PepsiCo's Donna Hrinak on Public Policy and Business in Latin America

Oct 27, 2011

In a wide-ranging conversation, former U.S. ambassador Donna Hrinak discusses her regional responsibilities in Latin America, and her global work with other food and beverage companies, together with NGOs, to make packaged foods and drinks healthier.

On October 14, 2011, Donna Hrinak became president of Boeing Brazil.

JULIA KENNEDY: Welcome to Just Business, a series of interviews on global business ethics.

Today I'm talking about global policy and business with Donna Hrinak, vice president of Global Public Policy and Government Relations at PepsiCo.

Few people are better qualified to analyze the intersection of global and business interests. As a former U.S. ambassador to Brazil, Venezuela, Bolivia, and the Dominican Republic, and as a current Board Member of the Council on Foreign Relations, Hrinak is well versed in global policy. And with experience both at Kraft Foods and PepsiCo, she also understands the private-sector perspective.

As more corporations redefine their roles as global citizens, PepsiCo is leading the way with innovative approaches to corporate social responsibility.

We have a lot of ground to cover today, so let's just jump into it.

Donna Hrinak, welcome to Just Business.

It's a pleasure to be here.

JULIA KENNEDY: First, why don't I ask you a little bit about your background and why you decided to make the leap from public sector and the Foreign Service into the private sector.

I joined the Foreign Service at a pretty young age and always said that I didn't want to be 65 and wonder if I could have ever done anything else. So when I had the chance to leave government and move into the private sector, I did.

I really had developed a great respect for the private sector during my years in government, and I think the U.S. private sector, particularly, has always been a model for how companies should act overseas as corporate citizens. I think more and more companies from other parts of the world are following that model.

But I know U.S. corporations got a bad rap in many cases for their actions and involvement in politics in one country or another. What I saw was almost universally admirable.

JULIA KENNEDY: Give me an example of something you saw that said to you, "This is something I want to get involved in."

I'll give you an example from my days in Brazil. Actually, it was an example that we promoted for the Secretary of State's Award for Corporate Social Responsibility. That was an example from Motorola, actually. I cite it because it's a great example of a company really considering what its value-add would be in the area of CSR.

A lot of companies were involved with environmental or education initiatives, all excellent activities and all badly needed. But Motorola said: "You know what we do? We do communications, and what you need in Brazil is communications among the law enforcement forces."

This was after 9/11, so we had run into that same problem here in the States. They started an initiative to upgrade communications equipment so that law enforcement in Brazil could talk to each other across agencies. I thought that was a great example of a company saying, "What can we do better than maybe anybody else, and let's make that our contribution." They did it, and they won the award.

JULIA KENNEDY: You left, and you started with Kraft Foods. What was that experience like?

It was excellent.

I have to say the food and beverage industry is really interesting to me because we have a real, intimate relationship with our consumers. I worked closely with Kraft Foods in Brazil, which was highly involved in the hunger program that Lula had sponsored. I was interested also in how the food and beverage industry could address this really basic problem, not just in Brazil but around the world. So that was my entrée to the food and beverage industry.

Then, fortunately, I was able to move to PepsiCo. I'll tell you, the advantage to PepsiCo, for someone like me, is that the company really takes positions on public policy issues; it wants to be involved in the debate.

You know, our CEO is a force of nature. Indra Nooyi is an example of how a CEO can really bring the force of a corporation to influence some of the big global issues that are affecting everyone in the world.

JULIA KENNEDY: Why don't you talk a little bit about your job here, and what your role is here at PepsiCo?

I actually have a couple of different hats.

Globally, I'm responsible for health and wellness policy issues. That means working, in particular, with multilateral organizations in the health and wellness sphere, the World Health Organization being the most prominent of those.

I work both as a representative of PepsiCo directly and also as a representative of PepsiCo through a couple of industry associations that we belong to, including the most prominent, the International Food and Beverage Alliance, which are ten global food and nonalcoholic beverage companies that have the shared objective of helping people achieve healthier lifestyles.

JULIA KENNEDY: It sounds like you are working mostly with nongovernmental organizations and international organizations. Or do you also work with national governments?

In the health and wellness sphere, in particular, I work with multinational organizations and global NGOs [non-governmental organizations] and other global companies.

Then I have a regional responsibility too, which is where my heart really lies, and that is in Latin America and the Caribbean. In that area, I work on all issues, from siting new plants, to taxation issues, to health and wellness.

JULIA KENNEDY: Tell me about the Latin America market. What is Pepsi mostly doing in Latin America? Are there certain products that you do more than others?

It's a really important market for us. Mexico is our second-largest market outside the United States, for example. Brazil is obviously a growing market. We are opening new plants there in both the food and beverage area.

We have some products that are unique to that market because we grew through acquisition in many cases. You'll see some of our foods and some of our beverages are Latin America-specific. But we also have 19 global billion-dollar brands, and those are as prominent in Latin America as they are elsewhere around the world.

JULIA KENNEDY: Are these brands ones that people might have heard of, such as Quaker, Tropicana, and Frito-Lay?

All of those, yes. And in Mexico, Sabritas and Gamesa.

I spoke to a Mexican minister when I first took this job and said, "I work for PepsiCo."

He looked kind of quizzical.

Then I said, "In Mexico, we are Sabritas and Gamesa."

And he just lit up. "Well, of course you are!"

Those are iconic Mexican brands, the way Elma or Lucky Chips are iconic brands in Brazil, for example. Frito-Lay brands that are the same product—but we know them here in the States by another name —would be Margarita chips in Colombia, for example.

So many people know PepsiCo products and brands, even if they don't know that that is PepsiCo.

Part of the challenge in my job, and part of my responsibility, is to make sure that people see the connection. We employ a lot of people in Latin America. In Brazil we employ about 11,000 people, for example. If you just think of PepsiCo as the carbonated soft drink, you are not going to understand what our impact is.

JULIA KENNEDY: How much do you tailor products that do have the same name in different countries to those markets? Do you ever use different ingredients or have different branches of a certain product that is tailored to Latin America?

: I think that's going to happen more and more, as we get increasingly global. I look particularly at our China business, where we have some beverage products that use traditional Chinese ingredients—in teas, for example—that are really China-specific. It will be interesting to see whether those kinds of products travel well to other regions of the world or even other countries in Asia. So sometimes, yes, they are very specific products for very specific markets.

But in other cases, we have formulas for certain products that are the same around the world. A Pepsi-Cola in Venezuela is going to taste the same as a Pepsi-Cola in Saudi Arabia.

JULIA KENNEDY: You started at Pepsi, actually, when Indra Nooyi was already here.

She was, yes. She was already CEO. She had been chief of strategies and CFO at PepsiCo beforehand.

JULIA KENNEDY: She started with the company in the 1990s, I think.

Yes, exactly.

JULIA KENNEDY: How do you see this as different from the way that other multinational corporations are run, with this big overarching idea of "performance with purpose"?

It's exactly that, that it is overarching, and it covers all of our activities. We really look at this as a holistic undertaking.

We don't apologize for being a profit-making corporation. That's the "performance" in the motto. We have an obligation to shareholders.

But we think that we should have a broader purpose beyond just profits, and we owe that to our shareholders as well. Indra likes to say, "We're people." Well, our shareholders are people too, and they have interests beyond just making money on PepsiCo shares.

So the "purpose" part of "performance with purpose" speaks to our consumers, to our customers, to our shareholders, to stakeholders in different areas, which include environmental sustainability (we all live on this planet, breathe this air, and use the water), human sustainability (we all want to be healthy), and talent sustainability.

It is somewhat directed toward our associates, making sure that we have a work force that reflects the countries in which we do business, but also the communities where we operate. We support education programs that benefit the broader community. But guess what? It means that there are more qualified people to work for PepsiCo also.

JULIA KENNEDY: So then, how does that affect you in public policy? I think a lot of people see "government relations" and think "lobbyist," right?

That is not a four-letter word, by the way. It's perfectly acceptable to be a lobbyist. I always rejected that idea that there is something wrong with being a lobbyist.

JULIA KENNEDY: Right. No, of course. Everyone needs to watch out for their interests.


JULIA KENNEDY: But then, also there is an element of public policy that says, "We are a global citizen as well." So I was wondering if you could talk about that balance.

I think it actually gets to the definition of lobbyist, because looking out for interests is certainly how I think most people would see lobbyists. But many times lobbyists inform and educate.

When I was in government, when lobbyists approached me, I often learned a lot from them about the concerns of their industry or the company they were representing.

So that's what we try to do in public policy too, to say, "Some of these issues are more complex than you might have considered, and let us present to you some complexities. The solutions have to be a little bit broader-based than we might otherwise have realized before, more so than you might have realized." And we learn from them.

I'll give you an example, International Food and Beverage Alliance. We are working a lot on the UN agenda on noncommunicable diseases.

JULIA KENNEDY: I was just about to ask you about that.

DONNA HRINAK: One of the events that we have sponsored in the preparation for the high-level meeting—and PepsiCo is the co-chair of the International Food and Beverage Alliance right now, by the way—was on NCDs, noncommunicable diseases, seen through a development lens: How do they affect development? This is the approach that the UN is taking.

JULIA KENNEDY: We're talking about—you may have said it already—diabetes and heart disease and—

Diabetes, heart disease, chronic lung disease, and cancer.

There are a lot of people that think the food and beverage industry is part of the problem on noncommunicable diseases—obesity is a contributing factor to many of these diseases—and would just say, "Just change your products, so that people will be able to eat more healthfully."

Well, it's not quite as simple as that. The best product in the world isn't going to help people live more healthfully if they won't eat it. So it has to be tasty. So what kind of research and development can we bring to the table that says, "We can create healthier products that are tasteful as well"?

We can include more fruits and vegetables in our products. Oh, and by the way, there's a double burden—not just obesity and noncommunicable diseases, but also there are still micronutrient deficiencies in many countries. There are deficiencies in vitamin A and iron. How do we fortify foods to ensure that we address those issues as well?

When you look at obesity or you look at nutrition, I think bringing in all of these different angles helps people understand maybe that there are more stakeholders on these issues than you might have initially believed.

JULIA KENNEDY: The reason I wanted to ask you about this declaration was also I read an article about some activists that said, "Well, there should be benchmarks for sodium levels and sugar levels." So I'm curious what your position on that is.

PepsiCo has our own benchmarks on reducing sodium, on reducing sugar and saturated fats. So we don't have any problems with benchmarks.

But the benchmarks have to be science-based, evidence-based. So I think that when you include benchmarks in a political declaration, you have to make sure that you have some sound basis for including those targets that you might want to have in a declaration.

The declaration right now—and it's still in draft form—calls for some benchmarks or targets to be developed over the course of the next 15 months. Hopefully, that will allow time to consider just what science is available.

JULIA KENNEDY: Tell me a little bit about setting your own internal targets or benchmarks, whichever word you want to use here, at Pepsi. How did that happen, and why is that a priority for the company?

In these three areas of human, environmental, and talent sustainability, we wanted to make concretely clear what we were talking about. So we came up with a series of promises in each of these areas.

We realized that one of the things we can do is reformulate the products, as we've committed to through the International Food and Beverage Alliance. So we wanted to state specifically how we could reformulate our products.

Sodium is the best example here. We have cutting-edge technology on how you redesign sodium crystals that you're including in your products, so that the sodium taste—the salty taste that consumers really like—will come through with a smaller amount of sodium included in the product.

It came about through discussions, saying: Okay, if you're talking about human sustainability, what does human sustainability mean? Well, it means understanding that children are a particularly vulnerable group, and so we want to have marketing and advertising restrictions on what we will say to children.

We recognize that schools are places where children make decisions on their own without their parents' supervision, so we wanted to make sure that we had products in schools that are healthier products.

We believe in choice, and we produce a wide portfolio of products. Almost all of them can be included in a diet. Obviously, a person who suffers from diabetes or has other medical conditions will have to be more careful about what products they consume. But our products are designed to offer a range of choices for people to make their decisions.

JULIA KENNEDY: I know a lot of schools have been banning vending machines or certain snacks to be offered. So I'm wondering if there is a growing market for these healthy snack foods that Pepsi sees in its long-term planning.

I think this is a key, to make sure that consumer taste and offerings from the food and beverage industry move apace.

One of the commitments we've made through the International Food and Beverage Alliance—and it's part of what PepsiCo promises as well—is to inform consumers, to give consumers the information that they will need on what is actually in the products that they're buying.

So we support on-pack labeling, for example. Or where that's not possible, or where additional information is needed, we provide website information.

So how do you communicate that kind of information beyond the developed world? I have worked in countries where candidates' names on a ballot had to be accompanied by a party animal symbol because people really could not read the name of the party, so they couldn't tell who they were voting for. How do you communicate how much sodium is in a product through a label that will be meaningful in an emerging market?

It has been quoted back at me several times by a colleague and a friend who works at the Pan American Health Organization, because I said one time, "You have to help us educate and inform consumers, because no company is going to shoot itself in the foot. As long as consumers want to buy these products, we are going to keep making them."

Now, do we have responsibility to make sure that consumers are better informed? PepsiCo believes we do.

JULIA KENNEDY: I also want to return to Latin America a little bit. What specific regional particularities are there in Latin America at the intersection between government and business that you find, whether it's entering new markets or developing markets, whether it's political risk or business risk? What do you see cropping up?

It's kind of a twofold challenge now, I think.

One of the challenges is more longstanding. It's no secret that the United States has a bit of baggage in Latin America, in certain countries in particular. That has always been an issue for U.S. companies: How do they balance their U.S. identity with being clearly a corporate citizen of the country in which they were operating? How do they make clear that what's good for General Motors isn't always good for the United States, and vice versa? I think that has been a challenge for U.S. companies in the region.

JULIA KENNEDY: Because they are seen as this hegemon who's coming in. Is that it?

: Yes.

You look back at United Fruit in Guatemala, for example, in the 1950s. A company operating in Latin America in the 21st century is quite different from a company operating in Central America in the 1950s.

But one of the things you learn when you go overseas as a U.S. diplomat is that we in the United States have very short memories, and people in the other regions—particularly in Latin America—have much longer memories. So it's easy for us to say, "Oh, get over it already." It's not so easy for them to think in that same way.

But the new challenge is precisely that we are competing against global companies now, and not just global companies the traditional Unilever or Nestlé from Europe—but we're competing against multi-Latinas too, Latin American multinationals that are expanding into the United States and elsewhere. So the competitive set has just grown immeasurably in the last generation.

JULIA KENNEDY: One thing that I was excited about is that Pepsi now has a line of coconut water.

Yes, we do.

JULIA KENNEDY: That's a Brazilian product that is now traveling to the States.

Exactly, yes. It shows that we can create export platforms in these countries too. Brazil is a great example because we export from Brazil to the United States and to other countries in South America.

We export from Mexico throughout the region. We export from Argentina to Chile and vice versa; their products just cross the border.

Now, this puts a premium on trade agreements that, for example, allow us to use the same kind of labeling standards in one country as we do elsewhere. It's tremendously complicated to do cross-border trade if the labeling requirements are different in one country from another. So Mercosur [Mercado Común del Sur, or Southern Common Market] standardization of labeling is very important.

And the kind of business facilitation: We started talking about free trade agreements in the Americas, or we look at bilateral free trade agreements. I think people saw it as big-picture integration.

For a company on the ground, it means have labeling standards that apply everywhere, that facilitate operations in your ports. So it's really nitty-gritty issues that make trade possible.

JULIA KENNEDY: I also wanted to ask you a little bit about this global citizenship question more broadly. You mentioned Motorola. I'm sure you see a lot of other corporations taking on a bigger global citizenship role. Depending what you read, you see a lot of different motivations cited for that
whether it's because there's so much transparency with consumers, consumers or shareholders are crying out for it more, it's a magnetic CEO, or it's fear of future government regulation. So I'm curious if you see this as a combination, or if there is one factor that is really driving a lot of the increased global citizenship among corporations.

I think it's a combination, actually. I guess with any one particular company the exact mix of those factors would vary.

But certainly we think shareholders are more concerned about these kinds of issues. We are very proud. We are the only U.S. company in this year's Dow Jones Sustainability Index that is a super-sector leader in food and beverages. We're terribly proud about that, because we know that position on the Dow Jones is reflected in analysts' reports and in companies' stock prices. So we think that can only be good for PepsiCo, as it has been good for the communities where we are operating that have allowed us to present the evidence that puts us into that position.

I think having a magnetic CEO is very important; it sets a standard. But the important thing is infusing that message throughout the organization. I think PepsiCo has been particularly good about that, when you hear it not just from the CEO, but from the business unit leader in a small country in Latin America, or from a country in the Middle East where you're a market leader. They say, "This gives us a special responsibility because we are leading the market here." That's what really is important.

And transparency, yes, absolutely. We are very proud of the commitments we have made, and we encourage people to judge us by them.

JULIA KENNEDY: Another interesting thing that I read about Pepsi—and I don't know if this is in your department or not—but as for the Pepsi Refresh project, I read somewhere that it didn't bump up profits as much as Pepsi had hoped, but they were going to continue doing it anyway. So I'm curious if you know anything about what went into that decision, and why Pepsi is committed to continuing it.

We are committed to doing it just because we see ourselves as a really important player in many of the communities.

JULIA KENNEDY: I didn't even say what the Pepsi Refresh project is. It's small grants to local organizations.

DONNA HRINAK: Small grants, and the local organizations compete.

JULIA KENNEDY: They compete online.

Exactly right. They get people to vote for their projects. I just think we have had tremendous impact on the ground where it counts, particularly in this economy.

For a kid that needs a computer in a classroom, the PepsiCo Refresh Project has had tremendous impact.

I think a combination of doing those big advertising campaigns, and creative campaigns—and we've had some great creative advertisements, in the Super Bowl in particular, some of which have come from amateurs putting together their own commercials for our products—but making that combination with this really on-the-ground, we can do it where the rubber meets the road.

I think that's a balance we are striving to hit—and I think we are making a good balance—in all places around the world. How do we talk about "Performance with Purpose" in Brazil and make sure that that reaches the potato farmers that we are buying the product from? What does that mean, when you are buying in the supply chain in a small market like Ecuador or Peru?

We have a product called Lays Andinas. It was a potato chip that we developed in Peru with the traditional Peruvian potatoes that are purple, blue, or gold-yellow. So these are potatoes that look really beautiful. Not only are they a tasty product, but they say something about Peruvian culture. To the farmers that produce that traditional kind of potato crop—that maybe doesn't make it into French fries everywhere—this gave them a sense of pride, I think, that their products were valued.

JULIA KENNEDY: Interesting.

I guess the only other question I want to ask you is, are you traveling a lot to Latin America? I know you live in Danbury, so you probably travel there quite a bit if you can, if you want to go to a Brazilian restaurant or something on Main Street.

DONNA HRINAK: We're very fortunate in Danbury to have a really great ethnic mix of Brazilian, but also other South American countries, a large Central American population, not to mention Italians and Germans. So yes, it's a great ethnic mix.

But I am on the road a lot, also. And frequently we're also receiving visitors here in Purchase, where Pepsi headquarters are located. We have lovely grounds. This was a sculpture garden that Donald Kendall started when we moved our headquarters out here from Manhattan. The community takes advantage of it. You can see people walking their dogs or jogging in the park. Fortunately, visitors from Latin America and elsewhere like to come and take the tour of the sculptures as well.

Oh, that's fantastic. Donald Kendall, of course, is a friend of the Carnegie Council, so it's wonderful to hear about that.

Thank you so much for being on Just Business.

DONNA HRINAK: Thanks for the opportunity.

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