Frito-Lay's transformation chief on how drooping bags became one of the biggest problems in the digital overhaul effort at $186 billion PepsiCo's most profitable division
- For decades, Frito-Lay had an ideal supply chain operation. But as consumers pivot to digital and new snack options pose new challenges, the maker of Doritos and Lay's is pursuing a major overhaul.
- Leading that effort is David Lindsey, chief strategy and transformation officer at Frito-Lay North America. But despite initial investments, there are several hurdles facing parent company PepsiCo's most profitable division.
- Among them is drooping bags. While the company is trying to use visual recognition tech to enhance store placement and display, the tech has difficulty capturing the product when it is falling over on the shelf.
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SAN FRANCISCO, CALIFORNIA - Artificial intelligence has met its match: a drooping bag of chips.
Burgeoning visual recognition technology holds immense promise to, among other things, help blind consumers shop easier by scanning objects and vocally identifying them. But it can't scan bags that are drooping or lop-sided on the shelf. Unlike cereal boxes, which are rigid, snack bags are flexible and easily move around the display, making it difficult for the tech to properly analyze.
The quandary highlights the promise of AI, along with the difficult path companies face in trying to harness the still nascent technology. And it's one of the biggest problems facing Michael Lindsey, chief strategy and transformation officer at Frito-Lay North America.
"We are definitely thinking about how would you use packaging both for the shelf and image recognition, and then also for e-commerce to make sure that they can ship as effectively as we'd want," Michael Lindsey, chief strategy and transformation officer at Frito-Lay North America, told Business Insider.
It's all part of a digital overhaul effort Lindsey is leading across the supply and delivery chains to use advanced technology like artificial intelligence to get the right product placed in the most opportune areas of supermarkets and other sales locations in visually attractive way for customers.
For many years, Frito-Lay had the dream supply-chain operation. The company owns all of the 30 manufacturing plants that produce popular products like Lay's and Doritos, 200 distribution centers across the US, and a fleet of delivery trucks larger than UPS and FedEx.
That model succeeded for a while, but no longer. Now, the most profitable division of PepsiCo is faced with a major challenge. The number of products available exploded to meet new competition - like organic offerings and seaweed snacks. Frito-Lay's now has around 1,200 unique items, up from a couple hundred a decade ago. Consumers are also no longer just purchasing their favorite snacks from grocery stores.
"You have a whole wide variety of how people want to buy and a huge explosion of what they want to buy," Lindsey said. In the company's system, "where we control everything end-to-end, we're not well-equipped normally to deal with that type of complexity because it introduces literally [an] exponential increase."
Lindsey shared the changes already underway at the consumer goods giant and why input from the employees who actually deliver and stock the Frito-Lay products on shelves in stores is helping to drive that overhaul.
Striving for the perfect shelf placement
If you enter a Walmart and see an individual stocking Frito-Lay products on the shelf, that isn't a Walmart employee. It's one of Frito-Lay's 25,000 frontline workers.
And now, they're equipped with Salesforce-powered smartphones that tell them, based on consumer sales data, what the best assortment of products are for a specific neighborhood.
"We are in every store in that whole neighborhood, so we know not just what Walmart's doing, but what Kroger's doing and what 7-Eleven is doing, what e-commerce is doing," said Lindsey. "We know the weather and the trends and how they impact the snacking consumption."
The company can also send the specific shelf display that would work best for the particular market. The front-line associates in charge of delivering and stocking the merchandise are then able to snap a picture of their shelf and use AI to compare with the template provided by Frito-Lay.
But that is where the challenge of the falling bags come in. Visual recognition technology is still early enough in the development cycle that it can miss products on the display that aren't a rigid structure. Still, Lindsey thinks the current applications are going to advance "much sooner than we realize."
Convincing middle-management of the need to change
There's a simple reason why Frito-Lay is investing so much in their frontline workers: they're the ones who understand the imperative to transform.
That's why Lindsey spends so much time doing road shows and other interactions that put him face-to-face with those employees. Feedback from associates help inform the technology strategy to make sure the company stays on pace with the rest of the market.
The tougher sell, however, are the managers. That's why the biggest challenge facing Lindsey is how to convince those mid-level employees to embrace change and the complexity that comes with it.
"It's the middle of the management that grew up in a system that maybe doesn't exist anymore, in a competitive environment that's changed," he said. "It's not that they don't understand that. It's that they've got a really tough job to do day in, day out to manage a business that's performing really, really well."