Billion Global Brands in the store folio but it all started , createdbrads 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 beyonce. For the big picture, you need to look at pepsicos food business as it gets about half of the two yearly revenue from snacks it is starting with everyones 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, fritolay, known for cheetos, doritos, crackerjack and much more. In 2001 pepsico merged with the 135yearold 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 cocacola, 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 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. Thats he believes the more scale they have and having 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 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 highermargin 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. Lets get everyone caught up on what else we are watching. The irs says under current law, congress cannot put an end to the tax haven deals. Pfizer the line shares of yelp of as much as 11 in premarket trading. Lossported firstquarter less than estimates and raised its fullyear 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 japans softbank planning to move forward for a bid for tmobile usa and met with banks this month to make that arrangements for the office offer. Bloomberg newss managing editor of mna joins us with more on the possible deal. Jeff, lets talk about the timing. When the spring 20 to make a possible bid . 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 junejuly time frame to get a deal done with tmobile. Its got to negotiate with Budget Telecom back in germany, tmobile. 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 tmobile is different from sprint brine tmobile. 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 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 comcasttime 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 fastmoving 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 tmobile ceo john leger. 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 cant 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, thats 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. We are going inside pepsico for a look at the companys 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 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, 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 . Lets step back and talk about why rmb. In todays 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 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 . Lets 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 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 billiondollar brand in your per folio . I think we have 22 billiondollar 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 were focused on, because in todays world where it is so expensive to build a brand, the fact we have 22 billiondollar 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 market and now 9 billiondollar market. How did pepsico and cocacola miss the Energy Drink Market . I do not think weve 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 Drink Market, 9 billion and red bull and monster have two thirds of it. It would have been a perfect market for pepsico and cocacola 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 doityourself soft drinks category. Is that something you want to be in . Inhome 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 dont 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 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 inhome 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 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. 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 ceos 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 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 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 costbenefit 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 foodservice contracts ban cocacola . 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 se