Why Corporate Venturing - PepsiCo Global Chief Venturing and Investment Office Daniel Grubbs

Hi, I'm Fred Schoenberg, and thank you for joining me on the VentureFuel podcast. At VentureFuel, we help companies find new solutions by partnering with the best startups from around the world. On the show, you'll learn the secrets of business leaders, you tap into startups, and the founders drive in extraordinary results. We'll consider new ideas, stretch our mindsets beyond the status quo, and in the process, remember how to leap the competition and fuel personal growth. Hello, everyone, and welcome to the VentureFuel Visionaries podcast. I'm your host, Fred Schoenberg, and I'm so excited to welcome you today to listen to my guest, Daniel Grubbs. Daniel is the global chief venturing and investment officer at PepsiCo. He leads PepsiCo Ventures, which is the corporate venture capital and business development group at Pepsi, focused on their global investments with emerging B2C and B2B companies in the consumer good space. He also oversees the widely successful Greenhouse Accelerator, which is a mentor-guided program supporting the acceleration of the latest innovators that seek to transform the ways consumers eat, drink, and live their lives. For anyone that does not know, PepsiCo products are enjoyed by consumers more than one billion times a day, more than 200 countries and territories around the world. PepsiCo generated 79 billion in that revenue in 2021, driven by a complimentary, beverage, and convenient foods portfolio, including Lays, Doritos, Cheetos, Gatorade, Pepsi, Mountain Dew, Quaker, and Soda Street. Today, Daniel and I talk about why CBC, why Accelerators, why even think about startup collaboration, and how does PepsiCo Ventures invest ahead of the core business. So please join me in welcoming Daniel Grubbs. Daniel, welcome to the show, sir. Thanks, Fred. Thanks for having me. I look forward to it. So last we spoke, we're at dinner in Vegas, and I was teasing you, I was going to get you on the podcast somehow some way because it was you, it was GM Ventures, Comcast Ventures, and we were just kind of noodling around how to be in this world, how to stay in front of businesses and somehow I hoodwinked you into sharing your wisdom here with everybody. Yes, no, I look forward to, no, no, we were, yes, there was a four podcast conversation and it was some four non-podcast conversation, but yes, it was good time and I look forward to getting into it here. Cool. So let's level set for the audience. How did you get into BC and what do you do on a daily basis at Pepsi? Yeah, not your traditional route, but I joined PepsiCo almost 10 years ago now, and that previously was in the consulting world and working with many strategics sort of in the consumer space, retail space, and coming into the PepsiCo organization, helping lead a portion of our beverage business from a strategy for analytics, but also it was a portion of our organization that was ahead of set of emerging product lines and such. And so by nature, we were a group that was pressing the needle a little bit and was a couple other like-minded individuals. We were pushing on the idea of not only were we driving businesses that were more the forefront of our portfolio, but also trying to tap into consumer needs as we were conscious of the idea and the activities that we also needed to probably venture as an organization. So really, myself and a couple of other colleagues really continue to push on that idea and for the next few years, really I would characterize it more as an incubation period for the organization, looked at an investment in the venture landscape, particularly with package goods companies at that time, which then led to really PepsiCo as a whole continue to kind of say, hey, this needs to be a global corporate activity, a lot of it around centralization of this. How do we kind of bring this to other portions of our business and ultimately kind of bring the value we're seeing in not just this business sector, but to really all the business sectors, which is really so I kind of shape the direction and the design, the constitution, if you will, of what we'd be doing from a venture group activity, which is carried on to this day. So it's not your traditional sense, like I mentioned, but really also in those incubation years, it was building up the relationships that you would, as any VC would, building up sort of the institutional knowledge from a deal structure nature, but also from a corporate venture capital is how to make sure that it was going to take the best of the corporate side, but also leverage a lot of the traditional external VC and how to design it for ourselves in that capacity. I love that. We definitely want to spend more time talking about that best of the venture world and best of what Pepsi or a large strategic brings to the table. One of the things that we touched on a few times at that dinner was this idea of investing in front of the core business, the great Gretzky quote of skating to wherever the puck is going. The difference is your puck is a $79 billion a year company, so that's a big puck. So would love your perspective on that, of how to kind of be out in front. Yeah, and for a company like us, which out in front, many of our businesses are leading in their space, if not number one, number two. And so it's really important that we continue to kind of, we think, keep our market share, keep our positions, keep relevant from a consumer, but also from capabilities how to meet those needs underlying. And so yeah, I mean, we spent a lot of our time, we have a high bar to kind of keep in that capacity of whether it's consumer relevance or it's consumer demand, but it's also around how consumers are also changing their lives as it has to do with food and beverage, but also their health and their digitalization and other aspects that kind of become a part of it. So our group is, my team kind of really spends a lot of time also with our insight partners and other parts of the organization saying, where is the market today? Where do we continue to kind of think it's going? It's working with a lot of third parties as well. So we don't pretend to know everything ourselves, trust our gut, trust our instinct. And a lot of that comes through kind of our various activities from a scouting and how we scout, obviously, and really understand consumer habits and how those are changing, consumer behaviors and how they're changing sort of that first wave, second wave, third wave kind of influences that might drive changes in purchase decisions. And so it's really important for us as a group for the organization to be making sure that we're staying abreast of that, digesting it, really thinking about it. Some of those things we think might continue to have a life of their own, and we think some of those trends might fall away and become more fad or not really call it sustainable or scalable. And so for us, a lot of that is staying ahead. Going ahead of the puck is we really don't know necessarily always when those things might manifest themselves for organization to take advantage of, but it's really important that we kind of take stock of a lot of those dynamics and trends. And then the key part of that is ultimately, it doesn't mean very much if it just lives with us in terms of our group within the organization, but it's that it's actually becomes more ingrained in as a part of the core businesses understanding. And then this is a big part of it is that they are also aware of what we're seeing, hearing, and feeling in terms of as an example around how consumers are really focused on reuse and around or moving away from products that beverages that you might consume that have elements of certain ingredients, and is that something that's going to continue to grow? Well, we kind of make them aware of where that is today, where how that's been evolving. We might not be ready to go innovate against it, let alone kind of transform, let alone go acquire into there. But a key part of that is making sure that the business is understanding it. So it's our job to really make sure that we're looking at a lot of things, a lot of applications that come into making products, moving products, selling products, and in that regard, we're global in nature and looking at those trends and also bringing that back in appropriately. Can you give maybe a few examples of previous investments that are public from your portfolio just to kind of maybe exemplify what you're talking about? One company involved right now characterizes it in the beverage world, but also something language we use around sort of beyond the bottle is a company called AirUp, which evolved sort of the idea of delivering a beverage and delivering flavor, but using retro nasal sensory and technology right to deliver that, which means 80% of your taste really comes through sort of the retro nasal versus ortho in that regard. And they've developed a new novel approach to actually deliver on flavored water, flavor beverage. And it's a big change in terms of how consumers consume beverages, consumer flavor. Most often they're used to actually the actual beverage itself in a liquid component, having the flavor inside of it. This is a new evolution in that way. It takes time. There's a lot of potential tangents that that can offshoot, and that's a company that we're obviously interested in for what they're doing, but where that can kind of continue to go in terms of maybe a whole new platform and technology, waste terms. And so it's an area that we bring very close to our core business to how do we help, how do we support, how do we partner in terms of their development, but that also we understand it just in terms of not just the company itself, but how consumers kind of continue to think about how do that live in their lives, and is that going to change some underlying, goes to market approaches, ways to selling in that capacity. There's another company as well though, if we're part of our Gatorade businesses, we're really big in the sports fitness, hydration space, and we also understand that in that world increasingly as technology has become prevalent with everyone in all parts of their life, but increasingly also in your sport and fitness routines. And people want information, no surprise. And they want information from their technology, and so there's businesses in that field that we felt have a real ability to deliver information, but also very much tied to our core products, i.e. Gatorade. And so we really worked with a company Epicor and Sweat Patch Technology, which delivers appropriately the information around your fitness routines and how your sweat, where your composition is, where you are from a hydration, and obviously it has a close relationship to our Gatorade business, which is a business that is rooted in science, but we really believe it's not just a product, it's a business that's rooted in it. And we work with companies like that also, and how they're connected into our core business, and that we think our Gatorade is not just about the product, but it's about continuing the growing of that business and that franchise in terms of being at the core and helping athletes achieve their best in that capacity. I think both of those are so interesting as examples because where I wanted to dive in from before is as you started to create the Constitution for this and build up this practice, there's this dynamic that every CVC sort of faces, right, of strategic versus financial and value to start to the startup and then value back to the core. And I think both of these are interesting sort of use cases on that. Can you talk a little bit about how you think about that dynamic and you can use either of them as an example or whatever you'd like, but how you kind of took the best of the strategic and the best of the VC world to build something here that works and win-win for everybody involved. Yeah, look, and a lot of the VC side is ultimately rooted in the financial outcomes, and that's important to us, obviously. I mean, it goes that same, but there's 51 plus percent of this ultimately kind of comes down to the strategic dynamics. At the end of it, the financial, it's not going to move the needle for us as a broad organization, of course. So it's really about, but also unto itself as many other parts of our business, we want to make sure it's delivered and it's returning the right level of financial in that regard. But ultimately, strategically, and for us, strategically means we've rooted ourselves and it's an area for us as an organization we talk about, which is driving sort of the faster agenda. And the faster agenda for us as a company is tied very much towards sort of consumer centricity. So back to those two examples was that's really rooted in what the consumers we believe is already asking for, maybe not there so overtly, but where they're interested to move towards. And so how do we kind of make sure that we're rooted in that as well? And strategically, what we also look at is we understand, in some cases, it might mean a direct partnership. In other cases, it's an actual, we need to be with them and learn from them and they learn from us. And maybe it's not a tangible partnership in terms, in our world, sometimes that means co-product development, co-manufacturing, distribution, but it could also still just be a knowledge sharing learning aspect of it. And that's the strategic also importance for us. And that might have backwards effects on maybe not for us to compete with them, but also how that might change some of our core businesses. We become a better student in terms of how to kind of think about where's the consumer going and what's key for them, health, nutrition, flavoring, ingredients, all those sorts of things or also where they're shopping or how they're shopping and that we need to be aware of that. And that those are the strategic ones that are also, those are harder to measure, right? It's always right from a CVC is also like measuring that value is going to be, it's not just hard because it's less tangible, but it's also longer in time. And what I always say is like, you can try to draw some understanding of the impact, right? But you really ain't any time to measure that. But the other thing I always say is it's probably better to talk about use cases. So it's, yes, you can talk about the aggregate and what's the aggregate impact, but I think if you can also understand it from specific use cases, like the ones I kind of gave you, you can also see the strategic value and strategic relationship and understanding of how that kind of plays a role back into the organization. But a key part of all of that in the strategic is that it's got to be tied back into the core business and with the core people and building and having those relationships there and that it doesn't, the information doesn't sit in a silo or the relationship doesn't sit in a silo in that regard. Is there any part of it that is considered like disruption insurance, right? Which you know what I mean, like if all of a sudden flavored water can be delivered just with scent, right? That fundamentally changes the big portion of business, right? And obviously you could acquire that company should it hit a certain level and those kinds of things too. So I don't mean it in disruption like, uh-oh, the walls are falling in, but more so like, is there motivation there or is this about growth, right? Like is there, what's the friction between those two? Yeah, I think we look at just, I think more from a positive nature of things in terms of like, look, I think we feel strong about our position. I think we want to understand it, knowledge it. I think acquisition is always a potential, right? But also, yeah, if this thing continues to evolve, it could mean that party is of interest to us, but also like with a lot of innovation, there's offshoots of it, right? That offshoots of it could be very value-centric, it could be very mainstream, it could be very premium, right? It has a lot of different ways of developing it and we might be best suited to go after a portion of it that's maybe more value or mainstream while a lot of innovation still lives at the very premium end of the spectrum. We still might also think of that premium as something important to have from an acquisition, but then it could also be as, oh, it's actually more relevant in this part of the world, right? Versus that part of the world. So we do get active, right? There is a strategic, part of the strategic is potential acquisition, of course, but I think like with a lot of corporates, ultimately, the acquisition target percentage is single digit in most regards for what they're in and a lot of that also comes down to is many factors can become a part of that acquisition, let alone did that thing develop to the stage, that it was worthy of it, let alone did timing work out and all those things. So to foretell that, hey, we're going to get in because of this and we're going to create a boxed-in position that's a little presumptuous in some cases. Absolutely. That's very interesting. It's kind of flipping it around to a startup that might be listening. There's obviously some misconceptions around taking CBC investment as somehow less optimal than taking a VC investment and/or like, oh, the corporates are going to slow you down, which there might be some truth to that in certain pockets. Just curious when you're talking to a startup, how do you want them to think about working with you all? I would actually say it's going back to the early days for us and probably in our industry, a lot of preconceived notions too, right? A lot of it coming from the VC side of, hey, be wary of corporates and that sort of thing. I've always said, you got to get to know the corporates, you got to get to know us. We're not a big scary beast, we're still individuals, we're still people, right? In that way, I mean, there's a lot to offer from ourselves, but to your point, a big thing is setting expectations out front, right? Who we are is obviously a company who lives and breathes in a number of different categories. We have a deep expertise in those categories and sort of the relevant adjacencies. We're vertically integrated, so we have subject matter expertise on a lot of the steps and in the process and how to kind of bring that to full. We are a capital investor, so we have capital, but also the right expectation is we're not a pure play financial investor in that regard, but it depends on the company and the situation. In some cases, we look to lead, some other cases, we look to become a part of more of a syndicate of around, but that just because we have maybe a larger balance sheet doesn't necessarily also mean is that we're going to be there forever and ever to carry the round or carry future rounds in that way, right? By the way, that's no different than any BC, right? So why would we be any different in that regard? Do we operate at a certain timetable in terms of ability to close and other of those things? Yeah, I mean, we have to go through our processes, but I think operating for a number of years we're pretty systematic about how we kind of go through it and how to make sure that we have some speed to action, but at the same time, it doesn't mean that between a Tuesday and a Wednesday, checks are cut and kind of decisions are made. Those days might be over in general from the VC world, too. Yeah, exactly. Yeah. But I think going back to your point, it's level setting right out of the gate in terms of who we are and where we're at, and we do a lot of that proactively on our end, where we're also the ones that we're most interested where we've kind of worked out a lot of the time element even before kind of starting the conversation, so that we are ready to kind of go in and kind of learn and figure out if this is going to be something that's mutually beneficial for both sides. Love it. So I have a question that I get asked a lot, right? If I'm talking to the CEO and it ranges right from CEOs of $100 million type companies up to Fortune 500, the question comes up, why corporate venturing, right? So whether that means accelerators or CVCs or whatever piece within this, what would be your answer to that? Why even think about partnering with startups when you already have an R&D group and all the insights and sort of the machine that are bohemath? How would you answer that question? I think you just mentioned, right? There's a lot of activities that happen in a corporate that ultimately just live in the corporate, right, which is they live within the walls, they live within the mindspace of the individuals in the organization. And it's different when you're actually touching, feeling, operating out in the market and the knowledge, the perspective, the intuition that you develop, that's very different than call it words on a page or hiring an insight firm or research agency to tell you something, right? You develop a different understanding and appreciation of where the dynamics. You also, you're in the businesses to understand kind of actually the dynamics that they're going through that you wouldn't know if you were essentially being told this through some third party or if it was just ultimately from your R&D team or your insight team or whatever it is. And so we look at it as it's an additional piece to the puzzle, right? It's not the entire puzzle, but by no means. But without it, you're kind of missing that perspective. It was a period too where it's the way we think about ourselves too is the investment gets all the attention, but it's what comes with that, right? What really comes with that is being involved and being active. And what does that also start turning into? It creates a different layer of insight. So insight organizations, that's almost like an offshoot of that as well. It's competitive intelligence. You have competitive intelligence units within organization. This is sort of also related to that, right? It's also partner network. So a lot of the firms that we work with and the companies we're investing in and work with a lot of more emerging, call it design firms and all these other different activities that when our organization is working, we're working at a certain scale, we don't always have that appreciation for the next up and coming call it right partners who we think could be appropriate for our organization. And so if you think about it in those terms, it's you can call it tip of the spear, whatever it might be, but it's also a real depth and progressive understanding of where the market is and where the market's going and a lot of different aspects of the value chain. And how do we make sure that we are active in that and then we're bringing that back in. And without it, you're kind of really missing a good appreciation and many times you're going to be a lager or choose the wrong kind of vehicle or instrument to kind of move your business forward in that regard. I always think about, I was on a, I was hosting like a tech conference that we built in London years ago. And as part of that, there was a bigger sort of main conference that I, I got to be on a panel and it was right as like the Cambridge Analytica data privacy thing dropped like it was that week. And the panel was Twitter and Facebook. It was like, it was sort of an interesting moment in time, but on stage, everyone was saying, you know, we have to figure out if there's a way for people to own their own data. And I was like, Hey guys, across the street, we have five startups that are all doing that. And like, they're like 18 months in, like they, they've got the jump on it. And to me, it seemed like very like, Hey, just walk across the street, it's right there. But they were all such nascent startups. Do you know what I mean? Like, so they, they weren't on anyone's radar yet. And I think that's what's interesting about this space is you start to see things that are percolating and growing and you're like, Oh, here's a solution to maybe a bigger problem that's not on your radar at first, right? And then it's there. So being active in that space, you get exposed to so many different things and waves. People are tackling problems. And the larger the, almost the larger the organization becomes, right? The more in need you are of that because of also you create lines of chain of command, lines of decision making, and things get lost, right? In that regard, if you think about the most innovative, right, it's, you know, they're starting from a basis of a much smaller, but as they mushroom by nature, what happens is a lot of those things get lost in terms of how to stay in progressive and how to stay in the innovator. Yeah. Very true. All right. Well, so can you tell us a little bit about the greenhouse accelerator? Yeah. Yeah. And just, you know, greenhouses is a program we've helped drive within our organization and out into the market for a number of years. It's our accelerator. So in addition to our group, obviously investing, but also as a vehicle before even investing and scouting and in other cases, sort of incubating businesses, the accelerator, it has two primary purposes. And when we developed it, this was at the cart then, but we developed it in Europe a number of years ago, really because of the business we were looking at there going, hey, let's, you know, we need to continue to make sure we're on the forefront. And there was a lot of new entrepreneurship coming to the European market at the time, almost as a wave that typically happens after a degree of innovation coming out of the US. And so we felt like the European market was a good place to kind of stand this up and be in progressive. And where it's evolved into is we've run a number of different editions of it, of working with emerging companies and startups, typically companies who are developed an initial product, an initial launch aspect to their business. And we work with 10 companies, typically, and in addition, we've run a number of them in Europe, number in the US, we've run some global ones from an R&D as well as sustainability perspective. And it's really twofold, one, for these companies, we really kind of see it as more mission purpose of around developing these relationships, giving back the mentorship from our subject matter experts internally, could be supply chain perspective, could be an R&D plastics perspective, it could be a flavoring, it could be around procurement and how to think about a lot of different things, let alone marketing or design. And so a lot of it is around just giving back. And we think of that as what we want to be a part of the ecosystem and we think there's potential dividends for the organization downstream many years later as these companies evolve or as individuals, they may move on to something else and we just want to foster good collaborative relationships across sort of the industry. And the second purpose really is for internal is to develop a set of mentors and the mentorship internally as a part of our culture. We're a large organization and in many parts of our business, even people who work say in our beverage business within North America or other parts of the globe, you know, you might not necessarily, the marketing person might not necessarily know the supply chain person at certain levels of the organization. And we see it as critical that also people develop an understanding and appreciation for each other, but also learn from each other. And then what we typically find is, you know, as years go on, they move around within the organization and preexisting relationship is valuable for terms of breaking down walls and silos in that. And so, you know, we've been at it for a number of years now, and like I mentioned, different geographical areas, but we've also looked at kind of executing it, not just with call it your typical call it package good, but life, R&D life science companies, you know, Middle East and the sustainability set of initiatives. And so it's kind of taken a life of its own in terms of how it can be applied. And it's something we'll continue to do and we'll be kicking off another edition of it probably in the next month or so, you'll see some more information coming out. And so yeah, we're very proud of it and how that's continued to grow. Is there anything, I mean, you've been at this, I love that the themes sort of change of where it is and it keeps it very fresh. Is there anything you've learned during the years of doing this that you didn't know up front? Right? If you're launching a new, if a corporate's listening and they're like, Hey, we're gonna launch an accelerator. Is there any like, Hey, watch out for this, or you should definitely do this. Is there anything that comes from mind? Yeah, I think, you know, externally, I think it's, you know, you want it emerging and all that, but actually you don't want, it sort of depends as a corporate. You probably want things that are a little further along because, you know, they're more ready to work, digest, you know, converse, go through it. It also really depends on what you're trying to get out of it as the corporate, right? We don't go in to say, Hey, we're looking to find emerging companies we want to, and we want some ownership equity pieces. We've taken ownership, we take no equity through this. So it's also like what's your goal, what are your outcomes in it, but having companies for us that was a little bit later is we think they will get more out of it, knowing who we are as an organization. On the other side too, is, you know, by nature is, and the internal is, is having people understand that this is not an activity for us to kind of, I think some people would think of it as a way to stay abreast of the innovation and say, Okay, how does this spark something for us? We don't need the greenhouse program itself to kind of spark inspiration and ideas in there. You know, that can come from a lot of other means. This can serve its primary purpose, like what I mentioned, what it is in terms of giving back, but then also fostering it at the employee mentorship internally. All right, I'm going to get you out of here on this question. So let's, let's go back to zooming out and looking at where the puck is going. Yeah. I think we'll surprise those listening about how we eat, drink, and live our lives, you know, say 10 years from now out in the future. Is there anything that comes to mind about how the world is going to change that you think might surprise folks listening? Well, I would say first is change can be small C, big C. You just look over the last 10 years, let alone 20 or 30 years, there's, there's been quite a bit of change and a lot of that. And so to me, I think it's the question go forward is kind of look backwards for a minute and say, what has been the historical set, sets of changes and how will those continue to occur is that I think a lot of it has been historically rooted in even in food and bev has been rooted in technology and information at the root of it, right? Going back at least, you know, 40 plus years. And what that's resulted in is more information in people's hands, which means more personal choice and desire for what is important for them and pushing for it and actually voicing that. And it's resulted in, you know, the evolution of products and ingredients that are called a wider range on a spectrum, right? From dietary dynamics to, you know, preference towards, you know, things that are of a certain size or characteristic. And if you just think about that in terms of choice and what's going on in the market today is no surprise from climate and from sustainability, which is, you know, which is at the core of our business now, obviously, is that I think that'll only continue to mushroom in terms of a choice and a preference from there. And how does that result in, and it's been happening already in terms of saying, hey, I want products that are farmed a certain way or that are grown a certain way. But I think that'll also continue to show up in packaging and that I want things to be delivered to me in terms of more sustainably from a packaging, right? Of course, that can mean compostable and things like that. But I also think it's around reuse and it's around more acceptance and around solutions that are in the home that are, or that are away from home about how do you reuse the core ingredients or how do you reuse packaging? I think that's going to, if you just think about the development and push in terms of from a climate, I think it's going to show up with more and more folks in terms of pushing and demanding for companies and as well as retailers or whomever it might be for those solutions. And I think the market will deliver on, it's just a matter of kind of the different technologies and companies coming together and kind of figuring that out and what sort of, what sort of speed. Love it. Daniel, thank you for taking the time to talk with us. And for all you're doing to spark change, it's always great to see you and to chat with you. So I appreciate it. Thanks for your time Fred. This is great man. Thanks so much for listening today. I absolutely love this conversation with Daniel. He's truly out in front of the market in so many different ways and has such a different and interesting perspective on all of this. If you enjoy the show, please share it with anyone else that you think might get some value out of it and of course you can subscribe to the podcast and if you go to LinkedIn and look up venture fuel, that is where we post about all our upcoming events, podcast guests. I think it'll be something interesting for you all if you enjoyed this episode. Otherwise, I will see you back here next time. Thanks so much.