Businessweek Archives

The Pepsi Regeneration


People: EXECUTIVE SUITE

THE PEPSI REGENERATION

Its top troubleshooter's tough new assignment: CEO

In the end, Roger A. Enrico couldn't resist the Pepsi Challenge. After years of on-again, off-again speculation over whether the 51-year-old heir-apparent to longtime CEO D. Wayne Calloway really wanted the top job at PepsiCo Inc., the answer came quickly. Less than a week after Calloway approached Enrico about the succession, the hard-charging marketing whiz agreed to take the helm at the soft-drink and snack-foods giant. "I doubt if Enrico's ever shrunk from a challenge in his life," says Ronald A. Rittenmeyer, who headed operations for Frito-Lay Inc. under Enrico.

If news of the 60-year-old Calloway's premature retirement startled many, Enrico's elevation came as little surprise: Since the early 1980's, the 24-year PepsiCo veteran has played a key role in turning around each of the company's three businesses. Thanks largely to those efforts, Pepsi is in better shape now than it has been in years. Enrico's latest success: the revival of Pizza Hut Inc. (box, page 72). With the worst problems stanched in the troubled restaurant unit, Pepsi's sales rose 6.6%, to $30.4 billion, in 1995, while operating profits rose 10%, to $3.5 billion. Since early 1995, Pepsi's stock has nearly doubled, to 64.

HITTING EAGLE. The question now: Will Pepsi's "Mr. Fixit" be able to rev up the overall company as successfully as he has juiced its individual businesses? Pepsi may no longer be struggling, but challenges remain. Sales growth of its main brands in the U.S. trails Coca-Cola Co.'s, fountain sales are slow, and international plans need new fizz. Observers expect Enrico to invigorate those efforts but also see risks. A hands-on manager, Enrico thrived in the autonomous operating units that the low-key Calloway fostered. But as Enrico brings his hard-charging style to the corner office, he has admitted that his biggest problem may simply be stepping back and letting his managers manage.

Enrico refused to comment. But those who have worked with him describe Enrico as a brilliant, creative leader with great instincts. "He's a guy who can create change by seeing business differently than others," says Laurence M. Zwain, who left Pepsi's international restaurant unit in February to become CEO of rival Boston Market. Yet many say he can also be unpredictable and volatile--though he has mellowed since a 1990 heart attack. "Roger was a young hotshot throughout the years, with great marketing talent," says Westinghouse Electric CEO Michael H. Jordan, a former No.2 at Pepsi. "He was a little impatient, but he has changed a lot."

Enrico first earned his stripes in the early 1980's, after he took the top job at Pepsi-Cola Co. When Coke launched its disastrous New Coke in 1985, Enrico brashly proclaimed that Pepsi had won the cola wars. He also masterminded an aggressive plan to win share from much bigger Coke, particularly among young consumers, through a costly, attention-grabbing ad campaign featuring Madonna and Michael Jackson. The moves revitalized Pepsi's brand.

Behind the public showmanship, Enrico is also a tough-minded operating executive. When he came to perk up Frito-Lay in 1991, the bloated division had grown complacent. Costs were too high, and rivals such as Anheuser-Busch Cos.' Eagle Snacks unit were cutting into margins. Enrico slashed 60% of Frito's management and administrative jobs and restructured manufacturing. The money saved was poured into new-product development and slick new ads. Today, the $5.7 billion division is Pepsi's most profitable--and a defeated Anheuser just announced plans to shutter Eagle.

TOUGH TASKMASTER. Along the way, Enrico also built a reputation as a hard taskmaster. Rittenmeyer recalls a long, draining presentation on Frito-Lay: Enrico kept at him all day with tough questions. "At times he could be a bear to work for," he says. "At other times, you'd follow him anywhere, even to war."

By 1993, Enrico had stepped back from daily management. But there were growing problems at Pepsi's restaurants: KFC's launch of rotisserie chicken was trouble-prone, Pizza Hut had run out of steam, and Taco Bell's new Healthy Border Lights was cannibalizing sales. Enrico jumped back into the fray.

So far, success has been most visible in Pizza Hut's marketing. But Enrico has also bolstered the unit's financial health by shutting 300 underperforming restaurants and selling some 300 company-owned stores to franchisees. His goal: to redeploy the freed-up capital to the higher-margin beverage and snack businesses.

Still, fixing Pepsi's other restaurants remains one of Enrico's major challenges. And Pepsi-Cola, too, has lost much of the momentum it had when he was chief. Although domestic soft drink sales volume grew 3.2% last year, Coke's rose 6%. "He needs to pump fresh thinking into Pepsi," says Gary M. Stibel of the New England Consulting Group. Fountain sales are still poor, partly because few restaurant chains want to take a rival's product. But Enrico has said he won't give up that fight.

Still, his biggest efforts will likely be abroad, where Coke is miles ahead of Pepsi. With inroads tough to make in Western Europe and Japan, Pepsi has focused on emerging markets such as Brazil and India. It has a long way to go: Coke now gets 80% of profits from overseas beverages, compared with 6% for Pepsi. Just the kind of challenge to fire up Pepsi's Mr. Fixit.By Lori Bongiorno in New YorkReturn to top


We Almost Lost the Nasdaq
LIMITED-TIME OFFER SUBSCRIBE NOW

(enter your email)
(enter up to 5 email addresses, separated by commas)

Max 250 characters

 
blog comments powered by Disqus