PepsiCo, Purchase, N.Y., continually examines the opportunities to improve and expand its food and beverage portfolio. The company also applies the continuous improvement mantra to the team dedicated to designing its products. In 2009, the global food and beverage company reorganized its research and development teams with the goal of looking beyond flavor, color and taste and delving deeper into the science behind the products and how consumers enjoy them.

In the reorganization, PepsiCo assembled a global team of clinicians, epidemiologists and food scientists, each with their own individual area of expertise and perspective, to develop products with natural ingredients and a better-for-you positioning. The company also partnered with research institutes around the world to investigate the latest science and ingredients.

“We’ve changed the way we innovate at PepsiCo,” says Jeremy Cage, senior vice president of innovation and insights for PepsiCo Beverages North America. “Ideas can come from anywhere, so having a global R&D network is a critical ingredient to the future growth of our business. Our R&D resources enable us to meet our ambitious nutrition goals, including a 25 percent reduction in added sugars by 2020.”

PepsiCo’s research and development team is headed by Dr. Mehmood Khan, chief scientific officer of PepsiCo and chief executive officer of the company’s Global Nutrition Group. PepsiCo created its Global Nutrition Group in October 2010 with the goal of delivering breakthrough innovation in the areas of fruits, vegetables, grains, dairy and functional nutrition. Based in Chicago, the Global Nutrition Group was created as part of PepsiCo’s long-term strategy to grow its nutrition businesses from about $10 billion in revenue in 2010 to $30 billion a decade later, said PepsiCo Chairwoman and Chief Executive Officer Indra Nooyi last year.

The Global Nutrition Group is supported by PepsiCo’s corporate R&D team, which includes executives who are focused on long-term research as well as the specific areas of health, food, strategy and finance. Jonathan McIntyre, senior vice president of R&D global beverages, joined the company in July 2009 and has a background in pharmaceutical, food ingredient and agriculture research.

“As we have identified some of the challenges that PepsiCo needs to deliver against, we are looking not to replace what we already know, but enhance what we know with people with different backgrounds,” McIntyre says. “I came [to PepsiCo] with more of a focus on human health and more of a focus on the basic science that underpins many of the critical issues that we’re dealing with.”

PepsiCo’s R&D team is focused on building a corporate research function dedicated to investigating human health, sensory science, packaging and material science, and processing technology, McIntyre says. To accomplish this, it has taken more of an internal focus on R&D.

“In the past, vendors would come to us with their newest idea, bauble, toy or process and we would then ask the question, ‘Where do we want to put this?’” McIntyre says. “Now we’re more into identifying the critical gaps and hurdles that we need to deliver on. We have our own corporate research teams, and we still work with outside vendors. Between those two groups, we’ve really bulked up our capability of getting the newest, best and specifically directed technologies that we’re going to need for the kinds of challenges that will grow our business and deliver against our Performance with Purpose commitments.”

PepsiCo’s internal R&D team is focused on scientific research into aspects within food and beverage ingredients, including sugar reduction and increasing consumption of fruits and vegetables. Its R&D team operates on a set of rigid guidelines both internally and externally, and PepsiCo’s internal research also must withstand the scrutiny of science, McIntyre says.

Its researchers delve deeply into understanding the components of food and beverages and their affect on aroma, flavor, mouthfeel and preference, he explains. The goal is to understand how to create better-for-you products that maintain PepsiCo’s standard of great taste and provide nutritional benefits, McIntyre says.

“On top of that, to make this an even greater challenge, we have to do it in a way that makes the product convenient,” he says. “We also want to process our products very minimally. We want them to be as close to whole goodness of the ingredients as possible and do that in a cost-effective manner. We think those are all requirements to be successful going forward in this space of providing healthier options. But they’ve got to be healthier options within the way that the consumer understands them, can afford them, can clearly understand the benefits of the product that they’re going to get, and with no compromise on pleasure that they get from the foods that they eat.”

Leveraging synergies
PepsiCo’s global presence allows the R&D team to tap into insights from teams working around the world. McIntyre and Heidi Kleinbach-Sauter, senior vice president of PepsiCo global foods R&D, are responsible for ensuring the implementation of PepsiCo’s long-term strategy and major R&D initiatives in the Americas, Europe, Asia, Middle East and Africa. McIntyre works with international teams on overall PepsiCo initiatives, while product launches are taken care of at the local level, he says.

The company maintains visibility into the research projects at each of its facilities, which provides useful insight and opportunity, McIntyre says.

“If [any global] initiatives are initiatives that we think have resonance with consumers in other regions, we have the capability through the central group to what we call in PepsiCo ‘Lift and Shift’ those products or those technologies to different regions,” he says. “We can ‘Lift and Shift’ from the major research centers in the Americas to the regions, or if we identify new opportunities in the regions, we can lift them from the region, bring it to the support center and then make it available to all the regions.”

The local vs. global approach provided some inspiration for a reorganization of the global beverage R&D team that occurred about a year ago, McIntyre says.

“We found that the challenges of the future for beverages were more in common than they were separate, so we have people focused on brands, and we have people focused on individual projects,” he says. “We eliminated the business unit-specific R&D organization. We went to more of a matrix structure where we have functional departments building technical depth and expertise in certain areas. Then that way, we can take that expertise across multiple platforms.

“For example, we have a group that is working on developing beverage applications for new ingredients like new sweeteners, new flavor systems, new fruits and vegetable processes,” McIntyre says. “We may be able to take a technology and put the new finding into a carbonated soft drink, a tea or a Gatorade product.”

Within the structure, project-based personnel are known as platform leaders who lead an R&D portfolio focused on a certain area of the business or category. For example, a platform leader might be focused on the development of a carbonated soft drink with specific properties, McIntyre says.

PepsiCo also has dedicated researchers who are studying materials to improve its packaging, such as lightweighting bottles, as well as additional innovations, McIntyre says.

“Packaging design is so critical to getting people excited about a product, engaging them and providing the great consumer experience,” he says. “Understanding the materials and understanding the design and the formation of those materials also is important to freeing up the capability to do more unique designs.”

The matrix structure helps to hasten the development timeline, but also allows R&D team members to become experts by focusing on one area of development, McIntyre says.

“We have a flavor team, and they are expert flavor scientists,” he says. “They may work on a Gatorade product one week and they may work on a SoBe product the next week. At the same time, we don’t want to lose the closeness to the brand, understanding the consumer and the goal of the brand, so we have some people who are totally focused on integrating with the business and managing all of the R&D efforts, but then using the matrix to get access to all the technology.”

For its Gatorade brand, PepsiCo expanded resources beyond exercise physiologists who researched the product’s hydration benefits to adding personnel who understand true functional performance, McIntyre says. As part of the brand’s new positioning, the R&D team includes members who are knowledgeable in muscle physiology, mental acuteness and total nutritional support of an athlete, he says.

In addition, the matrix structure allows any R&D team member access to co-workers who are experts in a given application area, he says.

“You can get flavor expertise when you need it,” McIntyre says. “You can get somebody who is an expert in putting protein into beverages or somebody who’s an expert in package design. Whatever the challenge of the project is, a person can tap into the functional expertise where it resides in the function, build a project team and execute. That way we have the ability to be more nimble and to quickly get resources against the highest priorities agnostic to brand.”

Similar to PepsiCo’s visibility across regions, the R&D team has visibility across brand-based projects as well as those that are focused on a particular solution, or enabling technology as McIntyre says.

“[Projects are] managed in the same portfolio across all of beverages, and they have total visibility,” he says. “So if you’re working on carbonated soft drinks, you have ability to see everything that’s happening in these enabling technologies and figure out how you can incorporate those into the needs of your business unit.”

This visibility also allows senior level executives to see what projects R&D is working on, the intended benefits of those projects, expected launch dates, and technologies leveraged by the projects, he says.

Sweetener strategies
Prior to implementing the matrix structure, PepsiCo realized the structure’s possible benefit when it introduced its first beverages made with PureVia, a stevia-based sweetener, in late 2008, McIntyre says.

The company had been working on innovation of the zero-calorie natural sweetener within its R&D organization and with Chicago-based Whole Earth Sweetener. Once the stevia extract rebaudioside A (Reb A), which is used in PureVia, was granted generally recognized as safe (GRAS) status by the U.S. Food and Drug administration, PepsiCo aligned its organization to launch SoBe Lifewater and Trop50, McIntyre says.

“When the GRAS petition was filed and then accepted we were in the market within a week,” he says. “That meant, obviously, total enterprise synchronization to get those products out into the market as quickly as possible.”

The launches of reduced calorie Trop50 orange juice and zero-calorie SoBe Lifewater in Black and Blue Berry, Fuji Apple Pear and Yumberry Pomegranate varieties, provided a glimpse into the benefit of an aligned internal R&D structure, McIntyre says.

“When we launched PureVia, we saw some of the benefits of [the structure], and that was some of the reason why we decided to make the total plunge,” he says. “We were starting to see that working with Reb A was going to be important, especially to be able to say how we could do it in each group versus having a small group of people in each group working on Reb A. We have people who became experts in understanding how to formulate Reb A, and then we could formulate across other platforms.”

PepsiCo continues to develop products that are sweetened with PureVia in the SoBe Lifewater and Trop50 platforms. In January, SoBe Lifewater expanded with the introduction of zero-calorie Strawberry Kiwi Lemonade and Macintosh Apple Cherry varieties. The Trop50 portfolio has grown beyond the original 50 percent less sugar and calorie orange juice and most recently added Trop50 Farmstand Apple in August.

Both SoBe Lifewater and Trop50 have inherent properties and formulations that help to mitigate some of the challenges that can be encountered when formulating with Reb A, McIntyre says.

“From an R&D perspective, the challenge was in the nature of stevia products,” he says. “Stevia has a nice front sweet, but it doesn’t have the intensity of sweetness of sucrose or some of the artificial sweeteners. As you try to increase the sweetness, you then start pulling in some flavors and taste profiles that are probably not the best in many of our beverage formats — you start to get a bitterness and a licorice-like taste with increasing amounts of Reb A. What was critical in our development was finding the flavor systems and the flavor profiles that would allow us to maintain the great flavor and get the sweetness to the right level without getting the bitterness.”

SoBe Lifewater’s portfolio is designed to have exotic fruit flavors that can carry the Reb A and the product also contains natural sugar alcohol erythritol to round out the sweet flavor, McIntyre says. For Trop50, the product’s juice base lends itself well to the use of Reb A, he says.

To further its sweetener options, in August 2010 PepsiCo formed a four-year partnership with Senomyx Inc., a San Diego-based company focused on discovering and developing novel flavor ingredients for the food, beverage and ingredient supply industries. The collaboration provides PepsiCo with the exclusive rights to the Senomyx sweet flavor ingredients developed under the collaboration, which is focused on the discovery, development and commercialization of sweet enhancers and natural high-potency sweeteners for use in lower calorie PepsiCo beverages, the company says.

The partnership with Senomyx also includes research into the human biology and physiology of sweet perception.

“We are working in a partnership with Senomyx to say, ‘How do humans perceive sweetness? How do we understand that? How do we know the impact of that on our products and how can we then identify, discover and develop the next generation of technologies that allow us to make products have great taste and have the right level of sweetness without as much calories as we had to use in the past?” McIntyre says. “It’s not a product forward-only approach. It’s a little bit of a biology approach to really understanding the whole area of sweet sensation.”

Innovation focuses
Along with exploring sweet-enhancers, PepsiCo has increased the use of natural ingredients through its use of PureVia and sugar. In September, the company reformulated its Sierra Mist lemon-lime carbonated soft drink to contain only natural ingredients. Sierra Mist Natural is made with five ingredients, including sugar, as are Pepsi and Mountain Dew Throwback formulations. Gatorade’s G2 brand removed high fructose corn syrup with additional Gatorade products to follow, the company says.

For McIntyre’s R&D team, reformulating an existing product might present a greater challenge than new product development, he says.

“You’re asking to make the product essentially taste as close to the original as possible, because in some cases different, but better, may not be seen that way,” McIntyre says.

The company is dedicated to evolving its portfolio to include more natural products, but each product presents its own formulation challenges, McIntyre says. In the meantime, the R&D team is working to increase the amount of natural ingredients used in PepsiCo products.

“We are looking at both process science as well as ingredient science to eliminate the artificial preservatives and the artificial colors where we can and where consumers really care to have them removed,” McIntyre says.

PepsiCo’s R&D team is researching natural ingredients that also can impart color, safety and stability in a product. The company has been investigating methods of process technology that can provide the microbiological safety currently incorporated by artificial ingredients, McIntyre says. The company also is looking at botanicals as a way to include more natural ingredients, he says.

“In some cases we’re looking to understand which natural ingredients may be involved in imparting health or wellness attributes,” McIntyre says. “[Or] how do we find the natural ingredients that allow us to have those brilliant stable colors that people really like and in a very healthy, natural way? Finally is the preservation — what ingredients are made in nature and protect us and make our products safe? The approach is to build access to the variety of what nature provides, and then being able to test it against those parameters such that we can identify the new functional ingredients.”

To discover new and natural ingredients, PepsiCo is leveraging its global scale, he says.

“That means scouring the globe and understanding local knowledge of foods and preparation of foods to find and identify those new products,” McIntyre says. “We are working with local, on-the-ground universities, research institutes, chefs and food scientists all across the globe, especially in areas that are a little more remote or known for their incredible diversity.”

Together with its Global Nutrition Group, PepsiCo’s long-term R&D goals are to deliver against PepsiCo’s Performance with Purpose agenda and deliver great tasting good-for-you foods and beverages internationally.

“At the end of the day, it’s really truly understanding what the consumer wants and needs and being able to deliver against that in a way that continues to deliver what Pepsi has always delivered, which is a great consumer experience and a great tasting product,” McIntyre says. “Now it’s the goal to even that up with eliminating some of the negatives to make it easier for people to consume some of those products and really ratcheting up the benefits that they are going to get through consuming more fruits and vegetables, whole grains and protein.” BI