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Are Layoffs the Answer for PepsiCo?

Posted by Dale Buss on January 5, 2012 02:10 PM

Embattled PepsiCo CEO Indra Nooyi is beginning to dig deeper to find ways to satisfy circling investors and analysts, including some who'd like to see the company split up into traditional and growth-business segments the way that Kraft has been.

The New York Post hears the word on the Street is that Nooyi is considering laying off about 4,000 workers and ending the company's 401(k) matching program in order to boost earnings. Bloomberg, doing some more digging, also hears that layoffs are indeed under consideration, although "less" than the 4,000 figure reported by the Post.

Job eliminations of that magnitude would amount to a little more than 1 percent of PepsiCo's payroll, including some workers at the company's Purchase, N.Y., headquarters. So it wouldn't contribute all that much to PepsiCo's bottom line. But trimming head count could send an important signal to frustrated investors that Nooyi not only recognizes significant problems at PepsiCo but also is entertaining ways to solve them.

The problems include a series of marketing missteps, according to the Post, as well as the "lack of a clear heir apparent" to Nooyi and a stock price that has risen only about 2 percent in the five years and three months since Nooyi took PepsiCo's helm.

Most obvious among Nooyi's mistakes has been the fall of the Pepsi brand to the No. 3 U.S. soft drink, behind both Coke and Diet Coke. She's attempting to correct that problem with much heavier traditional advertising spending behind Pepsi this year, after funneling significant Pepsi marketing outlays into the online-oriented Pepsi Refresh project beginning in 2010.

Other challenges for Nooyi include uneven results from PepsiCo's better-for-you push within existing brands such as Frito-Lay, and new brands. On the other hand, PepsiCo has fared increasingly well with sales in emerging markets, including winning Effie awards in India for its local marketing, by contrast with sluggishness in traditional Western markets.

Layoffs might be enough to keep Nooyi's critics at bay for a while. Or they could be just a first step.


pete United States says:

nooyi needs to be replaced or give up all her earnings. leave the front line alone. pepsico is too top heavy. cut at the top or walk away nooyi

January 6, 2012 08:48 PM #

Pepsico Insider United States says:

I agree Pete!  We keep adding layers and layers of VP's to "improve" our marketing and brands while laying off the middle management and hourly employees that get the work done,  Pretty soon there will be noone left to make the products!

January 9, 2012 02:58 PM #

George Brennan United States says:

Pepsico has historically not valued its employees, annually laying off key workers after 10, 15, 20 years of service - this is nothing new - just getting worse in their quest to be the most UNAMERICAN CORPORATION - only union truck drivers and top heavy senior management retire from PepsiCo.   That's how they have kept the company going for over 30 years - they don't layoff for performance reasons always to make the numbers which is wrong!  The reason their is no heir apparent for Nooyi is that many of those who rose through the ranks were unjustly laid off!    The amount of people they have laid off in the past 30 years alone is a good reason their sales are down.  Former employees don't let familes and friends drink Pepsi.

January 6, 2012 10:52 PM #

Paul United States says:


January 7, 2012 05:59 AM #

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