Oliver Wyman Partner Dave Xie engages in a discussion with Iris Wang from PepsiCo, delving into how the food giant's product development, innovation, and localization strategies in China are driven by diverse consumer needs.

INFocus Series
INFocus provides exclusive insights and trends from experts and leaders across the Asia Pacific region, exploring the forces, opportunities, and challenges shaping its future.

Go to series

Iris Wang

Let's return to the essence of all our business, which comes from the needs of consumers. This is around which all our research, development, and some product innovations are closely centered, what our consumers truly need. 

[series intro clip]

Dave Xie

Hello everyone. I'm Dave Xie, a Partner at Oliver Wyman, specializing in the retail and consumer goods industries. Welcome to today's Oliver Wyman's INFocus series. Today, we are honored to invite the head of strategy, business development and venture capital for PepsiCo Asia-Pacific, Iris Wang, to share with us the story behind the innovation and localization strategies of its Chinese enterprises. 

For example, Lay's potato chips have undergone many such localized innovations in recent years, and we are very interested in these. Could you share from your perspective, on a strategic level, some innovations that PepsiCo China has had in recent years that might be considered leading, and some localized cases of innovation that we can discuss? 

Iris

From PepsiCo's perspective, the entire group highly respects and promotes the concept of localized innovation. We have the "East for East" or "China for China" innovation strategy, and in Shanghai, we also have one of our global top five R&D centers, the Asia R&D Center. It is dedicated to the Asian market, developing products that cater to local tastes. 

The products are mainly food and beverages. Based on such considerations, our resource allocation and strategic layout have been continuously emerging, centered around local innovation in the development of such food and beverages. As you mentioned earlier, for the flavor innovation of Lay's potato chips, the underlying idea is to restore Chinese dietary culture and bring it to a broader consumer base in various regions and at different times, and create both interactions with consumers, and personal and emotional connections with the brand. 

This is actually a kind of focus on our consumers' needs for health and wellness. It's a further expansion of our approach. Another product is our Pop Corner, which is a brand we acquired in 2019 in the United States. It produces non-fried corn chips. It compresses our favorite popcorn into a chip-like thin and crispy shape. You can enjoy the taste of corn chips without it being bad for you, because it's not fried. It doesn't have any extra ingredients. This is a move towards a better health concept in the development of new products. 

When we entered China, we localized it with innovation in taste and packaging to better match our local consumers and their product needs. We need to look at the underlying logic of Chinese consumers' needs, which comes from the need for diversity. In this area, through the Bai Cao Wei brand, we introduced more of these Chinese-style snack categories, including our nuts, dried fruits, and meat products, such as beef jerky and chicken feet. These are all snacks that Chinese consumers like and purchase. We have succeeded in further meeting the needs of Chinese consumers. PepsiCo Group has done a lot of local innovation, or the introduction of new product categories, to build such a local market.

Dave

Thank you for your wonderful insight, Iris. Based on what you have shared, I have a few questions I would like to follow up on. You just mentioned a very interesting example, which is the Pop Corner. When you introduced it to China, it seems that you tailored it for Chinese people. Chinese consumers' preferences for such snacks, or when I eat such snacks, I also hope to have some nutritional value. You developed such a new product and made adjustments in your work.

Do you also feel that Chinese consumers are a group that is relatively difficult to satisfy, or their needs show greater unpredictability? 

Iris

As you just said, it's not easy to capture. Our consumers want this, that, and the other. This brings certain difficulties or challenges to our innovation. How do we satisfy the ever-changing needs of Chinese consumers? First of all, PepsiCo spends a lot of resources and energy on R&D and consumer insight every year. 

We then track market dynamics and changes in consumer behavior and needs, as well as emerging brands and new enterprises in the market's latest trends. All of these gives us a lot of insights. As China is vast and diverse, and our consumers are the largest consumer group in the world, such a group of people actually will be more complex and diverse than some markets abroad. 

So this is inevitable. Its needs come from different products, packaging, and service methods, and how we can better establish some consumer brand connections. We break it down and segment it within the food and beverage field, according to the needs of the consumers and the different scenarios that exist. All these needs are like trickling streams that converge into our overall business planning. We break it down layer by layer to find a faster, stronger, and better way to explore ideas for serving Chinese consumers well. The core strategy is to cultivate robust internal strength. 

Then, in the face of consumer changes, no matter how consumers change, we are able to have corresponding products and services that can accurately meet their needs. At the heart of the matter, it all aligns with our human needs, and comes from common sense about consumers' needs. I believe it is this essence that remains constant amid change. 

On this basis, we can then think about how to do some diversified innovation to give consumers more different, novel experiences. Regarding the issue of innovation, since we see now there are many trendy brands that are emerging one after another, they need to have a lot of freshness and continuously provide something new to consumers. 

How do we pursue freshness and create scarcity or innovation between them to achieve a balance? How can we avoid our innovation from being trend-chasing, such that it is water without a source, wood without roots? How to balance scarcity and sustainability? In these endeavors, we still return to the essence of all our business, which comes from consumers' needs. All our research, development, and product innovations are closely centered around what our consumers truly need. 

What is the underlying logic? It's that we don't just chase after hot trends, especially when there are many opportunities and temptations in the market, or when there are many emerging hot trends. We still conduct very strict screening and evaluation to determine which ones have sustainability that truly address our consumers' pain points or needs. Only then will we consider focusing our further resources and energy. 

Dave

I think what you mentioned just now about avoiding excessive innovation is quite critical. Especially now, since we all hope for sustainable economic development rather than just blindly burning money, or seeking short-term growth in an unhealthy way. How do you approach mastering this balance? I think truly understanding consumers' real needs is quite critical. 

As a follow-up question, do you think creating demand conflicts with meeting demand? How do you address this dilemma? Many companies hope to create demand for something and then monopolize this market. But in many cases, it is about what consumers need and how to better meet those needs. What is your view on the relationship between these two aspects? 

Iris

I think creating demand is also absolutely necessary, especially for leading enterprises. We are leading the market or consumers in the cognition of these products and services. 

Actually, it is very difficult for consumers to tell you directly what they truly want. You can also hardly capture their real needs through a simple survey. More impactful is the accumulation of years of experience to observe and capture the unmet needs at a deeper level. During this process, leading enterprises will have a set of mature methodologies and sufficiently rich experience to summarize which previously unrecognized needs are from our consumers that they may not have explicitly stated but are actually unmet pain points. 

Then the products for these needs can be created. By creating this demand in a new market, you will create incremental demand. It's not just about saying we do some kind of substitution where one thing replaces another within an existing market, but we are truly creating new demand. 

I think with regard to creating demand, it must be an indispensable part of the strategic process. Yes, I believe existing capabilities are indeed important foundationally. Just like the regionally limited flavors you just mentioned are actually rooted in traditional local Chinese flavors and characteristics of such snacks – many brands might compete in the snack food sector or within the realm of snacks, but they haven't considered combining the two. Although we have merged these two, we haven't created something entirely new. However, we have offered consumers a new way to satisfy their needs. I believe this is actually a very good example of creating new demand. 

Dave

Today, we are very grateful for your time, Iris. We look forward to seeing everyone again next time. 

Oliver Wyman Partner Dave Xie engages in a discussion with Iris Wang from PepsiCo, delving into how the food giant's product development, innovation, and localization strategies in China are driven by diverse consumer needs.

INFocus Series
INFocus provides exclusive insights and trends from experts and leaders across the Asia Pacific region, exploring the forces, opportunities, and challenges shaping its future.

Go to series

Iris Wang

Let's return to the essence of all our business, which comes from the needs of consumers. This is around which all our research, development, and some product innovations are closely centered, what our consumers truly need. 

[series intro clip]

Dave Xie

Hello everyone. I'm Dave Xie, a Partner at Oliver Wyman, specializing in the retail and consumer goods industries. Welcome to today's Oliver Wyman's INFocus series. Today, we are honored to invite the head of strategy, business development and venture capital for PepsiCo Asia-Pacific, Iris Wang, to share with us the story behind the innovation and localization strategies of its Chinese enterprises. 

For example, Lay's potato chips have undergone many such localized innovations in recent years, and we are very interested in these. Could you share from your perspective, on a strategic level, some innovations that PepsiCo China has had in recent years that might be considered leading, and some localized cases of innovation that we can discuss? 

Iris

From PepsiCo's perspective, the entire group highly respects and promotes the concept of localized innovation. We have the "East for East" or "China for China" innovation strategy, and in Shanghai, we also have one of our global top five R&D centers, the Asia R&D Center. It is dedicated to the Asian market, developing products that cater to local tastes. 

The products are mainly food and beverages. Based on such considerations, our resource allocation and strategic layout have been continuously emerging, centered around local innovation in the development of such food and beverages. As you mentioned earlier, for the flavor innovation of Lay's potato chips, the underlying idea is to restore Chinese dietary culture and bring it to a broader consumer base in various regions and at different times, and create both interactions with consumers, and personal and emotional connections with the brand. 

This is actually a kind of focus on our consumers' needs for health and wellness. It's a further expansion of our approach. Another product is our Pop Corner, which is a brand we acquired in 2019 in the United States. It produces non-fried corn chips. It compresses our favorite popcorn into a chip-like thin and crispy shape. You can enjoy the taste of corn chips without it being bad for you, because it's not fried. It doesn't have any extra ingredients. This is a move towards a better health concept in the development of new products. 

When we entered China, we localized it with innovation in taste and packaging to better match our local consumers and their product needs. We need to look at the underlying logic of Chinese consumers' needs, which comes from the need for diversity. In this area, through the Bai Cao Wei brand, we introduced more of these Chinese-style snack categories, including our nuts, dried fruits, and meat products, such as beef jerky and chicken feet. These are all snacks that Chinese consumers like and purchase. We have succeeded in further meeting the needs of Chinese consumers. PepsiCo Group has done a lot of local innovation, or the introduction of new product categories, to build such a local market.

Dave

Thank you for your wonderful insight, Iris. Based on what you have shared, I have a few questions I would like to follow up on. You just mentioned a very interesting example, which is the Pop Corner. When you introduced it to China, it seems that you tailored it for Chinese people. Chinese consumers' preferences for such snacks, or when I eat such snacks, I also hope to have some nutritional value. You developed such a new product and made adjustments in your work.

Do you also feel that Chinese consumers are a group that is relatively difficult to satisfy, or their needs show greater unpredictability? 

Iris

As you just said, it's not easy to capture. Our consumers want this, that, and the other. This brings certain difficulties or challenges to our innovation. How do we satisfy the ever-changing needs of Chinese consumers? First of all, PepsiCo spends a lot of resources and energy on R&D and consumer insight every year. 

We then track market dynamics and changes in consumer behavior and needs, as well as emerging brands and new enterprises in the market's latest trends. All of these gives us a lot of insights. As China is vast and diverse, and our consumers are the largest consumer group in the world, such a group of people actually will be more complex and diverse than some markets abroad. 

So this is inevitable. Its needs come from different products, packaging, and service methods, and how we can better establish some consumer brand connections. We break it down and segment it within the food and beverage field, according to the needs of the consumers and the different scenarios that exist. All these needs are like trickling streams that converge into our overall business planning. We break it down layer by layer to find a faster, stronger, and better way to explore ideas for serving Chinese consumers well. The core strategy is to cultivate robust internal strength. 

Then, in the face of consumer changes, no matter how consumers change, we are able to have corresponding products and services that can accurately meet their needs. At the heart of the matter, it all aligns with our human needs, and comes from common sense about consumers' needs. I believe it is this essence that remains constant amid change. 

On this basis, we can then think about how to do some diversified innovation to give consumers more different, novel experiences. Regarding the issue of innovation, since we see now there are many trendy brands that are emerging one after another, they need to have a lot of freshness and continuously provide something new to consumers. 

How do we pursue freshness and create scarcity or innovation between them to achieve a balance? How can we avoid our innovation from being trend-chasing, such that it is water without a source, wood without roots? How to balance scarcity and sustainability? In these endeavors, we still return to the essence of all our business, which comes from consumers' needs. All our research, development, and product innovations are closely centered around what our consumers truly need. 

What is the underlying logic? It's that we don't just chase after hot trends, especially when there are many opportunities and temptations in the market, or when there are many emerging hot trends. We still conduct very strict screening and evaluation to determine which ones have sustainability that truly address our consumers' pain points or needs. Only then will we consider focusing our further resources and energy. 

Dave

I think what you mentioned just now about avoiding excessive innovation is quite critical. Especially now, since we all hope for sustainable economic development rather than just blindly burning money, or seeking short-term growth in an unhealthy way. How do you approach mastering this balance? I think truly understanding consumers' real needs is quite critical. 

As a follow-up question, do you think creating demand conflicts with meeting demand? How do you address this dilemma? Many companies hope to create demand for something and then monopolize this market. But in many cases, it is about what consumers need and how to better meet those needs. What is your view on the relationship between these two aspects? 

Iris

I think creating demand is also absolutely necessary, especially for leading enterprises. We are leading the market or consumers in the cognition of these products and services. 

Actually, it is very difficult for consumers to tell you directly what they truly want. You can also hardly capture their real needs through a simple survey. More impactful is the accumulation of years of experience to observe and capture the unmet needs at a deeper level. During this process, leading enterprises will have a set of mature methodologies and sufficiently rich experience to summarize which previously unrecognized needs are from our consumers that they may not have explicitly stated but are actually unmet pain points. 

Then the products for these needs can be created. By creating this demand in a new market, you will create incremental demand. It's not just about saying we do some kind of substitution where one thing replaces another within an existing market, but we are truly creating new demand. 

I think with regard to creating demand, it must be an indispensable part of the strategic process. Yes, I believe existing capabilities are indeed important foundationally. Just like the regionally limited flavors you just mentioned are actually rooted in traditional local Chinese flavors and characteristics of such snacks – many brands might compete in the snack food sector or within the realm of snacks, but they haven't considered combining the two. Although we have merged these two, we haven't created something entirely new. However, we have offered consumers a new way to satisfy their needs. I believe this is actually a very good example of creating new demand. 

Dave

Today, we are very grateful for your time, Iris. We look forward to seeing everyone again next time.