Should Sanofi and Pepsi Combine as a New ‘Market Set’?
A Note on Interspecies Communication
In the annals of weirdness, last week stands apart.
The FDA was supposed to make a final decision about whether or not to approve Novavax's COVID-19 vaccine, but like everything else locked in orbit around the words “vaccine market” in the United States, that big forecast — Novavax was banking on $1.2 billion in revenue from a deal with Sanofi — is now another big forecast miss.
The delayed decision should be another signal of the bigger, wider and deeper pain ahead for pretty much the entire pharmaceutical-as-healthcare/healthcare-as-pharmacetutical market, especially those 250 brands and businesses whose ‘storyline of value’ was sold and seen through the lens of being a ‘vaccine company’ or now, even worse, “mRNA” as a platform for science, the word itself getting power-washed out of grant applications.
That mushrooming cloud of fear and forecast failure comes in the wake of mass layoffs at the health agencies last week, including the forced resignation of Peter Marks, who had long steered the FDA's regulation of vaccines as director of the Center for Biologics Evaluation and Research. Marks cited disagreements over vaccines policy and science with RFK Jr. as the reason for his resignation. CBER is the division in charge of reviewing vaccines. (Kennedy yesterday was in Lubbock, Texas, attending the funeral of a child who recently died of measles.)
[Calley Means, one of Kennedy’s newly-installed deputies and advocates for the “Make America Healthy Again” campaign, said Kennedy was correct to dismiss Marks. On a Politico podcast on Friday, Means said the removal of Marks was justified, as he “again and again went against FDA advisory opinions.” Means also alleged that CMS is “controlled by the American Medical Association, which is a pharmaceutical lobbying group.”
“When you turn on CNBC, it’s a nonstop infomercial for pharma. It’s a Skyrizi commercial followed by Scott Gottlieb saying Bobby is killing people followed by breathless coverage of the measles outbreak,” he said.]
As far as the sunny outlook in the United States for huge swaths of the “unique innovation ecosystem [that] drives scientific advances transforming how we fight disease with life-changing medicines and vaccines,” per the patient-centered bubble machine from PhRMA, not so fast — most, if not all, adcomm support staff who handled meeting-specific tasks have been laid off, throwing a new obstacle in the drug market’s marketing and sales plans.
And on Friday, CMS announced that it won’t be covering weight-loss drugs, which if processed with the Standard Model analysis, may not matter a whole lot, at least on paper — Novo Nordisk said the “announcement was limited” — if processed with a different perspective, as drone bees seeking out and sensing direction for the “magnificent” neck-snapping destruction of the “post-war international rules-based order” (per Steve Bannon) it may be time for industry to start asking itself different questions, especially around risk management, the taxonomy used to define a market, identity and even the growth potential from the United States (for more Blue Spoon thinking on this, see Is HIV Prevention and Treatment "Gender-Affirming Care?).
Which is the same sort of strategic head-scratching Pepsi is going through.
The ‘soda market’ (like the ‘vaccine market’) is a melting ice cube. Sales volume of Coca-Cola branded sodas slid 14 percent between 2010 and 2023, but Pepsi’s volume, including for Diet Pepsi and Pepsi Zero Sugar, plummeted 32 percent. And this market collapse likely won’t be helped by RFK Jr., who has referred to sugary, carbonated drinks as “poison.”
On its last earnings call, an analyst asked the obvious to PepsiCo Chief Executive Ramon Laguarta: What was going on?
“We are seeing some hope, but hope is not where we want to be,” Laguarta told analysts gathered for a conference in Orlando (translation: hope is not a strategy). In a variation of a theme from Ram Krishnan, who last year took charge of PepsiCo’s US beverage business:“maybe we lost the focus” as the Pepsi brand slipped to number three behind Coca-Cola and Dr. Pepper.
Maybe the problem isn’t losing focus so much as it is finding a new one.
A New ‘Market Set’
A thought experiment in big market innovation: Is Pepsi in the ‘soda market’, or is it really in the business of water stewardship? And then the question that follows: is there new money in the latter?
When it comes to corporate exposure to nature risk, water has to be the most salient. Agriculture uses 70 percent of the world’s freshwater. But it’s bigger than that — it’s an entire economic system that enfolds markets ranging from textiles to pharmaceuticals and semiconductors, not to mention all the data centers being built to enable all things AI.
For many years companies took for granted that water would be available in sufficient quantities for whatever they wanted to do. That perception is rapidly dissolving as the impacts of climate change -– from droughts to catastrophic floods to changes in rainfall patterns — make themselves felt on water supplies, infrastructure and business operations around the world.
”There’s either too little or too much,” says Alison Gilbert, water stewardship lead at consultancy Anthesis, in a piece at the beginning of the year for Reuters (Bridging the Water Finance Gap as Climate Impacts Bite). “Companies are having to deal with scarcity, floods and poor quality as well as growing regulatory and reputational risks. And they recognize that they need to do something about it.”
Recognition, however, is not the same thing as action.
At COP16 in Cali in October, Nature Action 100, the investor-led initiative to engage with companies deemed systematically important in stemming nature loss, reported in its inaugural benchmark assessment that while over two-thirds disclose a commitment to protect nature, only one had done a comprehensive materiality assessment of nature-related dependencies, impacts, risks or opportunities.
There are a number of initiatives specifically aimed at helping companies report on and manage their water use, including CDP’s water disclosure programme, the Taskforce for Nature-related Financial Disclosures and the Valuing Water Finance initiative at sustainable investment advocacy group Ceres.
Ceres’ water lead, Kirsten James heads up the latter initiative, which involves more than 100 investors responsible for $17 trillion in assets engaging with some of the world’s largest water users.
”Investors are concerned about the water risks in their portfolios. They see that water crises are increasing in scope and scale. At the same time, companies are at very different stages of their water stewardship journeys,” says James.
”Many companies have looked at the risks in their own operations but are pretty much ignorant about the risks in their supply chains and the water footprint of their suppliers. … You can do all the work inside your own fence line and still not have enough water.”
One brand that isn’t taking water for granted is PepsiCo (and, of course, its arch rival, Coca Cola).
”Water [stewardship] is a key ingredient for our agricultural raw materials and a central pillar of our strategy,” says David Grant, senior director for global climate and water solutions PepsiCo. Besides exceeding targets to improve water efficiency by 25 percent from 2015 levels by 2025 and to cut water use in agriculture by 15 percent, PepsiCo is also one of a number of companies with an ambition to have net-positive water impact.
Which brings things back to the value of water to the infectious disease market, not as a sustainability initiative side project (like DEI, there’s not much shareholder value in sustainability), but casting water management as a character in a new screenplay around which Sanofi and Pepsi can collaborate for “innovation” that extends the definition of ‘enterprise-wide’ beyond the fence line of either company.
Specifically wastewater analysis as an acorn molecule from which to grow and position a new care and service infrastructure. And even more specifically, approaching the thing as ‘infrastructure-as-a-service’, a big market innovation whose objectives are:
Compressing the ‘test-to-treat window’ for vaccines worldwide;
“Replacing” government as a source for real-time infectious disease detection;
Creating employer demand for vaccines (direct contracting);
Positioning retail pharmacy as the keystone to community-level primary care;
Giving technology what it wants (space and direction to build more technology); and
Helping governments in Africa “revolutionize their development financing approach” and drive Africa’s transformation around the production of public health.
About two years ago, Alphabet’s life sciences company Verily beat out Biobot Analytics to score a five year, $38 million contract with the CDC to collect samples from hundreds of wastewater treatment centers across the country, analyze them for Covid-19 and the mpox virus, and return the data to CDC within 36 hours of collecting the samples. That was followed by an expansion of wastewater surveillance program into the United Kingdom.
Beyond Covid-19, genetic surveillance of wastewater offers relatively low-cost, rapid early detection that can identify communities where H5N1 avian influenza could be circulating, when an outbreak could be taking place, how large that outbreak may be, and how efficient can an economic + health saving system be organized and mobilized. Last week, bird flu hit poultry flocks in Nigeria and Togo — and one of PepsiCo’s largest customers in Africa, KFC, closed down all of its restaurants in Lesotho due to the severe outbreak of bird flu in neighboring South Africa.
In the big money world of healthcare markets, $38 million is not even a rounding error on the balance sheets of most businesses. But that misses the larger point: The massive grapple in healthcare is balancing ‘value alignment’ across a system of markets. And then positioning the basis of competition on the production of outcomes, not the consumption of inputs, as the ‘large language model’ around which to approach big market innovation.
And that process starts by asking different questions (for related Blue Spoon thinking on this, see Can Novartis Save the NHS?).
How to Talk to Whales
Strategic fit to the world according to Donald Trump doesn’t sound like this:
CAMBRIDGE, MA / April 7, 2025 / Moderna, Inc. (NASDAQ:MRNA) today announced that the Company will present research across multiple infectious disease areas, including COVID-19, influenza, respiratory syncytial virus (RSV), cytomegalovirus (CMV), norovirus, and mpox, at the ESCMID - European Society of Clinical Microbiology and Infectious Diseases Global Congress in Vienna, Austria, from April 11-15, 2025.
Moderna will present twelve scientific presentations at the ESCMID 2025 Global Congress, including three oral presentations, one e-poster presentation, and eight poster presentations, highlighting the breadth of its [mRNA] research in respiratory and emerging infectious diseases.
More to the point, the probability for big commercial success for a business locked in the conceptual past is low. Ditto for its managers. (Moderna is trading at a 52-week low, and its “fair value” was lowered by Morningstar last week because of a “hostile” FDA environment.)
Roadmaps to the next hundred billion in growth from the largest and most lucrative market on Earth don’t start with “data interoperability” to enable big tech visions. They start with ‘market interoperability’ to invent better economic systems (“ecosystems”).
Less ‘out there’ already than intentionally designed, the best ecosystems are products of ‘differential connectedness’ -- whoever does the better job weaving market sets into new combinations will emerge the sustainable winner. The key decision isn’t doing the past better with new technologies, but how to negotiate among the tornado of opportunities and choose the right thing to do with better system vision.
From The New Pepsi Challenge: Saving Pepsi From Years of Decline:
The job of rescuing Pepsi-Cola starts very early in the morning for Ram Krishnan.
On a recent trip to San Antonio, the head of PepsiCo U.S. beverage business was up before sunrise for a 5 a.m. meeting with the local sales team, followed by a roundtable discussion at 7 a.m. with managers.
At 8 a.m., they hit the streets. They split into four teams and started visiting stores — Walmart, Dollar General, Circle K, 7-Eleven and four others. They walked through the aisles with scorecards. Are the shelves full? Are the right PepsiCo drinks highlighted? What about the product mix? The shelf tags? The drink cooler at the checkout?
In February, the company dusted off the Pepsi Challenge, this time pitting Pepsi Zero Sugar against Coca-Cola Zero Sugar. In advertising, it aims to position Pepsi as better than Coke or other beverages for pairing with food. The pitch: Food deserves Pepsi.
The more you connect, the wider your economic playing field becomes.
Water stewardship is not a separate and distinct thing from health stewardship, the latter becoming a big something big employers are getting tuned into (for evidence of this emerging strategic theme: “Even 'good' employers face rising risk of lawsuits over health plan costs”, via BenefitsPro; and “JPMorgan Chase failed to protect employees from inflated health care costs”, via The Columbus Dispatch) .
Perhaps Sanofi can help make PepsiCo make a different pitch. Perhaps PepsiCo can help Sanofi construct a different vaccine business. Either way, "dusting off"" the Standard Model has stopped making sense.
The Magical Mystery Tour
in Trump, Unbowed, Is Enacting Change on a Scale Rarely Seen Before in the Wall Street Journal this morning:
No American president has disrupted so many aspects of the nation’s daily life as President Trump has in less than three months in office, writes Aaron Zitner, Alex Leary and Rachel Louise Ensign this morning. “His no-apologies agenda has made him the focal point of crucial decisions now being made in America’s C-suites, on factory floors, in faculty lounges, elementary-school libraries and capitals around the world—as well as around kitchen tables across the U.S.
He has moved with astonishing speed to enact an immigration crackdown, cut the federal workforce and demolish federal agencies. He is checking off a list of perceived enemies, firing people at will and slashing at major law firms that some advisers allege once aided investigations into his actions. Asserting a broad mandate, Trump has worked with little regard for public criticism. In typical is-he-serious-or-not form, Trump now flirts with seeking a third term.
“He’s going after all these targets with a sense of presidential power that is unbound,” said Princeton historian Julian Zelizer. “Where this goes next is a mystery.”
And it’s only been 78 days.
/ jgs
John G. Singer is Executive Director of Blue Spoon, the global leader in positioning strategy at a system level. Blue Spoon specializes in constructing new industry ecosystems.