Insider Innovation at PepsiCo

Emad Jafa spent several years as a researcher with appliance and heavy equipment manufacturers such as GE Appliance, UTC Carrier, and Caterpillar. That’s where he stoked his personal passion for exploring sustainable solutions for refrigerants and helping optimize energy usage.

"I’m supporting the goal of the corporation. And I’m going into futuristic refrigerant systems to do it."

But it wasn’t until Jafa joined PepsiCo in 2007 that he started down a path that now gives him vast freedom as a researcher to develop, test, try, fail at—and go back to the drawing board for—energy conservation technologies that can make a difference in one of the world’s largest applications of refrigeration: coolers and vending machines. PepsiCo’s products are conveyed in millions of coolers and vending machines around the world, and anything Jafa can do to help make their energy usage more efficient and more sustainable can be hugely important.

Jafa has been able to supercharge his research since he was named a PepsiCo research fellow in 2014. “We have company goals to reduce emissions by 40% by 2030 and to achieve net zero by 2040,” Jafa says. “I’m supporting the goal of the corporation. And I’m going into futuristic refrigerant systems to do it, such as possibly magnetic refrigerants or off-grid solutions. Those are areas that today are immature or too costly to be implemented.”

Jafa is exemplary of a fellows program that has become a staple of advanced research efforts at PepsiCo and a major way for the beverage and snacks titan to keep its star R&D people happy and challenged.

“Our fellows are renowned experts and leading authorities in their fields,” says Antonio Tataranni, PepsiCo’s chief medical officer. “For this reason, they are tasked with some of the most complex projects and help to solve business challenges related to both PepsiCo and the scientific and technical communities. Fellows are strategists, forecasters, and business partners to senior staff and global business units, advising on the critical path to achieve breakthrough innovation and cracking the code on new solutions that enable strategic efforts and give PepsiCo a competitive advantage.”

PepsiCo is emblematic of many major food and beverage companies that spent the past decade reinventing their approaches to innovation. A tumultuous shift in consumer preferences beginning a quarter-century ago made it apparent that CPG giants weren’t coming up with enough new stuff in the better-for-you arena, a deficit that quickly eroded their businesses.

So companies pivoted toward external sources of innovation such as acquisitions, equity stakes in inventive smaller companies, and corporate incubators—anything to bring new creative spark, young talent, great ideas, and non-bureaucratic thinking from the outside in.

Feeling the Squeeze

Meanwhile, cost and margin pressures in an industry under transformation began squeezing even core functions such as R&D. “When companies began clear-cutting their budgets, they began shifting more innovation to external resources because they could treat them as marketing expenses rather than having to deal with them in internal budgeting and accounting,” says Jamie Valenti-Jordan, chief executive officer of Catapult Commercialization Services, which helps food companies develop products. “Internal programs to support long-term R&D don’t deliver quarterly results.”

Kraft tried the fellows approach some years ago. The company based its efforts on what it learned from 3M, the industrial titan that produces thousands of items—and whose approach to incubating ideas became iconic with the emergence of Post-it Notes, an “accidental” innovation from a 3M scientist who was working on a completely different project.

“At that time [in the 1990s], 3M was publicizing that it gave all their scientists 10% to 15% of their time to follow their own interests,” recalls John Ruff, a former long-time Kraft R&D executive. “So we took our North American tech team for a meeting with 3M. I asked 3M a question: ‘How do you track and monitor that?’ The guy looked at me and said, ‘We don’t.’ That’s when the light came on for me: You set an environment for people who have less-direct commitments daily for the business. You encourage people to pursue an idea, to even go find someone to bounce it off of.”

But the availability of external innovation, budgetary pressures, and other factors means that “intrapreneurship” in the food business now is at no better than a simmer.

“Researchers’ freedom to pursue things that have an innovation impact still need to be targeted against business opportunities and needs,” says Todd Abraham, who led the research and nutrition organization for Mondelēz International. “I used to talk [to] my group about innovation and remind them that we’re not in the car tire business. So I don’t want you spending your time making car tires.”

PepsiCo’s Pioneering Approach

All of this makes PepsiCo’s fellows program more remarkable. The company has been a modern pioneer in this area since the CPG giant launched its R&D Fellows Program in 2012, with the aim of “encouraging PepsiCo’s most accomplished scientists to conduct research designed to benefit consumers and society,” Tataranni says. The fellows’ mission is to “individually and collectively create value for PepsiCo through interdisciplinary thought leadership that champions and nurtures visionary research, enabling disruptive portfolio transformation for our consumers.”

The program is structured “to provide the optimal environment for the fellows to explore and think critically about their passion projects, and generate breakthrough results for the company and industry,” Tataranni says. Fellows also “effectively partner with experts in their research areas and represent PepsiCo in consortia and other professional settings.”

Fellows are encouraged to “delve into research topic areas they’re passionate about and where they have the potential to generate game-changing results for consumers.” While determined by each fellow, areas of emphasis tend to fall into one of these categories: making progress on PepsiCo’s sustainability journey; investigating ways to improve quality and reduce costs; discovering ways to deliver more functional benefits to consumers; and fortifying intellectual, technical, and equipment-based capabilities.

One result of the program is about as current as they come: the just-introduced Gx Sweat Patch, a first-to-market platform that measures and analyzes athletes’ sweat in real time and helps them understand their hydration needs at any moment. Gatorade’s legendary 35 years of research into performance hydration laid the foundation for such innovations, and PepsiCo fellow Lindsay Baker, a scientist at the Gatorade Sports Science Institute in Barrington, Ill., used her expertise in exercise physiology and sweat science to create a breakthrough that comprises PepsiCo’s first wearable. The Gx Sweat Patch is “particularly innovative,” Tataranni says.

And now, Baker is focused on next-generation wearables. For instance, she is working on different ways to capture readings further below the skin’s surface that measure hydration and electrolyte levels in the body.

“You have to have a creative mindset and the ability to approach a problem in a different way.”

Ajay Bhaskar, another of the PepsiCo fellows, says qualifications for fellows include strong problem-solving skills and intellectual curiosity. “You need to be able to think outside the box, with a passion for innovation,” he says. “You have to have a creative mindset and the ability to approach a problem in a different way, along with strong product and process knowledge.”

With all of this, PepsiCo’s fellows remain a rare breed even after nine years. The program currently boasts 14 fellows, but that includes three who were newly inducted this year. Fellows remain a limited population because the criteria are very demanding. The program is “highly selective, with rigorous admission and retention standards that establish premier functional excellence and build consistent scientific and technical capability globally,” Tataranni says.

Fellows must “demonstrate exceptional expertise and leadership on a company and industry level, and have a proven track record of strategically and/or commercially significant technical innovation,” Tataranni explains. Research superpowers come in handy. “They see around corners—either identifying or actually creating future food and beverage industry trends,” Tataranni says.

Typically, fellows devote about one-quarter of their work time to their research in the program. One of the most important provisions for fellows is their ability to get extra funding outside their normal work, to pursue pet projects. Requests typically amount to extra resources of $25,000 to $150,000 a year based on project needs and within the overall fellows group budget. “That’s a big benefit,” Bhaskar says. “With new ideas, sometimes it can be hard to get your manager to work on a new hypothesis unless you’re part of a long-term research group.”

Fellows enjoy strong platforms for internal collaboration. “We can work with other parts of the organization, such as experts in beverages, packaging, and water,” Bhaskar says. A monthly meeting “keeps our intellectual curiosity going, because it’s outside our normal areas.” He and his colleagues get passes to R&D “town halls” where PepsiCo leadership “explains what they’re looking for [in] the next three to five years,” Bhaskar says.

Under the fellows program, participants also can develop partners to help with the research, such as a university, government agency, or NGO. “This is part of how you manage time in a fellows project,” Bhaskar says. “You work with someone and make it a nice thesis project for them, too.”

Fellows can get outside advice from consultants and others who are trend watching industry R&D. Jafa, for example, has been talking with federal researchers at the Department of Energy as well as vending machine industry associations as part of a technology group that is looking into “future hydrocarbons and how to remove the barriers of hydrocarbons,” he says. As a fellow, he also has represented PepsiCo to the United Nations Environmental Program.

Beyond the Day Job

Sridevi Narayan-Sarathy is a polymer scientist who was recruited to PepsiCo’s Advanced Research Group 13 years ago, and her first assignment was to come up with value-added applications for byproducts—specifically, oat hulls and orange peels. PepsiCo generates about 100 million pounds a year of oat hulls, for example, most of them from its Quaker Oats production processes.

“I had the luxury of a little bit of extra resources not related to my day job.”

Soon, her early work yielded a patent. But Narayan-Sarathy also was interested in the application of new biopolymers for PepsiCo food packaging. And when she was inducted as a fellow in 2016, “I had the luxury of a little bit of extra resources not related to my day job,” she says. “I thought, ‘Wouldn’t it be cool if you could incorporate oat hulls into [packaging] films?’”

There were challenges aplenty. For one thing, thin films have a thickness of less than 25 microns, and for oat hulls to be incorporated into them, they must not exceed 10 microns. The problem, according to Narayan-Sarathy, was that oat hulls start off at about 250 microns across.

“So I did a lot of work on that,” she explains. “And then, once you reduce the particle size, you have to blend it with polymers. If we did it with conventional polyolefin polymers, that would help reduce carbon footprints. But if we also could combine it with bio-based materials, there would even be a bigger gain.”

Another obstacle was that her brew of materials produced undesirable colors and odors, so it was important to reduce and minimize these characteristics for food packaging. “You don’t want to have it affect the product. We have a pretty good handle on the origin of odor, but the next step, of course, is to find a definite mitigation solution. That’s what’s interesting about these fellows projects: You can work on them. This is not something where someone is breathing down your neck,” she says.

Bhaskar has worked extensively with chickpeas, lentils, tubers, roots (such as sweet potatoes), and other alternative ingredients in PepsiCo snacks, trying to understand how to use them to make the company’s products more nutritious.

Sathya Kalambur started his professional career in the field of surfactants, and as a researcher in PepsiCo’s Plano, Texas, complex for Frito-Lay North America, he has been transforming beans, legumes, and other pulse ingredients into alternative plant-based foods, supplementing the company’s traditional corn and potato-based snacks.

But as a fellow since 2018, he says, “I’ve gotten opportunities to work in areas that are very far out compared with my day job. My day job is focused on business goals and our operating plan. But fellows has given me some bandwidth to dedicate time and energies to far-out things.”

“Fellows has given me some bandwidth to dedicate time and energies to far-out things.”

One of them is an effort to incorporate more corn hulls into chips, from the approximate 1.5 billion pounds of corn Frito-Lay uses each year. Chips taste better with minimal hulls, Kalambur says, but different corn hybrids retain various levels of hull during tortilla chip manufacturing. By developing corn hybrids that retain more hull during the process, Frito-Lay can deliver more whole grain per serving than from the current process, he says. Plus, Kalambur explains, he has used findings from other hull research, such as corn disease resistance and cellulose extraction in the paper industry, to develop hypotheses for hull retention in tortilla chip processing.

Sharing and Synergies

Bruce Linter has been part of the program since 2016. In his first five years, the expert on salt and fat reduction took advantage of his fellows freedoms to “build an understanding of what’s going on inside snack foods and understanding it right from what happens to the inside of an ingredient as it becomes a Cheetos Puff or Lay’s potato chip,” he says.

“It’s not just about what you can do, but about the networks you have that can help the company innovate.”

“How does the structure form, and how do you work with that to get a different structure, taste, and mouthfeel? And what happens in the mouth?” he reflects. His work focused on being able to design textures based on that understanding and providing potential commercialization pathways for his findings.

Networking is a crucial aspect of the fellows program. “It’s not just about what you can do, but about the networks you have that can help the company innovate,” Linter says. To that end, PepsiCo organizes a forum for its fellows every two years, including a virtual one in 2020. Plans are still taking shape for the next forum in 2022.

“It gives our scientists a platform to share all the great work around the company,” Narayan-Sarathy says. “It’s a lot of effort, but it’s very satisfying. One of the goals of the fellows program is knowledge sharing and collaboration.”

Linter says that PepsiCo leaves no stone unturned to try to ensure that the structure of the fellows program, and its participants, create great synergies for the company. “But let’s be clear,” he says. “It’s not always going to be successful. You have to take risks. Sometimes it works, and sometimes not. It’s important that you know when to stop and go on to something new.”