Tuesday, March 22, 2011

Global Economy: Interview with Pepsi CEO Indra Nooyi

I have been looking to post this interview since I heard comments made by Pepsi CEO Indra Nooyi on the state of the Global economy. She hits the mark closer than anyone else I have heard over the last 3 years.

Special attention should focus on her comments about sustainable job growth in the private enterprise. She has made comments somewhere else (I cant find them but heard her speaking) to the effect that what we are seeing now in an apparent economic recovery in some countries is that it is hard to see that this "recovery" is sustainable or real given that much of the job growth and key economic indicators that are apparently looking better are because of massive amounts of Government stimulus based on increased foreign debt. Clearly this is not a real recovery and I agree with Indra Nooyi about her assesment that it will not be until private enterprise are doing better for a significant period that we can all start to breathe a little easier.

Her basic idea is something I have been saying for along time but she has put it much better than I and that is why I have posted this interview on my blog.

From Money Control - Watch the Video Here.

Indra Nooyi runs one of the biggest consumer businesses in the world, Pepsico and has a pretty accurate pulse on demand in most economies across the world.

In an exclusive interview to CNBC's Maria Bartiromo, Indra Nooyi, CEO, Pepsico, talks about where growth is still sluggish and also about doing business in China at a time when Google has chosen to pull out.

Below is a verbatim transcript of the exclusive interview on CNBC-TV18. Also watch the accompanying video.

Q: What you are seeing in terms of the consumer today whether it is in the US or around the world, where do you say we are in this recovery?

A: I don’t know, this one worries me a bit. In the Western world especially in the United States, what I have not yet seen is the construction worker coming back to work. I think you need that worker coming back because the true test of the economic vitality of the economy is when that worker is employed. We are not seeing that as yet.

I hope that as we progress through the year and we come into the summer, housing stocks will go up and some more construction jobs come by. But we need jobs and I am not talking about 5,000 or 10,000 jobs, we need several 100,000 jobs fast so that we get confidence back in the economy, we can get people back to work then have the multiplier effect of people going back into construction jobs and then the multiplier effect of them dragging other jobs with it.

Q: As a global leader, what would it take for you to create new jobs? I know earlier you said that you are expecting a low double digit EPS growth in 2011 and 2012, what is it going to take for you to move at PepsiCo and other companies just like you to move from the cost cutting phase of things to the growth part of things where you are going to create new jobs, is it a policy out of the administration or something else?

A: I think it comes down to, ‘is the core economy doing well?’ Even Larry Summer said something which I have never forgotten, he said, “We could see GDP (gross domestic product) growth, we could see a statistical recovery for a human recession,” To me that is not good enough because the statistical recovery and a human recession is not going to be long-lived. We need to see sustainable job creation, we need to see statistical recovery and human growth, employment growth. So if that happens, confidence is back in all of private enterprise and we can start hiring and growing and planning for the future. We are still refreshing our talent and still hiring at many places including in US, but I think if you really want companies to come back to hiring cycle, we need to have confidence so there is going to be job growth in the country.

Q: A number of executives come on the programme and there are too many uncertainties at 2011, not just higher taxes which we know are coming, but also healthcare. So when you see this extraordinary healthcare bill done through reconciliation, as a leader in the global community, what do you think about this, how is this going to change your business?

A: The bill is just passed. Give us sometime to go and study it and understand the implications for the company. But the first thing we have to do is pause as Americans and say, here is the President who put everything out there to go sell a bill that he felt was right for the American public and it is right for a lot of people who don’t have healthcare insurance. So I think at this moment we are going to sit back and say, here is a President who deliver on the promise that he made during the campaign.

As far as the implications for PepsiCo, we have got a lot of people studying the implications of all of that what is the final mark-up in the bill. Over the next weeks and months, we will have a much better perspective.

Q: Let me ask you about the rest of the world. The last time we spoke you were in China and you were talking to me about the new plant that you were putting up there and you were planning on doing 13 plants in China, talk to me about the opportunity China? Google says it is coming out, it is going to shut down China because they cannot be censored, and you haven’t obviously had any issues with the Chinese government because you are creating new plants there?

A: Chinese government has been very good to us. We just got permission to build another 14 plants. We have got 22 plants on the ground already, we are going to build another 14 plants, and we are growing double digits in China. It is an important region for us and I must say specially recently the Chinese government has been particularly good to us, has been supportive of our strategies both on the beverages and on the snack side because we also do good for farmers, we developed agro, in all of these areas I think we are real partners for the Chinese government.

The one thing about PepsiCo is that we are a global company, a great global company, headquartered in United States, but we are local in every country in which we operate because you cannot export soft drinks and chips. You have to be local.

Q: And you are creating jobs.

A: We are creating jobs everywhere.

Q: So can you break it down for instance for us the international landscape or you still seeing much of the vibrancy at the company coming out of outside the US and emerging markets and how you Europe doing?

A: East to the Middle East, the markets are extremely vibrant. I think Japan has always been slow market, but in all other markets, East to the Middle East we are seeing extreme vibrancy, especially in markets like India we are seeing a level of excitement that is unbelievable.

We are also seeing a lot of vibrancy in South America, South of Mexico, especially markets like Brazil, there is a lot of optimism people are feeling great about that market. I think the slowness is in East and Western Europe and North America and Mexico. So those are the markets we need to have targeted attention to and figure out how to get the unemployment rates down. It is not just GDP growth, we have got to address jobs.

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