CONSUMER NEEDS OF SAUDI YOUTH

Saudi Arabia 2021 | ECONOMY | VIP INTERVIEW

TBY talks to Tamer Mosalam, VP & BU General Manager of PepsiCo, on Saudi Vision 2030, changing consumer needs, and sustainability.

How have the positive changes in Saudi Arabia regarding entertainment events affected the company's operations?

Before the launch of the Saudi Vision 2030, the Kingdom's economy was facing a number of challenges, especially in the fast moving consumer goods sector. Following the launch of Vision 2030 we saw increased appetite for both local and foreign investments to support the implementation and execution of this ambitious and bold reform agenda impacting all facets of like in the Kingdom. Changing consumer taste and needs triggered a change in strategy from companies including ours to address and deliver what consumers were looking for at the right value. First, we adapted to different revenue management strategies and created affordable price points to keep up with consumer behavior. Second, we established initiatives on a store level that brought back lost previous consumers, including marketing campaigns to support our core brands. Of course, the Kingdom's entertainment calendar is a great enabler since entertainment led to consumers being on-the-go seeking new out-of-home experiences, which in turn drove consumer consumption.

How is PepsiCo keeping up with the trends of consumer needs?

We have introduced initiatives recently in order to evolve our product portfolio with better taste, lower calories and reduced or no added sugar. For example, in 2019 we launched Pepsi Black, a new bold taste aimed at consumers looking for a no-sugar soft drink. It is still in its early days, but we are encouraged by our consumers' reaction to the launch in the Kingdom and the wider MENA region. Our portfolio today offers consumers variety on both beverages and snacks. When it comes to snacks, we have Lay's Forno that has 60% less fat and our entry into the nuts & seeds category through our brand Sunbites, and the oats categories through Quaker. PepsiCo is strongly supporting the the Saudi Food and Drug Authority (SFDA) in its ambitious Healthy Food and Strategy and we are proud of our partnership with them to drive a healthier diet and lifestyle in the Kingdom.

What are the key drivers that influence customer demand and how will this help PepsiCo align with Saudi Vision 2030?

Younger generations are mandating new rules. When you have a population like Saudi Arabia, 36.7% of them between 15 and 341, it is the youth that will drive the market, since they are bolder and willing to try new things. They are also demanding and vocal about their needs, which means product innovation needs to be dynamic at all times. This also allows us to be working for Saudi Vision 2030 delivering on two levels. The first is female empowerment, since women in Saudi Arabia play a fundamental role in delivering not only the Vision but in a complete social transformation. The second is to deliver on that social transformation and sponsoring equity, and how that will synchronize with Saudi Arabia's new entertainment calendar. The calendar will hopefully bring about mass participation in activities and sports, and with it, out-of-home consumption opportunities.

PepsiCo's Tamakani program was launched to empower female Saudi entrepreneurs. What will this entail for the women in Saudi Arabia?

Tamakani was started through sponsoring the movie Rise, which speaks about the journey of women in Saudi Arabia. It is about the evolution of Saudi Arabia, and how it went from first excluding women to increasing their participation after many changes took place. Then, the idea evolved into two parts: how we could improve the labor skills of women to give them a better chance in the professional market, and how we could develop the entrepreneurship skills of young female graduates. To address this, we partnered with three major Universities in Dammam, Riyadh, and Jeddah. Our partner in this initiative is INJAZ Al-Arab, a non-profit organization preparing young, talented entrepreneurs in project management and entrepreneurship. We are secondly encouraging both females and males to be advocates for women's rights. The third part is about sustainability, setting that as a theme for professional endeavors, which is a great story for the country as well. With these instruments, the Tamakani program will deliver strong results.

What are your major sustainability programs currently?

Sustainability is key to the PepsiCo agenda. We continue to find innovative and new ways to grow PepsiCo business while using fewer natural resources. We have made considerable progress by embedding environmental sustainability into all facets of our operations. In Saudi Arabia - the hub for our snacks business - we produce the highest quality of potatoes, and export snacks to 10 markets in the Middle East, including the UAE. In 2019 PepsiCo increased the recycling rate by 25% resulting in almost 85% of our total waste from the plants being put to reuse. We have a powerful agriculture program, in which 100% of the potatoes used for products sold in Saudi Arabia are sourced in the Kingdom. Therefore, instead of importing all our production material, we are localizing 60-70% of the same and helped in creating 1200 jobs in the agricultural sector. We will also focus on how to participate in the water consumption initiatives. For example, PepsiCo's plants in Saudi Arabia saved 28 million liters of water used in snack operations just in 2018. Our plan over the next 5 years is to save 98 billion liters of water through advanced PepsiCo agricultural technology. We are delivering a promising initiatives that will allow us to reduce water consumption in our facilities as well as increase the recycling rates not only in PepsiCo facilities, but even in the whole world. As we strive to design 100% of our packaging to be recyclable, compostable, or biodegradable by 2025.

What are your expectations going forward with sustainability and green initiatives such as the 'Free of Plastic Waste' event at Formula E 2019 and Dakar Rally 2020 in Saudi Arabia?

Formula E 2019 and Dakar Rally 2020 were the start of many of these initiatives. We will collaborate closely with the Saudi government, our partners and NGOs to drive the sustainability agenda in the Kingdom. There is still some work to do, and one of the major topics being discussed is plastic waste and recycling. As PepsiCo, we are working tirelessly on plastic use reduction in India; we are acquiring their best practices and aiming to develop a business model together, which we will then apply to our operations. In addition, we are looking into the recycling of our snack packaging for a safer environment, and our plan is to use 25% recycled content in our plastic packaging and reduce virgin plastic use across our beverage portfolio by 35% by 2025. This will equate to the elimination of 2.5 million metric tons of cumulative virgin plastic when taking into account business growth.

What is your outlook for 2020?

We are optimistic and making aggressive targets for ourselves. If we look into how Saudi Arabia performed in 2018 and the impeccable transition into 2019, we are extremely positive that this year will end well.