Crispy taco, wasabi ginger, and southern biscuits & gravy. These chip flavors are the million dollar ideas that won their inventor $1 million in prize money in PepsiCo Lay’s “Do Us a Flavor” competition. PepsiCo has hosted four rounds of this contest starting first in 2012. The competition solicits millions of ideas for new chip flavors from participants and then lets everyone vote on which flavor should actually be brought to shelves. This campaign was a huge marketing success even in its first run with 3.8 million ideas received and 22.5 million weekly Facebook page visitors.1 Beyond the marketing reach, this campaign is also a major asset to PepsiCo’s product development process.
The snack food market has been booming with US sales up 12% in the last four years for a total of $145 billion today.2 The healthy food and drink subcategory has especially taken off, driven mostly by small manufacturers who make up 60% of the clean-label market.3 Many companies, including PepsiCo, have resorted to billion-dollar acquisitions of these smaller food brands to gain access to this category.2 In order stay competitive in a snack food market heavily influenced by trends, PepsiCo needs a more systematic process to identify these emerging trends and develop new products in-house.
In the short term, campaigns like “Do Us a Flavor” are great ways to innovate existing product lines. The first step crowdsources flavor ideas from millions of participants, which massively scales the ideation funnel and makes it more likely to capture the upper tail end of “good” ideas. Next, they use Facebook to ask millions of users to “like” a flavor if they would eat it. This allows PepsiCo to quickly filter down ideas with zero investment in developing the recipe, speeding up the iteration phase. Ultimately, the company estimates that they have been able to reduce their time to product launch to 10 months from the original 15-20 months.1 They also saw a 12% increase in sales from the first competition, suggesting this new process also produces better results.1 However, it appears FritoLay is mostly using the competition as a marketing stunt as most of the past winning flavors have been discontinued.
In the long term, PepsiCo appears to be broadening its use of crowdsourcing, looking to also generate ideas for healthy ingredient substitutions and new product lines. In May 2017, they posted a request on open innovation website NineSights seeking “new and novel protein sources for usage in their snacks and beverages”.4 On another website eYeka, described as “a community of talented creators who love to solve brands’ challenges with fresh thinking,” PepsiCo Mexico ran multiple contests to gather ideas for snacks for working people during breaks and at their desks, as well as snacks that can be shared among couples and friends.5
While PepsiCo has been quite successful with these types of contests, they focus mostly on idea generation. They should also consider crowdsourcing the prototyping phase of their product development cycle. For example, for the “Do Us a Flavor” competition, PepsiCo only develops the actual flavor recipe for the 3 finalist ideas, likely because this step is R&D intensive. If they were to instead directly crowdsource recipes, they could potentially test many more flavors, increasing the likelihood of a successful flavor that actually stays on the shelf.
Longer term, PepsiCo should also engage earlier with the food startup community to identify and partner with promising new brands. It takes lots of capital to begin production on new food products, so there would be a lot of value for entrepreneurs to work with PepsiCo to bootstrap their manufacturing. Through this community, PepsiCo could spot food trends faster and source ideas for new products or companies to acquire.
While the idea of open innovation is exciting, it is not without limitations. Many companies that employ crowdsourcing for ideas face intellectual property rights issues.6 This would become even more of a concern if PepsiCo started to crowdsource actual recipes instead of just ideas. Additionally, there are privacy concerns about the data PepsiCo collects during their “Do Us a Flavor” competition. Currently, they use Facebook likes as their votes, giving them access to data on user location, gender, birthday, photos, list of friends and status updates.7 In light of Facebook’s recent data privacy scandals, users may become more cautious in sharing their data and participating in these types of competitions. (726 words)
1 Brittany W, “Crowdsourcing Your Next Chip Flavor: Lay’s ‘Do Us A Flavor’ Campaign,” HBS Digital Initiative, March 24, 2018, https://digital.hbs.edu/platform-digit/submission/crowdsourcing-your-next-chip-flavor-lays-do-us-a-flavor-campaign/.
2 Julie Creswell, “PepsiCo to Acquire the Fruit and Veggie Snack Maker Bare Foods,” NYTimes, May 25, 2018, https://www.nytimes.com/2018/05/25/business/dealbook/pepsico-bare-foods.html.
3 “Booming Snack Sales Highlight a Growth Opportunity in Emerging Markets,” Nielsen, March 12, 2018, https://www.nielsen.com/us/en/insights/news/2018/booming-snack-sales-highlight-a-growth-opportunity-in-emerging-markets.html.
4 “Novel Protein Sources,” NineSights.com, https://ninesights.ninesigma.com/servlet/hype/IMT?userAction=Browse&documentId=34971ac66b581486cf68bd73ad1a7c10&templateName=&documentTableId=1008809492095505715.
5 “#PepsicoSnacks – Invent the new PepsiCo Snacks!,” eYeka.com, https://en.eyeka.com/campaigns/21-pepsicosnacks.
6 de Beer, McCarthy, Soliman, and Treen, “Click here to agree: Managing intellectual property when crowdsourcing solutions,” Business Horizons, Volume 60, Issue 2 (April 2017).
7 Stephane Clifford, “Social Media Are Giving a Voice to Taste Buds,” NYTimes, July 30, 2012, https://www.nytimes.com/2012/07/31/technology/facebook-twitter-and-foursquare-as-corporate-focus-groups.html.