Can PepsiCo Inspire Sustainable Development in Africa?

Yesterday the Stockholm International Water Institute (SIWI) awarded PepsiCo the Stockholm Industry Water Award here at World Water Week. The ceremony summed up the mood here among the 2500 delegates from 43 countries: ominous warnings about the world’s impending water crisis with an air of cautious optimism. SIWI awarded the prize to PepsiCo for the company’s overall improvement in water efficiency by 20 percent per unit of production four years ahead of its 2015 goal. PepsiCo also conserved 4.2 billion gallons of water last year and saved $45 million in water and energy costs last year. So can PepsiCo take that experience and thrive in one of the most water stressed continents on the planet?

PepsiCo plans on expanding its operations in Africa this coming decade. In an interview with Sanjeev Chadha, head of PepsiCo’s operations in the Middle East and Africa, he explained why Pepsi is bullish about its prospects in Africa despite the region’s reputation as a difficult and contentious place in which to both conduct business--and he was adamant that the company can maintain sustainable development and operate responsibly.

“Africa is the new Asia,” Chadha said to me yesterday as we started our chat as yesterday’s sessions winded down. The macroeconomic factors certainly support his optimism. Take Africa as one entity, and you have a billion people contributing to a trillion dollar economy. Economic growth is certainly impressive compared to much of the world, with an overall rate at five to six percent annually.

And what about the obvious negatives? “Volatility is the middle name of emerging markets,” explained Chadha, as he listed the obvious challenges. The lack of infrastructure, problems with security, political instability and the difficulty in finding talent to live and work there are the leading factors. But Chadha reminded me that while a graph outlining business performance in Africa will of course zigzag, the overall trajectory of that line will still go up.

The talent who can help PepsiCo thrive in Africa, however, will make all the difference, and many of these professionals are already there or have long had ties to the region. Many of the successful expats who have built lucrative businesses in Africa are from India, Pakistan, China and Lebanon. “They are the ones who are used to that volatility, corruption, security challenges, and therefore they have a much greater ability to adapt effectively,” said Chadha. That south-south synergy, which is only escalating, is important to harvest if any company is going to entrench its business within Africa. For years mostly European money fueled African development, but that is changing as professionals from other developing economies now thrive in Africa.

And those professionals can also help PepsiCo develop the right business model to launch success in Africa. Many companies struggle in Africa because they often focus on niche products and services that cater to the wealthiest Africans. The rest of that pyramid remains largely ignored. Those firms that can scale and find a price point affordable to people of all economic levels are the ones who will succeed. Right now the average cost of Pepsi product in Africa is 1.5 to two times the cost of a similar one in India, yet overall per capita income is much lower throughout Africa. The trick is to find the right approach and business model in Africa, build scale and thrive in this market of one billion people.

So how can a company that has devoted more energy to environmental stewardship and nutrition succeed in Africa? And speaking of the world’s most fragile resource, Africa is home to some of the most water stressed countries on earth. But Chadha insists that PepsiCo’s experience around the world, with plants in arid regions of the United States, farming innovations in Mexico and Ethiopia and partnerships in India offer PepsiCo a huge advantage over other companies mulling investment in Africa. PepsiCo has a huge network of NGOs and portfolio of projects around the world into which they can tap as they build capacity in Africa. The approach PepsiCo is taking in Africa is one other firms should watch. Launching business in Africa’s 60 countries and territories cannot just be about plants, factories and fleets--investment in the environment, water and communities will be necessary in order to succeed in the globe’s last frontier.

Leon Kaye, based in Fresno, California, is a sustainability consultant and the editor of GreenGoPost.com. He also contributes to Guardian Sustainable Business and covers sustainable architecture and design for Inhabitat. You can follow him on Twitter.

Disclosure: PepsiCo covered the cost of Leon Kaye’s attendance at World Water Week.

Photo of Sanjeev Chadha courtesy PepsiCo.