While well-known for its soft drinks, PepsiCo is more than a beverage company. It owns the Frito-Lay and Quaker Oats brands, and its beverage business includes Gatorade, Tropicana juice, and bottled water in addition to its iconic beverage, Pepsi. In 2017, it was the third largest food and beverage company in the world with global sales of $96.5 billion, behind Nestlé and the Coca-Cola Company.
Seven years ago, Dhianendra Laksmana, ACMA, CGMA, said yes to an opportunity of a lifetime to head the finance function of PepsiCo Indonesia as its CFO. When he started at the job, his boss, the PepsiCo Indonesia CEO, charged Laksmana with an audacious goal — try replacing the CEO. Laksmana shares in an interview with FM magazine how he works alongside the CEO to grow PepsiCo Indonesia’s businesses. Edited excerpts follow.
What is PepsiCo’s business model in Indonesia?
PepsiCo is a lean organisation, and the business model in Indonesia is a franchise business. It’s not a full-fledged manufacturing and distribution business, unlike Unilever or Reckitt (where I was previously). So we have a very small team in Indonesia, about 25 people, mainly sales and marketing. In finance itself I have four people under me.
We have three businesses in Indonesia — beverage, snack, and Quaker products. Our beverage division is a franchise business, meaning we only concentrate in third-party franchisees we call bottlers. And a bottling partner is the one who manufactures, bottles beverages into bottles, cans, or whatever form, and then distributes it and sells it to the retailers. PepsiCo then does the brand investment.
In snack, we have a joint venture with a local company which manufactures and distributes the snack. I sit in the management review every month and I join whatever meeting that I’m required to. But I’m not in charge of the daily operation; a different team does that.
In our Quaker business, we have a co-packing model. Again, we don’t own the manufacturing plant. We contracted co-manufacturers to produce for us, and then we distribute and sell it ourselves. So this is where the bulk of our team is; the sales team is for Quaker. This is basically how PepsiCo operates in many countries, except for two or three countries in the region that have full-fledged manufacturing.
You’ve been a finance manager and head of finance before becoming a CFO. What is a key difference you see in your role as CFO?
I think the main difference is that a CFO is more than just a finance head — you are expected to drive the business. Obviously, you ensure the delivery of financials, but the bigger objective is to work with the CEO to drive the business, drive performance.
One goal that perfectly summed the CFO’s role was when my boss told me when I first came and took on the role. He said, “Your objective is to try to replace me. Think like me and help me drive this business.”
For instance, I’m the one in charge of profit and loss forecasting. But forecasting will only be on paper. Any finance manager can do forecasting, but driving the business is making sure that the forecasted commitment is being carried through.
Can you give an example of delivering the forecasted numbers?
We have monthly rolling forecasts. First, what we do is bottom up — get the input from sales and marketing. This is what the forecast will look like. In most cases, that is not what we will finally submit because there may be top-down targets that need to be met, or the bottom-up targets are more than what we need to deliver. Then we will temper it down and put a buffer for ourselves.
The next thing after we submit the forecast, I have to sit down with sales and marketing on how to deliver the forecast. Say they submitted a target of IDR 100 million, but in the end I may not submit that number but submit IDR 120 million.
Then you have to go to the details line by line — how we can achieve this target? I go into the commercial aspect of the businesses. In the channels, I see where we can go, where we can push more. They might say it cannot be done. So I will look at the historical numbers and say, “You did this without any promotional campaign. Now if you need to do the same, what do you need, how much (revenue) can we add if I give you more money for promotions?”
What is a challenge for your role?
We are responsible for overall Indonesia delivery. The main challenge is how to drive the business with the different kinds of set-up. We have to work with the bottling partner [but] we’re not the one who owns the sales team, we’re not the one who owns the manufacturing, and they (bottlers) have their own goals. We have to align their goals with ours to get our objectives.
It’s the same with our joint venture. It’s a JV set-up so we have more influence there, but still we’re not the ones running the daily business. We need to have a more holistic view looking at the business but at the same time ensure that the operation runs smoothly. That’s the challenge — how to get things done through others.
What is an example of driving growth through your partners?
One example is with our joint venture partner. We identified improvement areas to control and manage risk. There are a couple incidents that showed risk management is something that can be further improved. The joint venture partner sees it differently in the beginning. They had in mind that the budget is limited and we had to prioritise the investment.
So we looked around the PepsiCo system in the world and identified a consultant who can help us, and we had a round of discussions and decisions. In the end they agreed to implement the project, but it’s not like we just let them go run it. There is handholding, and we do it together with them.
What did you do when you first started as a CFO to understand PepsiCo’s business in Indonesia?
To understand the business, you get into the markets. I joined the sales team in their market meetings, in distributor meetings, and obviously some distributor meetings do require my presence because it has something to do with financials, but even before that, I joined regular business discussions with operations and distributors.
Whenever I have the time, I make sure I’m available to join them and just learn and understand. Then you understand the difficulty in doing the business. In finance, you don’t interact with the business regularly so you see this distributor not delivering their numbers and think, “This is a bad distributor; why are we continuing with them?” But when you sit with them you understand that the numbers are not 100% of the picture. It could be that your supply is poor so they cannot sell to the market. Secondly, they may have payment issues with their retailers, so that’s impacting their payment to us.
You mentioned your passion is in business partnering, why is that?
What I enjoy most is working with people. I was lucky that from the beginning of my career, I’ve always had a business partnering role. I’ve worked with the production manager, engineering manager, then business-partnered with marketing and sales. I don’t enjoy working behind the desk as much, doing reporting or a pure accounting role.
When I business-partnered, I went to the manufacturing line and saw how the lines work. We calculate on the capital expenditure. We calculate the product costing, but some people in finance haven’t even seen the line before. I think that it’s important for the finance person to really understand the business, be it supply chain, sales, or marketing. So that when they give input and recommendations to the function, it is based on something that’s attainable, not theoretical.
— Alexis See Tho (Alexis.SeeTho@aicpa-cima.com) is an FM magazine associate editor.