Chief Marketing Officer, PEPSICO ASIA
2009-08-01, China International Business (CIB) www.cibmagazine.com.cn
By Mina Choi | From CIB August 2009 Print Edition
FACE TO FACE INTERVIEW
Harry Hui is the grand maestro of China youth culture. After completing his MBA in the US, Hui joined Warner Chappell to head their Asia division, where he helped produce successful artists like Jacky Cheung, whose song ‘Zuo You Wei Nan’ became the fastest selling single in Taiwan with more than a million copies sold in its first six weeks.
After four years at Warner, Hui jumped over to MTV Asia to work on the launch of the first-ever music video award show in the Chinese mainland, as well as promote artists such as Ricky Martin, Wang Lee Hom and Faye Wong. It was his move to Universal Music in 2002 that turned Hui into a household name across China, when a television show he produced, My Show, which gave advice to young people, become an instant and far-reaching hit. But then in 2007 Hui surprised everyone by joining PepsiCo International as its chief marketing officer for the Greater China region.
How does Hui stay tuned to the fast-changing and fickle China youth culture? CIB sat down with him to discuss his career path to date, why he sees himself as “China’s young consumer guy,” and how he is using his experiences in music to help PepsiCo.
What made you decide to take the big leap from the media and music industry to food and beverages two and a half years ago?
Before Pepsi, I was with Universal Music for Southeast Asia, overseeing seven countries from Indonesia, China, Korea, all the way to India from the Hong Kong office. When I started in 2002, Universal was a music and recording company, but in the five years I was there the business scope expanded and we grew into a full music service company, including television production, artist management and a mobile music business.
It was a very challenging time. Music was undergoing tremendous challenges. We were hit with a perfect storm of online digital piracy — Napster — coupled with cheap CD burners. So although our company was doing very well and we grew our market share, the value of the business was contracting significantly during that time, which is why the Pepsi opportunity was so attractive.
When the Pepsi opportunity came along I was impressed by the sheer size of the business, which was significantly larger than what I was doing before, and secondly, I could bridge the gap between brand objectives and entertainment and media company objectives – to bring creativity to the way the brands are marketed.
So how did you get into the music business in the first place?
Well, in truth, I loved music, but I realized that I wasn’t a good enough musician. I didn’t have the talent or the vocals, but I always had a real love for it.
I first got involved in the music business from Hong Kong in the mid-90s, shortly after business school. I was working on something totally different — a market-entry consulting project — and suddenly I got a call from a good friend of mine saying, “Hey, Warner Chappell is looking for someone to set up their new division in Asia and it’s a perfect mix for someone who has creative and business skills.” I interviewed and they picked me. When I asked them why, they said, “You can teach people the music business, but you can’t teach people how to do business.” So that was my breakthrough.
I worked at Warner Chappell for three years. We published a number of top singles and hits during that time. We grew the business multiple times and then I got into MTV Asia when satellite television was huge in Asia. I was living out of a suitcase between Hong Kong, Shanghai, Beijing, Taipei and Korea overseeing all our projects. My proudest moment was when we launched our first video music awards — the Chinese Music Honors — here in China with CCTV. It took a year and a half of tenacious negotiations before we got the permit. Luckily the show went off with a historically high rating and everyone was very happy. Ten years on, it is still one of the most important annual shows in China.
How did your growth into a household name come about?
At Universal I created and produced a television show which became one of the highest-rating Friday night programs, and as a result of that I went off and wrote a book, Nine Lessons for Young People, which sold 200,000 copies and spawned various fan clubs. I became an accidental celebrity and was able to connect with the Chinese millennials – youth born after the 1980s.
The Chinese millennials are in conflict. They are Confucian, so on the one hand they work hard, they are humble, traditional and respectful, and on the other they want to show themselves, express their individualism and ego. They live in a world where there’s a strong sense of duality.
It’s a very interesting time for marketers. These insights you get, however, have to be interpreted very carefully, otherwise it might lead you to the wrong conclusions.
Do you find that your music and media background has been compatible with PepsiCo?
Let me put it this way: the music and media business is 5% glam and 95% business, but what the world sees is the 5% glam which overshadows everything else we do.
When you think of every artist and every new CD launch as a brand – what does it stand for, what does it represent, is the market big enough, is the market competitive, it’s very similar to any other business. We used to do product mapping, artist mapping, and it’s not too different from what we do at Pepsi today.
I’ve been very fortunate that in the last 15 years I’ve been completely inside a youth and consumer-oriented business that’s allowed me to get incredible insights on young people – what they’re wearing, thinking, reading, watching and drinking. What young people do today gives you a strong idea of what the future will be. It’s the ability to connect around the dots, see around the corner and then make a call on what the next big thing will be. And that is critical in business, but even more so in marketing.
What happens as people get older, yet Pepsi continues to focus on the youth market?
For Pepsi Cola, the key essence is about music, sports, interactive and digital. It’s a young attitude and a young-at-heart mentality, but the consumers in our research skew much older. What also happens as people get older is that they want more choices. They want to drink more than Carbonated Soda Drinks (CSDs) and they are more demanding. PepsiCo responds to that by offering a wide range of drinks that go beyond the CSDs, like Tropicana juice drinks.
Something that I’m really proud of is our newly-launched product, Herbal Life, the first traditional Chinese medicine-inspired drink from PepsiCo. We did research, and found that the most common element of TCM was balance – either you’re too hot or too cool. We developed this product over the course of two years. This is what my mother used to drink all the time, and here we’re offering the packaged solution. What’s exciting about the Chinese market is that we’re offering a wide range of products from tea to juices, and local Chinese TCM-inspired drinks to complement our soda business. So as people get older, we want to make sure we can provide them with choices.
Let’s talk about the cola war. When you joined PepsiCo, did they tell you, ‘Harry, you need to make us number one?’
China is one of the most important markets to PepsiCo globally. We’re very positive and optimistic about China. The object for us is not just to compete and win the carbonated drinks market but to transform our portfolio to give our consumers choice. We must keep up with the taste evolution of the Chinese consumers. Actually, we have the market leadership in China with Pepsi Cola and Mirinda.
Pepsi just announced a USD 1 billion investment in China over the next four years and the construction of new bottling plants. Are you happy with your overall market position?
We have a lot of work to do. The key is to continue to transform and expand our portfolio.
We also have to continue to expand into the third and the fourth-tier cities. In tier-one and tier-two cities there’s saturation, and the products are well-penetrated. The next opportunity is to go to the west of the country. China will see incredible urbanization in this market over the next 20 years, as 250-275 million people urbanize. When these people start looking for packaged beverages, we’ll make sure that we’re widely available and that we’re there. We want to make sure that our beverages are available in every destination, every city within arm’s reach.
How do you push into these third or fourth-tier cities?
It’s just about increasing our footprint, increasing our routes, the number of our coolers. Our sales reps cover the region widely and will expand geographically.
Can you explain some of your interactive programs?
We did a program last year called the Pepsi Creative Challenge (PCC). It’s become a gold standard for interactive marketing in China. The proposition was very simple: we asked people to take a photo of themselves and upload it onto our website to let people vote on it. The top 20 who got the most number of votes got on the new Pepsi can.
What we wanted to say was: “For many years you’ve seen your favorite superstars on the can, now it’s your turn.” It was putting consumers in control, away from 360 degree marketing to 3D marketing. It was amazing. We got 28 million photographs, and more than 160 million votes. This is 50% of China’s Internet penetration – it was an amazing success.
How do you pick celebrities to lead marketing campaigns?
The key question we ask is whether the celebrity is going up, going down or staying flat. Trend-spotting is very important – we want people going up or about to be famous. It is very easy to sign the biggest artist out there, but if they are famous, chances are they’re working with other brands and you can’t really own them. The second part is brand congruency: do they fit? Do they make sense? Will their personality fit the Pepsi brand?
How are Chinese consumers different from their foreign counterparts?
Chinese consumers are one of the loneliest generations in China. The single-child policy over the last 30 years, I would argue, has created a generation that has extreme pressures to succeed personally, professionally and academically. They may not find the best job, go to the best school, or even find someone that they can marry. One young person told us — and this is what sparked our interactive programs — that “it is a shame to be without friends.” Everywhere in China, the youth have more online and virtual friends than their counterparts in the US – up to 25% more. When we started connecting the dots we realized that technology is comfort food; technology connects lives. If our brands can be that comfort food, or a platform where people can come together, that was the driver behind our Pepsi Creative Challenge.
What are some of your marketing strategy meetings like?
It’s an extremely competitive business. The beverages business has become one of the top five advertisers on Chinese television. More than 700 new products are launched every year. It requires significant investments, so you have to make your bets very wisely.
Our marketing team looks one to three years ahead to determine where the taste shifts are going. We’re constantly doing research. In this office alone we have 50 people on our team; out in the field we have 600-700 people.
Marketing is not a quantitative science. When do you know if your marketing efforts have succeeded?
Marketing is a fine balance between art and science. The ultimate success for me — that is quantifiable — relates to three things: one, sales; two, brand performance indicators; three, relative share. These are the hard, cold facts which will measure whether you’ve been successful or not.
Are you concerned with other companies copying your marketing strategies?
Of course, imitation is flattery. We’ve noticed that many of the campaigns we’ve launched in year one get imitated in year two. But that keeps us on our feet and forces us to innovate, and that’s exciting. These are fast-moving consumer goods and tastes change. The Chinese market is full of high-trial and low-loyalty consumers. In that regard, you have to be very quick and on the top of your game, and I’m not worried because we have the best marketing people in our company.
Do you perform on-the-ground research?
All the time. Every weekend when I go out shopping with my wife and walk into a supermarket, or when I buy a loaf of bread, I can’t help but pick up the products. I peek inside the cooler to see what’s filled and what’s not. I move our drinks from the back of the refrigerator to the front. You cannot be anything other than like that in this business.
Do you find it difficult remarketing a product which hasn’t changed significantly since its inception?
No, I find it exciting. The Pepsi brand has been around for 100 years. Some of the smartest people have worked on the brand and they’ve thought about everything. Should it be taller? Should the bottle be thinner? Should it be in different colors? More bubbles? Less sugar? So in that context it’s very exciting to think about Pepsi as a platform and what it can be as an enabler.
With that it mind we launched a new program, ‘Gai Se Cun Yin’ (Voice of the New Generation: Battle of the Bands), as we realized, following the Olympics, that Chinese people wanted to express themselves in a new way. The key passions for young people were music, sports and online, and we knew that Pepsi must concentrate on music.
The music space is so crowded, we looked around and we realized that China had more than 20,000 underground bands. We also saw that the live concert business had grown 28% year-on-year, yet there were no TV shows or programs that allowed these bands to express themselves. That led us to say: “What if Pepsi became an enabler to allow these bands to express themselves?” Our concept was: ten weeks, ten bands, ten songs, one winning song, and an RMB 1 million prize. We now have 6,000 bands lined up who’ve played 720 concerts in 120 cities across the country. It’s still being broadcast now and we have an Internet site that will be launched showing the behind-the-scenes.
Are you happy with what you’ve achieved over the last two-and-a-half years?
Yes, generally. We have a lot more to do but we’re off to a good start. We’ve been able to change our portfolio, and offer new choices, and we have had impressive creative programming that we’re executing as a team .