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In Depth April 23, 2009, 5:00PM EST

Blowing Up Pepsi

PepsiCo Americas CEO Massimo d'Amore has been rebranding Pepsi's core products top to bottom. Creative destruction—or just destruction?

By Burt Helm

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Old (left) and new: Nooyi wanted a sleek and minimalist look, "like the iPod"

Arnell was a controversial choice as one of d'Amore's key brand advisers Alan Zale/The New York Times/Redux

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Cooper (left) heads all carbonated beverages; Burwick is chief marketing officer for North America David Yellen/Redux

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D'Amore aims to bring a more cohesive approach to each brand David Yellen/Redux

In 14 years at PepsiCo (PEP), Massimo F. d'Amore has muscled through his share of tough jobs. In New York in 2000 he marshaled PepsiCo's successful takeover battle for Gatorade's parent company, Quaker Oats. In 2002 he boosted PepsiCo's sales and profits in Latin America even as the Argentine economy disintegrated. In the following years the Latin America operations grew faster than Coca-Cola's (KO).

Now, d'Amore (pronounced da-more-ay) is tackling his biggest challenge yet: shoring up PepsiCo's North American beverage business. While Americans consume nearly twice as much soda per person as any other developed nation (49 gallons a year), they are drinking less and less these days. According to John Sicher of industry watcher Beverage Digest, Pepsi shipped 1 billion cases of Pepsi in 2007, down 29% from 2000. In recent years, PepsiCo has looked for growth in the juices, bottled water, and fruity sodas consumers increasingly prefer. That helped the North American beverage unit boost profits 6%, to $2.2 billion in 2007, on revenues of $10.2 billion. But starting last year, as the recession deepened, sales of noncarbonated drinks began suffering along with soda.

Not one to fiddle in the margins, d'Amore has taken drastic action. His audacious solution: tear down and then rebuild PepsiCo's biggest beverage brands, which, besides Pepsi, include Gatorade, Tropicana, and Mountain Dew. And he is doing this all at once. D'Amore's ambitious agenda brings to mind the Obama Administration's theory that it would be a shame to waste a crisis. His calculation is that a more powerful and enduring Pepsi will emerge from this creative destruction. D'Amore is willing to try new things even if it upsets traditionalists. And rather than cherry-pick a few priorities, he has taken on seven brands.

Since becoming CEO of PepsiCo Americas Beverages 16 months ago, d'Amore has not been shy. Gatorade, Tropicana, and Pepsi, which had long operated as independent fiefdoms, have been jammed into one operating division. And he has put himself at the center of brand management—hiring and firing ad agencies, helping conceive TV commercials, and even editing them. His hands-on style has alienated veteran marketing executives, and since his arrival several have left. D'Amore concedes he may have bruised egos but says: "We needed to implement this change fast."

It's a risky strategy, and d'Amore, 53, has already stumbled, most glaringly when a consumer backlash forced him to scrap new Tropicana packaging. If he fails, his tactics may well have ripped apart a storied marketing department and made PepsiCo weaker. If he succeeds, he'll have strengthened a famous brand and made himself a contender to succeed PepsiCo CEO Indra K. Nooyi.

In the fall of 2007, Nooyi was wrestling with a dilemma. Since becoming CEO the previous year, she'd been selling PepsiCo as a growth company. But while Frito-Lay and the international operations were doing well, Pepsi, the name on the door, was in decline. She needed someone to shore up cola and take a hard look at other beverages found wanting. She had in mind just the man for the job: Massimo d'Amore.

Nooyi had noticed him in the '90s when she ran corporate strategy and he was chief marketing officer of the International Division. An engineer with a creative bent, d'Amore had both sides of the brain working. "He could look around the bend better than anybody else," recalls Nooyi. She figured d'Amore, an Italian, would see the U.S. market with fresh eyes, just as she had upon emigrating from India. "People who didn't grow up in [the U.S.] are students of this culture," Nooyi says. "It's almost like when you convert, you're more passionate about the cause because you converted." On Oct. 3, 2007, Nooyi and d'Amore were in Venice for meetings. During a break she asked him to walk with her in the gardens of the Hotel Cipriani. Would he run the beverages unit? she asked.

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