PepsiCo is transforming how we think about beverages, pushing boundaries beyond the bottle. Greg Lyons, Chief Marketing Officer of PepsiCo’s Beverages North America Portfolio, shares his insights on driving this innovation. In this interview, Lyons discusses embracing a challenger mindset, navigating the COVID-19 pandemic, and expanding into new categories like functional and enhanced beverages.
Dave Knox: I want to start with a little bit of your own personal background. Can you tell me about what’s led you to the position you’re in today here at PepsiCo?
Greg Lyons: Right after college, I went into marketing consulting for a few years. That’s where I developed my love of brand management. The first brand I fell in love with was Miller High Life Beer, the champagne of beers. I knew I wanted to do it for a living. It was the first time I woke up truly excited to come to work, learn, and help build brands. So, I went back to business school at Kellogg and then joined PepsiCo. It’s been nearly 25 years now, Dave. I’ve worked in different countries, on big brands and small brands, in snacks and beverages. I returned to North America around 2000, ran our beverage business in Canada, and came to the US in about 2010. I’ve been working in our North America beverage business ever since.
Knox: You took over the role as the CMO for the North America beverage portfolio around 2017. How have you seen this portfolio evolve, especially considering the significance of the Pepsi brand?
Lyons: When I first became CMO, our portfolio was heavily weighted towards carbonated soft drinks and sports drinks. We have some terrific brands in those categories like Gatorade, Pepsi, and Mountain Dew. While these categories remain strong, we noticed some faster-growing beverage categories that were more future-oriented.
Since becoming CMO, we’ve diversified our portfolio to include more categories. We’ve established a presence in the energy drink category, sparkling water, enhanced water, and protein drinks. We’ve also ventured into products beyond the bottle, like powders, tablets, and containers. As a result, we now have a more robust portfolio that’s well positioned for the future.
Beyond the portfolio, our marketing has evolved significantly. The marketing landscape is entirely different from when we started our careers. We’ve been transforming our department’s capabilities. For instance, we’ve in-housed a creative team while still collaborating with external partners. We’ve hired data scientists to measure our marketing in a proprietary way.
One of my proudest achievements is building a database with 130 million first-party data records, enabling us to target our marketing more effectively. The transformation has been comprehensive, affecting both our portfolio and our marketing strategies.
Knox: When managing a house of brands, one challenge for large companies is that one or two dominant brands often grab the lion’s share of resources, even if you want to invest in other areas. How do you balance supporting major brands like Gatorade and Pepsi while also investing in future, next-generation brands?
Lyons: You need different models for launching and supporting brands. The traditional model involves big advertising and marketing (A&M) efforts, using national media to drive mass awareness quickly. This works for some brands, but it’s impractical to apply it to every single brand in a diverse portfolio.
For other brands, we might rely solely on social media or experiential marketing. Our go-to-market Direct Store Delivery (DSD) system also helps get our brands visible in stores, which is crucial for building brand presence. Availability at retail is half the battle in brand building.
Additionally, we leverage channels like food service—restaurants, stadiums, bars, etc.—which are excellent for brand building. This approach allows us to be more nimble and strategic, as the big boom launch model isn’t feasible for every category.
Knox: Speaking of some of those brands, two notable success stories during your tenure have been bubly and STARRY. PepsiCo has tried to play in these categories in the past, but this time, the results have been remarkably more successful. How did you approach these launches differently, and what has driven the impressive growth of these brands?
Lyons: When entering a new category, we follow a few simple principles. First, we aim to drive growth in the category rather than just taking market share. To achieve this, we need a brand proposition that offers an advantaged consumer experience.
Take bubly, for example. We had previously launched Aquafina Sparkling and Dasani Sparkling, but these brands struggled because they didn’t resonate with consumers. From my experience, it’s challenging for a non-carbonated brand to enter a carbonated category successfully. With bubly, we wanted to create an advantaged product. Blind taste tests show that bubly has superior flavors and optimal carbonation levels compared to other sparkling waters.
From a branding perspective, we saw a gap in the market. Sparkling waters were generally serious and worthy, unlike the playful soda brands. We brought lightheartedness and playfulness into the category with bubly, using fun elements like messages on the can tabs and smiles on the cans. This approach has made bubly the highest equity and awareness brand in sparkling water. We’ve also expanded into sweetened sparkling water, with bubly burst, maintaining our playful brand identity while introducing a superior product.
For STARRY we replaced Sierra Mist, which suffered from inconsistent support and messaging. Sierra Mist was repositioned multiple times, creating confusion. Consumers want crisp and refreshing drinks, especially in the lemon-lime category. With STARRY, we focused on delivering an advantaged product, particularly with STARRY Zero Sugar, which offers exceptional flavor. Our zero-sugar product has seen significant uptake, outperforming competitors like Sprite in this segment.
We also aimed to infuse the category with optimism and good vibes, contrasting with Sprite’s cool image. STARRY’s branding is all about lightness and positivity, and it’s starting to resonate effectively with consumers.
Knox: You mentioned the changes in the world of marketing, especially for those of us who grew up with traditional methods. PepsiCo is closely tied to big events like the Super Bowl. As marketing evolves, how have you encouraged your team to use data and analytics to stay responsive and agile?
Lyons: We’ve been on a significant capability journey, especially for those who didn’t grow up with all this data, like you and me. Changing behaviors in the marketing department is always challenging, so we’ve embedded new ways of working into our daily routines, briefs, reviews, and activities.
Let me give you an example of how we’ve integrated data into our processes. Traditionally, when we innovated, we relied on broad consumer trends, successful brands, popular categories, and ingredient reports. This approach worked, but we’ve now created what we call an attribute engine. This is a proprietary, sophisticated model that tracks social media conversations, trending ingredients, popular brands, and flavors.
We analyze global restaurant menus, international beverage successes, and online reviews to identify what is scoring well. Additionally, we engage with a group of 400 young trendsetters to gather their insights. We compile all this data into our model, which predicts future beverage growth drivers.
This approach is smart and fun, helping us focus on creating innovative ideas that are highly relevant. It has significantly enhanced our ability to be responsive and agile in our marketing strategies.
Knox: you’ve brought some of your creative work in-house and integrated analytics to study data. Considering the tremendous growth of new brands over the past decade or so, how do you keep your team agile in product development compared to a new startup launching in a niche category like functional cola?
Lyons: Pepsi has a legacy of having a challenger mindset. I recently read a great Forbes article discussing how big established companies with a challenger mindset have a significant advantage over startups. This is because we have vast resources and can afford to take big swings and occasionally miss, which startups often can’t.
Our focus on maintaining this challenger mindset drives us to question the status quo and stay more agile than many other large companies. This approach is embedded in PepsiCo’s culture and helps us remain innovative and responsive. It’s one of the things I love about working here—it’s almost part of our DNA to embrace this mindset in everything we do.
Knox: When you think about maintaining that culture, especially the idea that someone can make a million-dollar swing without sinking PepsiCo, how do you get your team comfortable with taking risks and understanding that failure is part of this environment? How do you encourage them to take those bets and swings?
Lyons: That’s a great question, Dave, and crucial for sustaining a challenger mindset. If you penalize people for swinging and missing, you unravel that culture quickly. We believe that when we challenge the status quo, we either win or learn. It’s essential to codify the learnings from misses and celebrate those as much as we celebrate home runs. Recognizing and valuing these lessons is a prerequisite for maintaining a culture of innovation and risk-taking. It ensures that everyone feels supported in taking bold steps, knowing that failures are simply opportunities to learn and improve.
Knox: How do you keep that challenger mindset alive, especially with new leaders and team members coming in? How do you ensure they maintain that growth-oriented culture?
Lyons: Embedding the challenger mindset into our culture hasn’t been too difficult because it’s already a core part of Pepsi’s DNA. People who join us tend to have that challenger spirit. However, to reinforce it, we have systematic processes in place.
We conduct annual reviews of the big swings we take and codify the learnings from these experiences. Celebrating these learnings is crucial. Every year, we aim to take two or three big swings. This practice inherently promotes a culture of challenge and innovation.
Additionally, by ensuring that failures are not punished but celebrated for the lessons they provide, we encourage a risk-taking environment. It’s vital that we don’t just talk about these values but embed them in our everyday actions. Walking the walk is far more effective than merely talking about it, and this approach ensures that our culture of challenging the status quo continues to thrive.
Knox: You’ve been leading this business since 2017, including navigating the challenges of the COVID pandemic. How have you maintained a positive and challenger mindset during uncertain times, ensuring the business, your people, and the company stayed solid?
Lyons: Thanks for the question. I believe strongly in authentic and compassionate leadership. It took COVID for me to truly understand and lead this way. We’ve all faced difficult times, whether due to the pandemic or personal challenges. Developing authentic relationships with friends, colleagues, and family is paramount. It makes life more meaningful and enjoyable.
At work, when you genuinely get to know people and care about them, it breaks down barriers, builds trust, and speeds things up. It creates a safe environment for people to be themselves. When marketers feel safe bringing their whole selves to work and know their bosses and peers care about them, they start thinking bigger and enjoying their work more.
Conversely, marketers who don’t feel they fit in or are worried about failure aren’t as effective. Confident marketers who feel they belong think big and perform better. I’ve invested a lot of time and energy into the culture of our department, ensuring we have leaders who genuinely care about their teams. This focus on culture and caring leadership is one of our secret sauces for developing some of the best marketing.
Knox: I want to revisit the “beyond the bottle” initiative you mentioned earlier. Many industries and companies often narrowly define the problems they solve. How have you, at PepsiCo, managed to shift from a long-standing focus on liquid beverages in bottles to a broader perspective on solving consumer needs?
Lyons: That shift was driven by a significant trend we observed. Think about how many people, including kids and young professionals, walk around with reusable water bottles. It’s become common to see people adding powders to their water to enhance it, rather than just opening a bottle of Pepsi and pouring it in. This trend is not only sustainable but also delivers good value and aligns with the growing interest in functional beverages.
The category has evolved from just tasty powders to those that provide functional benefits. This presented a fantastic opportunity for us to extend brands like Propel and Gatorade into this space. It was a natural adjacency because if we didn’t enter this market, we’d lose volume to it.
The challenging part was figuring out whether to manufacture these products ourselves or use co-packers, and managing the supply chain accordingly. However, we managed to solve those logistical issues quickly. This move aligns with consumer habits and keeps us relevant in the growing market of functional and enhanced beverages.