Pepsi's CEO to Protesters: I'm on Your Side—Sort Of

PepsiCo CEO Indra Nooyi. Neville Elder / Corbis

Still shaking off jet lag from a business trip to Russia and Turkey, PepsiCo CEO Indra Nooyi is talking about the growing Occupy Wall Street crowds at home. “Here’s the problem,” she says. “They are protesting capitalism. To me, capitalism is a source of job creation, it’s a source of innovation, it’s what keeps the engines of democracy going. It’s wrong to paint with a negative broad brush on capitalism.”

Nooyi tells me that she empathizes with the protesters’ frustrations—“a large part of the population feels disenfranchised”—but differs on the solution. Occupy Wall Street wants to fight, according to its website, “against the corrosive power” of banks and “multinational corporations.” Um, yes, that would refer to PepsiCo. Nooyi, on the other hand, says corporate power is actually the answer: it’s what is needed to solve the jobs crisis that sparked the protests in the first place.

“Private enterprise,” she declares, “shouldn’t be looked at as the bad guys.”

That line pretty much sums up Nooyi’s business philosophy. The Indian-born, indefatigable PepsiCo boss—she admits to sleeping only four hours a night—spends a good deal of her energy trying to prove that companies can do well by doing good. She has refocused the $60 billion PepsiCo—best known for sugary soda and Frito-Lay snacks like Doritos and Cheetos—on more nutritious foods. At the same time, she has championed multiple corporate do-gooder efforts, both in the U.S. (buying electric trucks for its fleet) and abroad (helping potato farmers in China). “We’re doing the right thing, and it’s creating jobs for people,” she says, pointing to another U.S. program, a recycling effort tied to job training for disabled veterans.

Her critics—and they are growing in number as well as decibel level—point out that none of this sells soda. They complain that by focusing on selling more nutritious foods, Nooyi has neglected the company’s core business. Sales of its flagship Pepsi-Cola soda tumbled 4.8 percent last year, falling behind not just Coca-Cola but also, for the first time, Diet Coke. PepsiCo’s share price is off about 5 percent in the past year, while rival Coca-Cola Co.’s shares jumped 9 percent during the same time period. Analysts are clamoring for her to break up the company; PepsiCo by this point has denied breakup speculation more times than Brad Pitt and Angelina Jolie.

“It’s a very enticing vision to be more focused on health and wellness, to be focused on global hunger and all of those things,” says Ali Dibadj, an analyst with Sanford C. Bernstein & Co. “The problem is, you have to remember where three quarters of the company comes from: sugary, salty, fatty” foods. He says PepsiCo is improving, but there has been “a strategic misalignment.” It’s also worth noting that Coca-Cola CEO Muhtar Kent has also thrown massive resources into various social-responsibility programs, from recycling to women’s entrepreneurship, but the company’s core soft-drink business continues to grow.

“I’m very comfortable with our strategy,” Nooyi contends. She’s tired of hearing that she’s taken her eye off the ball, a criticism she has called “rubbish.” Focusing on Pepsi-Cola sales alone is “yesterday’s game,” she says testily. She tells me that she measures success instead by total PepsiCo beverage sales—including Gatorade and Tropicana, among other brands—a measure by which PepsiCo comes out first. And she says focusing on the healthier-foods business makes sense because it’s growing at 8 to 10 percent a year, while some “fun for you” foods—her euphemistic phrase for the sugary, salty, fatty stuff—are flat to declining.

Her unrelenting campaign of good corporate citizenship is at least in part an attempt to shift the focus away from PepsiCo’s heritage as a purveyor of artery-clogging, obesity-inducing drinks and snacks. Nooyi also paints it as part of PepsiCo’s long-term growth strategy. Among other initiatives, the company has created programs to support sustainable farming in China, Ethiopia, and Mexico, all in public-private partnerships. The partnerships are intended “to generate growth and generate shareholder value,” she says, not just to look charitable. In China, for example, a PepsiCo program with the Ministry of Agriculture supports potato farmers, who help supply the more than 4 million tons of potatoes Frito-Lay uses each year. PepsiCo will introduce another overseas public-private partnership this week. The company has a few public-private partnerships in the U.S., too, though they are relatively tiny for a company that has 100,000 domestic employees. Frito-Lay, for example, has bought 176 all-electric trucks—out of a total fleet of 20,000. Still, Nooyi says public-private partnerships on a larger scale may be the solution to the current jobs crisis. Like many executives, she would like to see a reduction in corporate taxes on overseas profits, to encourage companies to bring home what she calls their “trapped cash.” But in her version, if the tax rate were brought down to 15 percent, only 10 percent would go to the government. The other 5 percent would be pooled to create a jobs-training program.

Which brings her thoughts back to Occupy Wall Street. “We all suffer because everyone wants the unemployment rate to come down,” she says. “What they might be protesting is that part of capitalism that went awry. Whether you support them or not, everybody is working to fix that part of capitalism that went awry.”

Joanne Lipman is a media adviser and Newsweek’s C-Suite columnist.