrains Contain fibre & essential nutrients Saturates 0.6g Fat 6.2g Sugar 2.1g Calories 132 7%2% 9%3% Salt 0.3g 5% One 28g pack contains of an adult’s guideline daily amount Already a £5m brand, Stakeholder praise and recognition

39 Dilemmas and challenges How best to build trust around what we are doing? What happens when the science is less clear cut, or consumer beliefs contradict it? Health claims must be tightly regulated, but have we got the right balance if we want to promote healthier options?

40 Transforming our portfolio – new product development Impact: £37m brand in 18 months Heavily consumed by younger consumers, and CDE background (key in Govt obesity strategy) Switching from less healthy “standard” crisps and snacks Performance with purpose Impact: £37m brand in 18 months Heavily consumed by younger consumers, and CDE background (key in Govt obesity strategy) Switching from less healthy “standard” crisps and snacks Performance with purpose Walkers Baked: Launched Sep % less fat than regular crisps Walkers Baked: Launched Sep % less fat than regular crisps

41 Dilemmas and challenges How best to build trust around what we are doing? What if healthier cooking methods (baking v frying) have a higher carbon footprint? How can niche products be… Microwave simmering But, in turn, a kettle can be 35-60% more efficient than a hob To boil water, a hob can be 36 to 92% more energy efficient than a microwave Source: University of Stockholm, Energy Use for Cooking and Other Stages in the Life Cycle of Food

42 Acquisitions are also helping to transform our portfolio

43 Making healthy choices accessible and affordable Consumer target 16-30’s, all social backgrounds Affordable price point (99p/£1.99) Accessible & interesting range of flavours: Apple, Kiwi and Lime Strawberry, Apple and Rhubarb Orange, Mandarin and Guava Strawberry and Banana PJ’s smoothies re-launched at an accessible price point 99p £ p

44 Brand specific Nutrition Factfiles Engaging our people TARGET GROUP CONTENT MODULE 1 e-learning Basic Nutrition (45 mins) MODULE 2 Interactive Workshop General Nutrition (1 day) MODULE 3 Interactive Workshop Specialist Nutrition (60-90 mins) AM Context PM Category Specific All Employees TBMs/marketers/managers R&D Specialist areas

45 Engaging stakeholders What type of community health programmes is it legitimate for food companies to support?

46 Public policy gaps Recycling infrastructure Everyday activity (planning, transport and the school run) Climate change adaptation Investment in consumer insight Green-wash marketing Incentivise technology transfer Renewables and micro-generation

47 Feedback / engagement Andrew Smith Head of Corporate Responsibility PepsiCo UK & Ireland


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