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tv   In the Loop With Betty Liu  Bloomberg  May 1, 2014 8:00am-10:01am EDT

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today i am taking you inside explore one of the biggest consumer brands in the world. how does pepsi combine the power of its beverage and snack products to drive growth, and what goes on behind the scenes? it is a lot more scientific than you think to give you the next great bag of chips for the big game. we will kick himself with -- an exclusive interview with chairman and ceo indra nooyi. and i will show you how gatorade is pushing hard to cater to athletes. we visited the florida research facility to find out what data they used to beef up their sports drink formula. endemol head to texas to find out how scientists and chefs work together to pack big flavors like chicken and waffles, how they pack them into the tiny chips. but first, pepsi by the numbers. pepsico is a global beverage and $1d powerhouse with 22
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billion global brands in the store folio but it all started , createdbrad's drink by a north carolina pharmacist. in 1940, pepsi made history with the first ever national television spot, at a time when each bottle sold for just a nickel. pepsimember the challenge, right? how about the super bowl ad from --hael jackson to the unsafe super bowl ads. from michael jackson to beyoncé. for the big picture, you need to look at pepsico's food business as it gets about half of the two yearly revenue from snacks it is starting with everyone's favorite crispy snack -- frito corn chips started in 1932, a small business selling chips out of the back of a model t ford. in 1961 a merged company formed,
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frito-lay, known for cheetos, doritos, crackerjack and much more. in 2001 pepsico merged with the 135-year-old quaker oats company to increase the food imprint any major way and also get pepsico gatorade. that is the time indra nooyi got a promotion to chief financial officer and since 2006 she has the chairman and ceo. reporterberg news happens to be based down in thenta, which is headquarters of coca-cola, the competitor. how are soft when -- soft drinks doing and how is either of those companies doing? >> soft drinks in north america has been a difficult proposition for about nine years now. it is just very hard to grow soft drinks, so they had to
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concentrate -- coke and pepsi had to concentrate on noncarbonated beverages and do sort of they can to cell soft drinks even at a time when people are moving away from sugary drinks and now appear to be moving away from aspartame which is found in several diet drinks. ne, we will talk to indra nooyi about the power of one, and how they leverage both beverages and snacks to drive growth. so far, what are investors excited about about this power of one strategy? >> one of the things you have to remember when you think about power of one is a lot of it happens behind the scenes. a sickly retailers get more powers they consolidate. coke and pepsi have to figure out a way to counter that and keep leverage for themselves when they are negotiating with the big retail chains for self -- shelf space. that's he believes the more scale they have and having
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beverages and snacks together -- pepsi believes the more scale they have been having beverages and snacks together it is important to keep the brands growing to get the shelf space they want. for instance, beverages are a huge seller at convenience store and pepsi believes in order to be able to do more with its snacks it need to both of those together so they can really push that at retail and get that kind of scale they need. that is one of the really important things pepsi stresses about power of one. of course, others believe a lot marketing hype within the company, that it is assetsway to sell these and sendoff of the suggestions. >> we will be diving deeper into gatorade. tell me how gatorade fits into the portfolio. >> gatorade has been an interesting brain. it was on fire, the leading sports drink. there was a time pretty much everyone was drinking it. people who worked out and people
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who sat on the couch all day. the recession created problems for the brain. people could easily switch to tap water. they could go to less expensive drinks. and indra nooyi and her team completely overhauled that. what they wanted to do was go for more of the athletes, the people who workout seriously, position that brand as a series sports drink and also expanded into other types of the tricia mike bars and gel tablets that you can take, little jellies you can take before you workout. they really try to position it as more of a specialty brand -- higher-margin -- specifically geared to athletes. that is what they have been doing for a few years now. >> thank you so much. duane,tamford -- bloomberg news reported. olivia has top headlines. >> let's get everyone caught up on what else we are watching. the irs says under current law, congress cannot put an end to
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the tax haven deals. pfizer -- the line shares of yelp of as much as 11% in premarket trading. lossported first-quarter less than estimates and raised its full-year forecast. shares of directv also up on a report that at&t may be interested in to the company, according to "the wall street journal." see at&t approach to that provider about an acquisition. no, from that company. approachedk also directv about a merger. a megamerger in the telecom industry may also be in the works. sprint, 80% owned by japan's softbank planning to move forward for a bid for t-mobile usa and met with banks this month to make that arrangements for the office -- offer. bloomberg news's managing editor of mna joins us with more on the possible deal. jeff, let's talk about the timing. when the spring 20 to make a possible bid?
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>> this is the oddest situation. it has been well telegraphed. late last year he met with banks and wanted to see if the financing was there, which it was. then he met with regulators and got a thumbs down. he has taken that into account and then i guess he will move forward just at -- anyway. he is confident the financing is there a what he is looking for is a june-july time frame to get a deal done with t-mobile. it's got to negotiate with budget telecom back in germany, t-mobile.of >> u.s. regulators seem to be the hurdle. i think back to the at&t deal in 2011, everyone thought it will pass but u.s. regulators stopped it. what is he thinking? at&t buying t-mobile is different from sprint brine t-mobile. at&t is one of the big dominant ones up there with verizon. they are one and two. three and four are a distant three and four. he said, you put three and four together, we are still going to struggle to compete with one and two. also if you have the comcast
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situation. in a lot of ways, all of this is coming together. cable companies and dish companies and phone companies are all becoming one. he is going to argue that the landscape is different and it was just a few years ago. >> so they are trying to piggyback on the comcast-time warner cable deal, hoping regulators will see it as the whole industry shaking up. >> there was the airline deal when american airlines merge with u.s. air. you ask how it is relevant. the regulators let a deal go through that a number of folks thought they would no way let the airlines merge, especially given the pricing power it would give them. but the deal did go through. i think he feels like regulators are more open to these large transactions, especially in a fast-moving industry like airlines and telecoms. >> people familiar said john leger might be the ceo of the company. during western into bloomberg west for emily chang plus exclusive interview with t-mobile ceo john leger.
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>> moving and shaking, actor kevin spacey is now playing the president of the united states in "house of cards." the show petraeus washington as a nightmare. anthrax scares, murder at the highest levels of government. naturally, it is popular with politicians. he spoke with charlie rose. >> what does he say? i can't watch it until hillary can -- she will not let me watch it alone. >> and you can watch all of charlie rose. interview with kevin spacey tonight here on bloomberg tv 8:00 p.m. eastern time. in while, betty liu is inside pepsi all day today. what is up next? i am very exciting, that's excited because texaco chairman indra nooyi will be joining me for an exclusive interview right after the break. it is only on bloomberg television. stay "in the loop." ♪
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>> we are going inside pepsico for a look at the company's strategy power of one. meaning every time you pick a joint, hopefully one of theirs, you pick up one of their snacks as well. your mellon do with doritos or tropicana juice with your quaker oats bar. but they are not just hoping, but they are using science and data to make sure all of that happens. here to talk about all of this is one of the architects of the power of one strategy, pepsico chairman and ceo indra nooyi but -- who has been in the helm since 2006. great to finally meet you. >> good to be here, betty. nice to see you, too. >> what has been your power -- proudest achievement of the power of one? >> issa talk about pepsico as a
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whole. power of one is just who we are. amazingly just an constructed company that has a portfolio of geographic diversity. we cover developing and emerging markets. we have product diversity. foods. beverages, and it is a constructive portfolio that can actually better all kinds of issues and still keep delivering results. >> is there one in particular you can point to that says this is the model for how we want to go forward with pepsico and the strategy? >> i think if you are starting to create a food and beverage company, you try to create a pepsico. if you are a beverage company, you look to marry up with the snap company and if you are eestnet company you look to marry with a brokerage company. if you eat a salty snack, you have to drink a beverage with it. no if, and, and butts about it. all the time, every day. and if you drink a beverage,
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half the time it is with a salty snack. so the pairing of those two is just like peanut butter and jelly, as you always say, they just naturally go together. if you are creating a food and beverage portfolio in a convenient space, you would be creating a pepsico. this is how you would be constructing it. how much are you putting into research and development to create the next big snack or drink? >> let's step back and talk about why rmb. in today's world, research and development is really what is going to define a successful company from a company that is not. what is different today than what it was than, say, 10 years ago was in the past there were so many tailwinds in the category that you could just do line extensions, flavor extensions and somehow managed to deliver the growth. i think in the last six or seven years, with the slowing down of categories. with the internet pervading every country around the world and innovation flowing around the world, it is critically
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important that you spend enough money to develop different shaded products and platforms that can give you more -- a real instrumentality in volume, revenue, and profits. >> how different can you make snacks? what can your research due to make snacks that different? >> let's talk about snacks and beverages because when we talk about research and development, we talk about across the food and beverage per fully. in all of our products we have to do three things -- we have to do line extensions. new flavors, new package formats. we do all of that almost like we breathe every day. that is what we do just to keep the core flat. then to deliver the growth -- and remember, we have deliver somewhere between $3 billion and $4 billion of growth every year. we have to do a couple of things. we have to look at her friend shaded innovations that will maintain the core but still develop instrumentality. new form functions. new consumer needs we had not
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ever served to before. going after competitive products that really did not meet the consumer needs. we look at each of these vacant spaces or competitive spaces and we innovate again to that with a different shaded products so consumers can come into our categories. >> what is the next billion-dollar brand in your per folio? >> i think we have 22 billion-dollar brands. >> what is the next one? >> i think taking brands between 15 and 22 and throwing them to be even stronger is our focus and that is what we're focused on, because in today's world where it is so expensive to build a brand, the fact we have 22 billion-dollar brand -- >> you just want to grow them even bigger? >> i think they are becoming more and more powerful coming into the future. ethical, --y difficult to create comp weekly . energy drinks, for instance, he $350 -- $350 million
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market and now 9 billion-dollar market. how did pepsico and coca-cola miss the energy drink market? >> i do not think we've missed rgy as a need is important because people are overworked and stressed and when the economy goes down you get even more stressed. energy has become even more important. and that eugenics just focus on energy -- energy as a drink just focus on that space. s the energy space. making cappuccino we serve a product with caffeine. >> you want to go deeper into coffee? >> our partnership with starbucks is fantastic. we are the number one ready to drink coffee company in the country. we are addressing the energy need space through multiple offerings. >> there is the whole energy
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drink market, $9 billion and red bull and monster have two thirds of it. it would have been a perfect market for pepsico and coca-cola to dominate >> we distribute rockstar, a great product. our participation in the energy drink category is through our distribution agreement with a rock star and our goal is to make it a lot more successful than today because we think it is a great product and partnership. a companyream is growing exponentially, and given the do-it-yourself soft drinks category. is that something you want to be in? in-home soft drink manufacturers, if you want to call it that, could be something that is a significant force into the future. when will it happen? we don't know. but i think our goal is to play with all the manufacturers of machinery to make sure when this category becomes a factor with consumers, we are playing with all the machinery manufacturers. it is an open system, and we can supply great tasting products
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for all of these people. so consumers can get pepsico product, whatever machine they buy. >> are you worried it can cannibalize your current products on store shelves? >> yes and no, because i think in the in-home experience you can offer completely different products, more crafted like products, more fun products, and more variety than you could in the store shelves. i think there is a place for both. the challenge is to play both of these intelligently to grow the whole pie. >> investors have been watching closely. they have been for years, the power of one shred ag, and how it is driving shareholder value. one very particular investor, nelson peltz who has been after pepsico to split the company. youhave done research and said, no, it is not a good idea. it will not increase your shareholder value. what gives you the resolve that you really stood up to him and said no way? >> i would not call it standing up to any shareholder. we listen to all of our
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shareholders. our goal is to create good shareholder value for all of our shareholders. we talked to all of our shareholders and listen to their point of view. at any time a shareholder gives us any sort of feedback, comments, input, we take it very, very seriously, because at the end of the day we are all shareholders of the company, too, and if anybody has an idea on how to create more value we have the first to take it to heart. i personally own 20 times of my salary in pepsico stock. in the case of all of the suggestions that we received, we actually studied it with great care. of one a strategic advantage? we always have known it is a strategic advantage. we went back and studied it. we are even more convinced now that pepsico is about complementary products that work better together. and the scale that it gives us, the access, the importance that retailers place on the pepsico partnership is simply spectacular. >> indra, walk me through that.
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when you say after you took a look and are more convinced power of one is the right strategy for pepsico, what gives you that further resolve or that further indication? what -- >> a personal experience. i was in europe last year. meetingsng invited to with the ceo's of large european retailers. it never happened before to the extent it was happening now. i am saying to myself, boy, there must be a reason they invited me. as snacksthat because and beverages individually we were maybe 35th player or 32nd, but we talked about have all -- how to drive the business jointly we became 10th, 11th, 12 most important player for retailers. >> it elevated you in their eyes. >> just to give you an idea -- salty snacks, a velocity of 30 or 50 turns and beverages, turns
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of about 80 and they pay as net 30 so we are a huge cash flow generated to retailers. they look at us and say, you have high velocity categories that can drive traffic. you have consumer insights that allow me to -- to bring people in the store. pepsicomust partner -- must partner with companies. sessionsng us to joint to figure out how to design so they can truly drive basket and ticket sizes, which is the only goal of retailers. as i said in the beginning, if you are going to craft a snack and beverage or a food business today -- this would be the one. you listen toout shareholder proposals and you at the same time are looking to cut costs, about $5 billion starting in 2015. one of the proposals is to consolidate your headquarters, perhaps close your purchase and
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chicago offices and merging them. is that something on the table? >> when we look at productivity programs at pepsico would look at all of the costs, we look at it in terms of cost-benefit and we look in terms of what do we need to do to hold our employees and create a work environment that makes sense. we never do anything in pepsico that does not create value or simply adds costs, because, as i said, we take shareholder value very, very seriously. in based of all -- on all the analysis we have done, the makeup of our employees, where they are and where we need them to be and where we need to attract the best and brightest, our current architecture is the right one. we are going to stay exactly where we are today. >> someone said given the power of one strategy, and as a combined company, you said you are stronger than standalone. someone said how come pepsico has not been able to generate more food-service contracts ban
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coca-cola? you have not been able to gain more market share in that area. why is that? >> i would say the opposite. i would say in the last four years we have been making huge strides in food service. when the -- the beverage business only have a concentrate business and the snacks business especially in north america, we could not really get the bottling system to play along with us and buying back the bottling system was a major unlocked because we could go out to food-service accounts of service them in a spectacular way. since 2011, every food-service account we picked up has been fantastic for us in terms of driving the top line but more importantly, food-service company -- companies go out of their way to write to me saying new snacks are being sold and they think buying back the bottlers was an amazing unlocked for us to go after food-service. i can talk about buffalo wild
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wings -- you heard sally talk about why she switched to pepsico. what will -- >> let sally smith talk about all of that. [laughter] pop a john, what a great partnership. we further the partnership with universities, disney in shanghai. i think food-service is just the beginning of major growth spurt and food-service and i'm very optimistic. last year i tell you our food-service equipment innovation, what we have done it is creating so much excitement that i think within the next five years food-service will be one of the most interesting growth opportunities for pepsico. >> i am glad you mentioned that because people are familiar, they have seen the coca-cola freestyle machine around various restaurants and chains. out is pepsi going to roll
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a version of that, or are you working on that right now. have a few hundred in test already, and between this year and next we will roll out a few thousand. all i have to tell you is our machine is more exciting. it is more user friendly. and the economics for food-service customers is so much better. the early test we have done with canomers only one word i use to describe what they're telling us a total excitement when they see our equipment. >> why is that? if customization question mark is that what consumers want these days? >> to a limit. because if you do too much customization -- economic environment, customers do not want to pay too much for the new equipment, so we have to make sure we are very sensitive in any launches to be aware of the economics of the food-service customer so what we have done in our machine is brought together all the
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technology and made it extremely consistent with the personal habits with it -- which is touch screen and user interfaces. but then we could get it customization to a limit. excessive customization. it actually confuses the customer and delays of the consumer experience. , soe's too much wait time we created the right assortment of products. and we really worked with our food-service partners to engineer the right assortment. buffalo wild wings, their franchise meeting, thrilled, and taco bell, will we showed it to them, delighted -- universities. everyone is thrilled with the new machine. to focus oni want one particular product, gatorade. when you reach for a gatorade after a hard workout you probably do not reason -- realize how much of science went into creating the drink. i went to a lab where they put toletes through their paces
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refine the drink. gssi is toion of really help athletes optimize the performance of their health through research and education. we work very closely with the different parts of r&d, including product development. is really gete the insights from the athlete to really drive innovation of the future. this particular test is looking at what fuels he is using so we can put those fuels back into the body. all the air that he is inhaling and all the air he is exhaling is measured. from that, we can calculate how much oxygen he is using and how much carbon dioxide he is producing. >> what do you do with this data? >> we can compare him to other athlete in the same sport, so we can see where he is. it also helps us to estimate
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where he can get. >> keep pushing through. [laughter] >> we do a sweat test for athletes because every athletes what's differently. we provide patches to capture the sweat. after the practice we measure body weight again. and during practice we measure the bottles and how much they drank. if we put all the information together we know how much of their sweating and what they are sweating so we know what to replace. >> what does this measure? >> a combination of your peripheral vision and your ability to respond. >> do i dare try? ok. 4305. 2528. almost 100% in that.
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globallye do with gssi is very coordinated. the information that we collect from athletes worldwide all comes together into the central database. and from there, we can start to do some of the analysis and see what patterns and trends we are seeing. just listening to athletes, trying to understand what their needs are. at the same time, we also have some ideas, and there are some scientific insights that can help us to develop products in the shorter term. pepsico'sback with chairman and ceo indra nooyi and also joining us is dr. khan, chief scientific officer at pepsico. thank you so much for joining us. it was fascinating going down to your science center and see how you really used the data, the scientific data, and
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you help athletes perform better. how do you take that data and put it into gatorade to drive sales of the product? what -- >> let's talk about the history of gatorade. the raid was a product of eyes for people -- gatorade was really a hydration people for people who are act of. it was developed at the university of florida for the football team and that is how we build the franchise -- for athletes, people with extreme act as thirst. noticed over time is several things had to happen. number one, for different athletes, you need a different gatorade to be able to get them iveough their act certifications and athletes prepared for the active thirst occasion differently and prepare differently. toused insights from the lab figure out what athletes need to
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consume before the exercise and after the exercise in order to wind down and recover. so we could now spread the gatorade franchise into a data rate active first system or sports nutrition system but we cannot do that based on no knowledge or science. what gatorade sport scientist do is figure out how to service different athletes, and on a horizontal basis, how to give them more of a pre-and post-product so they can have a whole system. >> is that a big market, mel, or is that hard of a bigger market that you see? >> it is potentially a big market. it may not be in volume but in terms of revenue -- a pre-and post-value -- products are higher value and gives a much more benefit for the athlete willing to pay for it. i think it is the beginning of the whole movement to really hydrate, toucts to
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provide nutrition for athletes to perform at their best. tell us about the data you gather from a place like the florida facility? do you use it for products across the board? >> we try to leverage all of the data and science everywhere we can across the country. a specific example with gatorade , it helps us understand rehydration of the body and how an athlete is performing and professional athletes, college athletes. what we are trying to understand is, throughout a person's life as they be -- as they become and remain athletes, whether -- what are the types of beverages and foods. we have taken gatorade into a solid form , gels andchews, to fit consumer need. >> why did you hire dr. khan? about 2006, was always a great development house. aboutof -- pepsico, until
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2006, was always a great development house. line extensions. leaps and bounds, that was the norm and innovation. 2006 and 2007, we realize the marketplace with changing dramatically and we needed different products to drive brand and to cut through the clutter on the retail shelf. we had to advertise real claims -- not just say another flavor being launched. we needed to do it to maintain the core. to get the growth we needed differentiated innovation. we needed to build a top-notch research group in pepsico, so we cast our net to see who we could bring into pepsico to augment our team. we saw a lot of candidates. but what we were looking for was somebody who understood not just product development but who understood sort of the biology of taste, the chemistry of product formulation, and then the actual physics of creating the product here >> some people
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would think in that way, one of your big jobs, the holy grail in beverages come of which is the sweetener, the sweetener that everyone will enjoy. or what you have been innovating on, finding the salty taste without the sodium. what is your biggest challenge right now, your big goal? >> our biggest goal is to meet the consumer needs. we know consumers want great tasting products inconvenient forms at prices they can afford. from an innovation point of view, we want to hit all three of those, depending on the type of product -- we want to go with the consumer goes. >> is a finding that sweetener, that 1 -- >> there is not one magic bullet. everything we consume is a complex mixture of textures, aroma, taste, physical form. have five senses and we want to excite all five senses when we think about our
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product and how the consumer engages. in fact, we will show you some of the product and you will see how we do that. >> i am excited. i am glad i didn't eat breakfast so i can try some products. you came from the pharmaceutical industry, right? started my career teaching, studying, and researching nutrition. for me, come into pepsico was a culmination of a whole 20-some year journey. it started in nutrition and at this point of my career i would like to think my last phase is with the greatest company on the planet in nutrition. was asking me, i was running this huge pharmaceutical organization -- when shechem two pepsico questioned him a reason. i said, look at pepsico -- you can taste every right as you formulate. all a lot different than when you are in pharmaceuticals. >> indra said, how many product that you discovered and developed in pharmaceutical you
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could taste yourself? i could think of that i had to think about it. you can try everyone here. >> no prescriptions. all right, thank you so much for joining me. we will continue to go inside pepsico all day long. dr. khan, i am surrounded by all the pepsico products from around the world and you will be taking me on a tour through some of the most exciting ones that have been in development and are out there on the shelves today. >> betty, i have something for you. a product called doritos dyn amitas --i think you will love it. here you go. >> hilarious -- did you guys see this? >> absolutely, enjoy. and make sure you have a beverage with that. >> of these are habaneros, i tried in florida. width that is to
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die for. >> thank you so much. indra nooyi, ceo of pepsico. i have never been on air eating and talking everything time. me khan will be taking through the pepsico products. a new generation -- not just didn't drink but in snacks. behind the scenes at the test kitchen with a cookoff a new flavor. you guys are terrific. thank you so much. ♪
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pepsico is always creating new innovations and new flavors. so i went down to plano, texas, at the frito-lay text kitchen -- test kitchen where they are perfecting recipes like chicken and waffles and putting them right into the data takes -- right onto computer chips. i got a look into how the process works. logyhe definition of culino
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is culinary arts with food science technology. the chefs crafting the executions are briefed to mimic what is out there in restaurants and then executions based on their own culinary creativity. when those get evaluating -- evaluated, it is a cause wetural team of -- and then bring consumers and to taste what we identify is the gold standard. >> explained that the gold standard is. >> the product of what we want the final execution to be. the final product should mention the gold standard flavor. this is a perfect transition to the cheesy garlic bread. this?t cheese is >> parmesan. and this is all about layering flavors again. mozzarella, cheddar, and once more -- one more, smoked buddha. raw garlic, sweet and puréed,
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ise black pepper, and that the culinary gold standard execution that became the final flavor experience for cheesy garlic bread. >> wanted this leaves the kitchen, what happened? what's once we identify the flavor experience, we work together to re-create the experience. then they come back to us and we evaluated as a group alongside the gold standard that inspired it. >> how do you know you've got it? >> you will find when you taste the chip, that the flavors are identical but the experience and emotions they evoke are also identical. we just don't want to tell you -- sell you a potato chip with seasoning. three different types of garlic, for different types of cheese. these have the right elements to give you a dynamic multi-flavored experience, but at the same time makes you feel like you are eating the comfort of cheesy garlic bread. >> let me try the chip.
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mmm, that is very similar. >> i hope so. [laughter] khan,are back with. your the chief scientific officer here at pepsico. walk me through a little bit about what happened in your lab and how it gets translated into the marketplace. >> we think about the 200 countries we operate in as businesses around pepsico and the dozens of labs around the world. all of the innovation started the pointonsumer -- is how it does in the marketplace. i think the matter of pride, we are industry-leading. if you look at 2013, nine of the 15 -- innovations were pepsico. i have examples. talking about energy earlier. ready to drink coffees. refreshers. these are due phenomenally in the markets pretty similarly, our iced tea, ready to drink tee, a great partnership with lipton.
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as we move, we created a whole new life form around our mountain dew franchise. we knew consumers who did not want coffee or tea but still one of the energy and start in the morning, we created mountain dew kickstart. it is based on juice, lower in calories, and phenomenal. you canperb third >> say this directly came out of your own labs. >> this is created by our r&d team leaders and partnership between r&d, marketing. we also heard consumers talk about the one more vegetables with their freak and in a convenient form so we created farm stand, another highly successful product. it gives you a serving of vegetables, a serving of fruit. it tastes great. >> let's move over to snacks, dr. khan. what are you most proud of? this is from all over the world. >> i am proud of all the things
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we create. the beauty of our portfolio diversity. cantinas, another top launch. the different forms we have taken the creator portfolio. quaker is a loved brand. >> this is china, right? >> as we think about quaker in the u.s. we think of oatmeal but if you go across the world you see consumers wanted in their culturally relevant form. coconut,ove -- in local dates and in the form of konji. >> you have something for me to try? what is -- >> as we think about western tastes and asian tastes, it here are real medleys. ready --add milk or water. this is a u.s. taste. all used to.are whether you are in new york. to parts of shanghai in
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china -- this is the same oatmeal. >> what i usually need to have in the morning. >> and it is good for you. >> it is different. >> it has local berries, a much more savory taste. when you think about farm stand -- do something for you to try. strawberry banana mix. like a chinese customized version with inclusions. a very different taste profile. >> i am always so fascinated about how people's tastes are different around the world. thank you so much for joining us this morning. she's scientific author -- he is the chief scientific officer at pepsico. olivia, i will throw back to you with more headlines. >> loberg news digest learned ford motors named mark fields successor to alan mulally. what do we know about them? >> we know a lot about mark fields. loberg news reported a couple of weeks ago that this was going to
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happen on this day. we have known this was coming for a few weeks. we have known this transition was coming really for a couple of years already. it was at least two years ago alan mulally started saying he was going to retire near the end of 2014. he did not say this, but everybody sort of knew that mark fields was going to be the new ceo. so widely known, such a badly kept secret that people would joke about it while introducing mark fields as a speaker at dinner, he would come up and not really deny it. it was clear this was going to happen. it was accelerated a little bit. a lot of people suspect because withan mulally's dalliance microsoft but the press release said he just bought the company was prepared and was ready to do it now and why put off any longer, so he brought it forward. --should be no mark fields should be known what fields i
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has already been running the business plan reviews for at least a year, so he has really been running the day-to-day operations in that sense for a while now. even before that, he was not only coo but previous to that he was running the americas and helped alan mulally engineer the turnaround at least in this country from record losses, so he really has a great resume. >> alan mulally is not going to retire july 1. there was so much speculation he might go to microsoft but he repeatedly denied that. any sense of where he might go? >> for a long time, he did not deny it, but he just really not non-denial may have led people to be uncomfortable and may have taken some of the focus off of what ford as a company was going to put it more on what alan mulally as a personality was doing. forink that was an issue bill ford, chairman of the company.
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the question now is what will alan mulally do. of course, he is one of the greatest ceo's the country has seen in a long time. people talk about him as a turnaround king, really engineering this amazing turnaround while the other car companies went bust. ford came through and became a very strong and competitive carmaker. is he going to become chairman of another big company? is what the spec -- speculation is. one thing for sure, he is not going to be laying tennis and golf. he is not retiring shot -- retiring type, and he is in great shape for his age. out -- we willt be talking to bill ford at 11:00 and then to alan mulally shortly after that, so a couple of great interviews. >> looking forward to that. you will be on "market makers." be sure to tune into that. condé nast traveler just released the annual hot list of the best new hotels in the world. ready for you to make the list and they are judged on a range
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of categories. this is the first time the new editor in chief has compiled a list, and she's got a lot of challenges ahead as she tries to revamp the magazine and lead the digital push. nastng me is condé traveler's editor in chief. last year the hot list had 154 hotels in this year it has 33 hotels. is this because the hotels were not up to snuff or have you raised the bar? >> i think it is definitely we wanted to narrow the filter a little bit. i think people want fewer choices. and list choices make you feel like we are not checking the filter enough. there were a lot that did not make the cut but -- but were still great. >> a lot of people asking whether condé nast traveler will be keeping the truth in travel moniker. >> absolutely. the ideas we have stringers all over the world and we are in getting fed bits of news all the time. i think we are keeping with the digital age. we are following contributors on
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social media and culling from them. inis just a different age which we get information, not just from travel journalists but our network of contributors. >> we had a great cover in march. of christyclose-up turlington in the foreground with a travel landscape reflected in her eyes and what is the cover saying? >> take a look. we are different these days. we are invaded with -- you get snapshots from your friends and facebook all the time and everything is looking the same. i think the idea was to really turn heads and say, sometimes, traveler sometimes a dream state. it is not always being on location and walk-in the streets but dreaming about your next trip. you can see the dream of her next trip, reflected in her lenses. >> what you think will be the biggest changes under your tutelage? >> what i was talking about before, the idea we are culling
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from a world of contributors, people with identified as somebody's whose sensibilities we share, and tapping into it on the ground, eyes and ears on the ground, which is something we were not able to do pre-digital age. i think now it is just about drawing from the network. >> we spent a lot of time at bloomberg talking about how you create content differently for different mediums. whether a feature-length piece in a magazine or for a digital audience. where are you focused? >> both, everywhere. i think the idea -- i feel a magazine like this is here to stay because i do -- we do want to lean back experience with print and you get to touch it and smell it and green -- dream about it. and when you are on the ground and you want to know where to get a bowl of noodles in the middle of tokyo, and i have an hour, that is when you want it on mobile. >> "condé nast traveler" is an interesting publication and we hear about the subscription model. yours thrives on newsstands.
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>> newsstand has never been our bread-and-butter, but circulation is really where we shine and we kept our subscription base that he all of these years. >> of the advertisers you have been working with, are they still in -- interested in advertising in print or using digital? across condéisers nast -- everybody wants a portfolio. they want to be in print, digital, they want to be part of what is next. >> where is the growth? other foretite international trips, certain types of experiences, domestic travel? >> is travel get easier and airbnb's, it it is democratized. --ple want to be newfoundland and also they want to be here. america is having a big moment. so many second cities that have
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been overlooked are now front and center. >> what is your favorite hotel on the list? gu irelandw, that fo is amazing. it is in newfoundland. it is gorgeous to look at. it is up on stilts, the remote regions of the universe. >> sounds like a dream. i have to check it out. editor in chief of "condé nast traveler." thank you so much. futures higher right now. it comes after jobless claims unexpectedly rose to a nine week high. consumer spending up a strong 0.9%. the biggest monthly gain in four and a half years. let's go back to betty liu who is inside pepsi. what you have in store? >> coming up, chicken and waffle chips or how about these? pepsico's first ever corporate chef talks about culinology and blending culinary arts with food science create taste profiles motion brought the entire world.
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we will be back as we go inside pepsico. ♪
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>> just 30 minutes away from the opening bell and we are inside pepsico's innovation center in valhalla, new york. you are "in the loop." i'm betty liu. mford --i know you cover both coca-cola and pepsico. we just wrapped up our exclusive interview with pepsico ceo indra nooyi. she said, look, if you are going to design a beverage and snack food company, pepsico will be the company. comeaid the two sides together, they pair together just like peanut butter and jelly. in fact, i want to play for you
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what she said about the power of one strategy. isthe pairing of these two just like peta butter and jelly, as we always say. they just go together. are creating a food and beverage per folio and a convenient space, you will be greeting a pepsico and i say it without a doubt. >> are investors convinced of that? thisey have been pushing message very hard, and they seem absolutely committed to it, not only in the u.s. but internationally as well. as you know, nelson peltz said really power of one is more talk than actually do and he says because of the fact that they have lagged peers when it comes to some of these products, he says that as evidence that power of one really isn't the benefit as the company makes it out to be. >> but the stock price, though, if i look at the 12 month chart
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of pepsico versus coca-cola, it seems as if that's the is ispacing coke -- pepsico outpacing coke. >> interesting because coca-cola had is really devastating period was go and pepsico came in able to make hay and then coke revitalized itself with a new ceo and a new focus and they have been really pushing hard and ramping up the competition in recent years. that was really dragging on mexico. pepsico ended up under investing in some of its bran admittedly, and sent has been trying to boost some of the investments. they purchased their bottling system. in the last year, because they were underperforming so bad, investors seemed to like what they were seeing, although questions still swirling about whether long-term they could get the kind of growth rates they were promising and whether they were investing enough in their brands. criticized that
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pepsico is behind coca-cola in food service contracts. of course, pepsico just won buffalo wild wings from coca-cola. another partor you of what indra nooyi said to me about their race to gain more market share in that area. ? >> i think food service, we are just in the beginning of a major growth spurt in food service and i'm very optimistic. last year, i tell you, our food service equipment innovation -- what we have done with all of the new installations in food service and what we are testing with consumers -- it is creating so much excitement, betty, that i think of the next five years food service is going to be one of the most interesting what opportunities for pepsico. wingsde from buffalo wild , what other gains can pepsico really point to in this area? veryis is going to be a interesting area to watch in the next few years. as you know, coca-cola came out with their freestyle system, a
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touchscreen, really kind of hip. kids like it, young people like it, if our regime -- a fountain machine we can make strings. the technology is completely different than what pepsico is coming up. they are going with something a little more cost-effective for food service companies. we will still have some of the tax -- touchscreen technology and things to drive the youth consumption with. it will be interesting to see which of the two platforms work, but they are clearly taking different approaches. it is going to be really key when it comes to food service and keeping accounts and trying to figure out the next way so you can get past some of the old-style sound machines we are all used to and get to something that is more exciting and people are interested in. perhaps we will cap the soft drink but no little more often. button ae soft drink little more often. >> i want to get back to our
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head and -- headquarters in new york city where olivia sterns is standing by with covenant mind. >> i actually want to bring you breaking news. we heard earlier alan mulally, bill ford, mark fields will be speaking at a news conference in michigan -- they are speaking right now, following word mark fields named to succeed alan mulally at the company. what do we know about fields? >> we know everything about mark fields. we have known he was going to be ceo for ever. bloomberg news broke the story that he will be named ceo on may 1, weeks ago. so it is not a surprise in the least. but it is kind of an interesting story, because for a long time, ,lan mulally said repetitively almost formulaic lay, he would stay as ceo serving ford motor company to death through 2014,
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which implies the end of the the end ofch implies the year. company was ready anselmo reason to wait through the end of the year, and push it up to six months. been his dalliance with microsoft, his talks with microsoft as a possible ceo candidate made ford and bill ford the chairman of little bit nervous and also took a lot of the focus off of the cars that they were putting out. they are releasing a ton, two dozen new cars this year and next year. it could have been the reason they are moving forward. >> you mentioned the new car releases. what will be mark fields' priorities? americas running the before being named chief operating officer. he will be focused a lot on china. a ford is seeing rapid, rapid growth in china.
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talking 50% year-over-year growth. that is the kind of growth you need to keep your eye on, you need to have a handle on. he has experience there. he has run mazda, the premier auto group win the ford owned aston martin, land rover, jaguar. he has been with the company 25 years. he went to rutgers, right of the year across the river and then to harvard business school but he has been with ford forever. it seems like you're in the u.s., his main goal should be to help elevate the lincoln brand to a true luxury status. it is really what ford is lacking when you look at it compared to -- of course, european rivals but definitely even compared to general motors. they need to elevate the lincoln brand. alan mulally named jim farley to do that, so it will be interesting to see mark fields and jim farley working hand-in-hand to achieve that important goal. theloomberg news broke
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story april 21. we have seen this company, but is the company itself prepared for transition? >> the company looks like it is very well prepared for transition. asr the last eight years, mulally came in and took over for boeing, he made a real cultural shift. these thursday weekly meetings called business plan reviews. he encouraged openness and honesty so any problems, especially in a red flag issues, should be stated weekly and they will know about something like, for example, a recall. that is an issue they have dealt with really well. and of course, they released a -- orrsion of the f-150 they have shown the new version. they are starting to produce the new aluminum -- aluminum body truck, the best-selling vehicle in the countries that they need to keep a handle on that legacy. mark fields is well prepared to do that. and they've got a lot of other
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exciting new products that will come out this year and next year -- or we have yet to see the consumer thinks they are exciting but they look pretty cool at auto shows. it will make it a lot easier for him to shift consumer and investor focus to the products rather than thinking about succession. >> matt miller, think of joining us. and you can watch ford has a live press conference live on or streaming your free bloomberg tv plus ipad app. "in the loop" is back in two with more insight pepsi. >> within a couple of hours -- and you all know bill. ♪
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pepsik with our insight special today, and i am here literally inside one of the test cages at that sicko and with me is executive research chef we -- one of the test kitchens at pepsico and with me is executive
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research chef and we have the senior vice president and head of long-term research at pepsico. as a guy think of you who goes around amazon rain forest to look for the next sweetener, the next when you -- plant to sweden or saw our product. why don't you start. >> you are right, we go around the world and look for flavors and natural agreements to help us and initiatives to lowering salt and fat and sugar in a lot of our products. a lot of these ingredients -- we just got back from china. it is interesting. we have a seaweed here that can help us in our lower sodium efforts. >> how does this seaweed -- a seaweed is naturally salty? is that what it is? >> the seaweed has a lot of minerals in their back and flavor of the dish, and flavor our applications in a way that we can lower the sodium. also have a natural salty plant that we just discovered in china that can give us this
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salty taste. does is itome captures the flavors real-time so we can study them later. >> can i actually try the plant, or is edible? does not edible but with some dishes later that you can taste. want -- do else the you want to show us? what are the avocados for? full fate us the effect without actually adding fat to the dish. if you smell this, it has a smoky note to it. >> and that is the hickory chips . it is almost like that's for you to put this in a barbecue flavor -- >> we will put it in a sauce that you can try right here. salsa made from smoke
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avocado. the hickory add another layer of flavor that gives you the savory mess that allows you to minimize the amount of salt would have to put in. you translate it to a chip? >> this is the more advanced research greg can tell you about. >> we basically take the flavor information and the consumer insights and then go back to the product innovation labs and say, are these ingredients we can use of a product development labs for a future chip is not moving forward. >> how much do you think of cost when you are researching? >> a certain role in innovation. we want consumers to have a lot of options and a lot of choices in their snacks. >> because i imagine something like that plant, for instance, is it cheap enough to gather the plant? >> we don't know. we might be able to cultivate a
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plan in the future. we might not need the whole plant, just a selection. >> a few years ago you had designer salt that you created. are you using that in your product? look atner salt -- we the size and shape of crystal to taste salt and how salt is perceived and a lot of the chips. >> we've got dishes here. tell me about this. ofthis is an execution macaroni and cheese that is lower in salt and lower in fat. it incorporates the smoke avocado salsa. seasoned grilled tofu to add another texture and flavor. and there is more of a thickening agent going on with some savory notes to replace the cheese flavor. >> you learn from this in what way? >> we take the insights from this dish that can give us the
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full salt and full fat flavor without using salt and fat and then apply it to the products moving forward in the future. >> everything that is going on that chefs are doing naturally through the artistic realm has a moleculesence and that are happening. and greg's team has been capturing the molecules, everything happening underneath the -- as far as science. >> i love mac & cheese, that is good, even at 9:15 in the morning. thank you so much. by the way. one of the big partners with mexico is yum! brands and young came out with a surprise announcement that they are replacing the ceo david novak. julie hyman has more on this breaking news. >> ford not the only one making a succession plan. these changes at yum will not be
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effective right away, they are not happening until next year, january 1. but yum is coming and laying out its plan. david novak, head of the company since 1999 and really overseeing the bulk of its growth, will be replaced by the head of the taco bell division. that will happen january 1. also it also go -- is going to join the board and novak will become nonexecutive chairman of the company and will hold that role. 13% theare up about past year. they recovered quite a bit after seeing a lot of problems in the china division, particularly at the kfc restaurants. they have seen sales of starting to improve there, so shareable -- shareholders have been happier. bell, the head of taco would be taking over as head of all of yum! brands as a general refers. stay with us. we will we write back with more in two minutes. ♪
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>> as we have been reporting, two big succession announcements from ford and yum! brands. i wanted to julie hyman. >> yum! brands, with -- we see david novak will step down from the ceo position. he will become nonexecutive chairman and greg creed who heads talk about chain will replace him in the ceo at the time and he will also join the board. yum! brands struggled with its business in china but it has been picking up once again. shares have picked up as well, up 13, 14% >> we are looking at pictures of kfc. we know they also owned pizza hut. taco bell is actually the smallest of the three major brands and its, unlike the
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others, really has the bulk of its presence in the united states. maybe, who knows, more growth prospects. >> thank you so much. coming up next, we will be breaking down motorola's solution's first quarter earnings with ceo greg brown. ♪
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>> welcome back. you are "in the loop." i'm olivia sterns. betty liu is on assignment inside pepsi. markets. tv is on the let's get you caught up on futures in the last moments before the opening bell. teachers have actually turned around. much&p and dow futures and flat and nasdaq gaining about 0.2%. we did get jobless claims unexpectedly rising to a nine-month high but on the upside u.s. consumer spending came up, rising almost one percent in march, the biggest monthly gain in nearly 40 half years, and of course, the focus to the monthly jobless report --
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the biggest monthly gain in nearly four and a half years. motorola's solutions, the $16 billion communications equipment company that just reported earnings, the company has been slimming down and shedding units like the handheld scanner business that it recently sold to zebra technologies for 3.5 billion dollars. i want to bring you my colleague jon erlichman, former west coast correspondent. break it down for us. what are your big takeaways? >> i think what is interesting is just leading up to the results you highlighted. this is a company that just fit a multibillion-dollar deal. it sold the business that basically provides things like tracking devices and scanners. and the goal was to in some way simplify the business, to focus instead on more broadly speaking, government, and very specifically, on first responders, on the kind of technologies they might use -- things like walkie-talkies, two-way radios, something motorola has always done. results, you see
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government revenue down about 11% -- or new sales they are generating from government down. that sort of raises questions, what kind of growth market is this? i think there has always been a question about whether the ways by which of the various police and fire departments by this technology -- what are the standards like across the country so that you can bulk up your orders, for example. different types of equipment? that is one area that always will raises questions in the other area is what is the growth in technology behind this equipment that is being used. certainly having software that is superior is where you generally have higher profit margins and can be a better business. >> we will talk about the hardware for a second. i believe motorola has a new smartphone coming up later this month and then aim much-anticipated watch coming up this summer. how important are those launches for motorola? what that goes back to the -- >> it goes back to the fact that
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this is a company that splits. motorola, inc., becoming motorola mobility and the motorola solutions. motorola mobility first went to google and then being sold to lenovo where motorola solutions was focused on some of the more traditional businesses. say, like two-way radios, up until recently, tracking devices, things like banners. and that was sold in a pretty big deal recently, a deal that some were wondering about the making.that company is that is something people are arising as well. >> jon erlichman, west coast correspondent, thanks a much. ward motor executive alan mulally, bill ford, mark fields speaking at a news conference following word ford motors named mark field to succeed alan mulally and yum just announced its own gnu c suite shakeup. joining me for more, matt miller julie hyman.
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-- matt miller and julie hyman. >> he has been at ford for 25 years. he has run almost every business in the company, most recently, the americas, which was a huge run around. mark and thefor companies. we have known he was going to be the ceo success in for a long time. the only issue was timing. we thought it would be at the end of 2014 but they moved it forward, the company says, because alan thought it was time and there was no reason to wait any longer. talking about what was going to happen, where was alan going to go, and more about the personalities and focusing less on the car launches. they were launching i think any three cards this year and next year. so it is really key that consumers focus on the product rather than the personalities -- alan mulally had almost become a celebrity now. this way we can sort of get past
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the success an issue. >> what is next alan mulally? not going to microsoft. >> that is a really good question. going to microsoft as ceo -- they already named a ceo. a lot of people are speculating he could move to a big important company like microsoft or ge or procter & gamble as a chairman or as someone on the board. and i will ask them and to live -- interview him at 11:15 a.m. eastern standard time. i'm sure he's not going to tell me today. but rest assured, he will not spend his silver days playing golf here >> how much of a surprise that this new cea -- ceo of taco bell is stepping up? hereere is a long rant --rap here. novak has been head of
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the company since 1999. he has overseen a lot of expansion. not as though there is some kind of big break. smoothpt for the transition. i want to go back to jon erlichman, senior west coast correspondent and joining him on the phone is motorola solutions chairman and ceo, greg brown. >> thanks, olivia, and our thanks to greg brown for joining us by phone. we were just talking about the fact that you guys try to simplify the business. the obvious example being multibillion-dollar sale of a business that has tracking devices. how would you describe motorola solutions is right now? >> it will be part of the enterprise transaction to zebra, a pure play mission-critical communications company. think about what we do as being the market leader in worldwide police,afety -- fire,
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and the lens, domestically, and internationally. worldwide leader in mission-critical communications and commercial areas, whether it is industrial, manufacturing, retail hospitality. much too small, that we will have end to end. we are a systems player, so we do the infrastructure as well as the subscriber devices and also the applications in between. >> i think when people look at the results and they see the highlights -- sales from the government union -- unit down year-over-year. they might ask the question, what does it mean and how big an opportunity it is, especially with earth responders. believe there is a huge opportunity for first responders worldwide. q1 and the decline in forecast guidance for q2 is more
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temporary in nature. we had record years, actually. in 20 11, 2012, and even the first half of 2013. very high growth rates. we look at this as more of a normalization. has historically been about a positive foreign a half percent compounded annual growth business. and there are prospects for growth moving forward. mission-critical communications remains a priority. we are building multiyear investingacklog and in public safety lte basically and broadband network of specialty devices and applying it to first responders worldwide. >> let's dive into that a little bit more. i think people will generalize and say, you guys make two-way radios, you make walkie-talkies, which kind of misses the point on things like software which presumably gets to higher margins, more ability to generate higher profit.
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the should we think about kinds of things making life easier and the technology that is more advanced that can be used by police department or fire department8 >? >> the majority of our engineers today arsonists -- the system software engineers, to your point. despite the fact we are making radio devices, walkie-talkies, if you will, with we are making sophisticated structure and in the end, software that glues them together. i think we will work with communities and states in the international countries beyond about building broadband public safety networks, which is a whole new area that is incremental. and softwarervices over time become a larger component of our business than just a hardware product that will be carter -- characterize as traditional public safety
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equipment. >> let's talk about here in the united states -- when you are going after contracts, is it a scattered market in terms of where you find these sales? need a more systematic approach to the buying that is being done by fire departments, i police department question mark i assume it would make your life a little easier. >> we have literally tens of thousands of customers in the u.s.. and there are different buying cycles. they have different levels of infrastructure that has varying degrees of aging associated with the. but we are engaged with all of them throughout this eight to convert them to either technology refresh, a new version of software, have a multiyear service agreement, give them some of the latest technology or radio subscriber devices that will be more efficient, and all of that engagement is designed to continue to build out for our customers interoperable voice
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communications. i think we are doing well and we gained share last year and doing that. we then will take that to the next level and build out for our customers here in the u.s., which you mentioned, interoperable raw band or interoperable public safety lte, and we think that opportunity is pretty significant and exciting for us. >> greg brown for motorola solutions joining us on the phone. >> thank you. >> our bloomberg senior west curse grasp on with greg brown. west coastor correspondent jon erlichman talking to greg brown. sales down zero point eight percent, expecting a gain, compared to rivals doing so well. about 14%.les up general motors sales were up about six percent. seeing real gains in the other carmakers as the weather clears up, and it is not happening for ford.
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if you look into the breakdown, you will see lincoln is really a big problem. those sales are down 11%. >> and that will be a priority for mark fields, the newly announced ceo. >> absolutely. got a comes in and it's big, i am guessing, on his list of things to do, something near the top. it is a luxury brand. do better at selling lincoln cars but obviously china is a huge issue for them, but they are running on all cylinders. >> i want to jump in right there because mark fields has been speaking to express -- any rest conference in dearborn, michigan. what his first order of business will be get >> the first order of business is obviously to have a great transition to next couple of months. then to continue to have relentless focus on the one brand and one ford top qualities into the
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marketplace. that is the sole pope -- our sole focus on we will not skip a beat. >> he said the first line of business is implementing the one ford land. >> my question for him today would be what do we -- are you going to do differently. we know he will be implementing the plan. they have been doing that for eight years. i am not saying it is bad. obviously, it has worked incredibly well for them and it really gives alan mulally kind of the crown as the turnaround came for america. they have done really well. they avoided the bailouts, the bankruptcy. they have built a really strong company. but the question is, what is mark fields going to do differently if anything? sure, he is going to put his own stamp of the company because he is that kind of guy and that's why bill fort waterman. >> he has been with the company -- >> 25 years. to watch hisre
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interview with chairman bill ford and ceo alan mulally coming up on "market makers" at 11:00 a.m.. ♪
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>> on april 24, google of three other tech companies quietly settled an antitrust case in 64,000 of grammars and engineers accused them of orchestrating a tightly coordinated hiring conspiracy. it was all done in the interest of stifling competition and depressing wages until now it has not received much attention at all. it is the cover story of the latest edition of "bloomberg businessweek" available for download tonight and paul, break it down. common is involved -- apple, google, intel, and adobe. what they were accused of was setting up a series of bilateral agreements among the companies,
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vowing not to recruit from each other's work forces. this would have the effect of keeping these high-level employees in place, and the further effect would be to suppress the wages. because if you don't have an offer from across the street you can go to your boss and say, give me a raise. >> this is blatantly illegal. how did these guys think they would get away with it? >> they have not admitted it was illegal but they have agreed to this settlement and earlier agreed to a settlement with the justice department who had its own investigation. --but stifling competition >> it certainly seems like classic improper antitrust behavior and what is very significant here is an e-mail you had the ceo's the of these companies kind of technology and, i kind of noble we are doing is not right and i don't want anybody to know about us and let's keep it between you and me. the funny thing is, they were doing it in e-mail. >> should always remember anything you put on e-mail could end up on the front page. i took one of the quotes out
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from your story from intel ceo and he says "we have a handshake no recruit between eric schmidt and myself. i would not like this broadly known." so these are never put an e-mail. it is startling how play in it is. >> that speaks to the unique who is of siliconr valley. people in a very short period of time become billionaires and they don't think there are mary -- ordinary rules of financial and i trust, the gravity, applied to them and this is the best illustration we have had so far. >> and a lot of critics saying --bris > e goobers -- >> they are willing to put up
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with it because the job of those saw after. it is not like anybody here was having trouble putting that on the table but it does not mean those same people to be exploited. >> and with a 324 million dollar fine it really only relates to about a couple hundred thousand dollars per for grammar or engineer and a lot of them making six figures. >> the ultimate irony. >> thank you so much for joining us. to see the latest issue, download the "long -- "bloomberg businessweek" plus app. ♪
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all right. we are back inside pepsi. we have been reporting on the breaking news out about yum! brands ceo david novak and his and the top about ceo now being elevated to the entire group at yum! brands.
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as you know, pepsico and yum! brands have had a long history together and in fact yum! at one point was in the pepsico fold before they spawn or thought of that company. olivia sterns, i know you are back in new york. i want to bring you back as well into the conversation. i then mentioned, there has been a long relationship between the two and in fact, last year, taco bell, one of the big food service accounts at pepsico that work with them with the power of one that a.j. and lots of it doritos locos which has been a $1 billion seller for d no surprise he has been elevated to the position. takewould love to get your on the extraordinary flavors you have been sampling. but one thing i want to know about is obviously pepsico has been under pressure tom a particularly from tree on management, nelson peltz, who has been calling for coming to
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spin off the beverage business from snacks. nooyie ceo and -- indra say anything about that question mark >> has ago -- about that? months lookingen over their operations and they came out with a statement earlier today saying indra nooyi talked to the board and they decided it was best to stay together. in fact, i asked indra nooyi this morning, i asked her what about some of the proposals improveut forward to shareholder value, including consolidating the corporate headquarters. here is what she said. >> we never do anything in pepsico that does not create value or simply adds costs, because as i said, all of us are shareholders as a company. we take shareholder value very, very seriously. and based on all the analysis we have done, based on the makeup of our employees and where they are and where we need them to be and where we need to attract the best and brightest, our current
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architecture is the right one. and we are going to stay exactly where we are today. wondering about russia as well. president obama, of course, has been talking and he's got angela merkel a washington trying to figure out how to impose steeper sanctions on ukraine and russia. he has asked that u.s. ceo's not attend the st. petersburg former -- form. say she will attend anyway? >> i asked executives and she said indra nooyi's schedule is in flux. she is on the schedule to attend but they said no schedule has been finalized, that it is still in flux at this moment. olivia, thank you so much for covering for me there at new york headquarters. but does it for today in the program but our insight pepsico special continues all day long, including an in-depth look at the company's associate media
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strategy and the high-tech bush to connect to a new generation of younger consumers ♪.
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>> it is 56 past the hour, meaning bloomberg television is on the market. i'm julie hyman. let's look at the big stock stories we have been watching, to see how the stocks are moving. ford, the company officially announcing this morning that mark fields will take over from alan mulally when he retires as of july 1. chief is currently the operating officer. over at yum! brands, david novak ceo, becomedown as executive chairman of the
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company, which owns kfc and pizza hut and taco bell in the ceo of taco bell will replace him. prepare fore to that transition. in terms of the broader markets, let's take a look at what is going on there. like yesterday, not a lot of changes coming out of the gate. economic data came in better than estimated in terms of some of the consumer spending numbers. of course, the big one comes tomorrow and the form of jobs. with stocks trading their record highs, the dow closing at a record yesterday. salome andold adage, go away? to look at why the strategy has served investors so well is the chief equityy -- strategist at standard & poor's. first of all, how often does a work? >> i think the adage sell in may is wrong.-- go away you should gravitate toward defensive areas. since 1990 is, if you moved
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toward consumer staples and health-care care sectors in may to october 30 oh and back in the market november through april you would have averaged added an average of three percentage points per year to the s&p 500 return while actually reducing the volatility. sell in may, i don't think you should go away. only six-month period in the full four-year cycle that posted an average decline in this may through october period. >> let's talk about some of the other specifics of this year, namely some of economic indicators which do seem to be improving. you would think in that environment the cyclicals would actually perform better if you look at that metric and that overlay the historical comparison. >> possibly. i think you are better off focusing on quality at this point. this has been pretty much a low-quality led rally. low-qualityt year, stocks, meaning those that had
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poor consistency of raising earnings and dividends traditionally more from the more cyclical areas have been -- beaten the higher consistency ratings by a good 10 percentage points. fact now is these low-quality stocks are trading at 36% premium to the projected the higher-quality stocks so i think you're much better off sticking toward stocks, gravitating toward defensive and if you can, aim for the high quality issues. >> if you are going to gravitate away from stocks and reallocate, what is your best bet in terms of other asset classes? >> bonds. sincerclays aggregate 1977, when the full year cycle low in the midterm election year was up 12 and half percent on average and rose 100% of the time versus the s&p's gain of only 1.3% and rising an average 56% of the time.
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bonds really have been the place to go in the sale in may period in the midterm election. >> even given the fed and where we are now? >> there are always different caveat request thank you so much. sam stovall. thank you so much. we will be on the market again in 30 minutes. live from bloomberg headquarters in new york, this is "market makers" with erik schatzker and stephanie ruhle. the top.ange at ceo alan mulally will retire and be replaced by mark fields. we will talk with our mulally and with the chairman go for it. >> sprint still wants t-mobile and now there is talk at&t wants directv. we will see what is behind all of this m&a. >> how to keep pepsi from going flat. exclusive interview with the ceo of the soft drink and snap company, indra nooyi. welcome to "market makers."


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