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The Power Of Two At Pepsi


People: Management

The Power of Two at Pepsi

A new team has to keep the snack-and-beverage empire growing

The first time Steve Reinemund offered Indra Nooyi a job, he had to work hard to convince her. It was 1998 and Reinemund, on the fast track to run PepsiCo, was head of its $11 billion Frito-Lay snack business. He was revamping the distribution system and wanted her analytic expertise. But Nooyi wasn't so sure.

For one thing, she found the former Marine a little too stiff. Nooyi likes to joke around; Reinemund is all spit and polish. Plus, as chief strategist, Nooyi was used to pondering such questions as PepsiCo's role in the 21st century. Reinemund wanted her to delve into real-world operations. He persisted, and she finally agreed to work with him part time. The result: a radical new system that gives sales reps more time in front of customers and lowers costs overall.

The next time Reinemund offered Nooyi a job, he didn't have to ask twice. When CEO Roger Enrico announced in December that he would hand over his office to Reinemund after the company's $13.8 billion deal to buy Quaker Oats Co. closes, probably this spring, Reinemund called Nooyi. "I can't do it unless I have you with me," he told her. The comment moved Nooyi to tears, she says, and she quickly accepted the offer to become his second in command, thus forming what could be one of the most unusual management teams in Corporate America. But if they can combine Reinemund's depth of operating experience with Nooyi's talent for big-picture thinking, it could also be one of the most powerful.NEW LANDSCAPE. As the next leaders of a newly reinvigorated Pepsi, the pair inherit a company with real momentum. After spinning off its bottling and restaurant businesses, Pepsi is now entirely focused on marketing packaged food and beverages. Enrico turned Pepsi around, but making sure it's a fast-growth company in a slow industry may be the tougher task. "Reinemund's mandate is to go faster," says Tom Pirko, president of beverage consultant Bevmark International. That's a tricky assignment considering that Sanford C. Bernstein & Co. already expects the company's revenue to increase 8% this year, to $20 billion, and operating earnings to climb 13%, to $3.3 billion. Plus, its stock has spiked 27% in the past 12 months.

To expand the company's reach, Reinemund, 52, and Nooyi, 45, will have to put brand names like Tropicana and Quaker on a variety of new snack foods. "For any part of the day we will have a little snack for you," says Nooyi. First, though, they have to digest Quaker, for which Pepsi paid a rich price. Then they have to adjust to the changing competitive landscape. Pepsi can no longer measure its performance only against Coke's fountain and grocery-store sales. The new Pepsi is competing against everyone from food giants like Kraft to any upstart with a great idea for a drink.

To beat those rivals, the $20 billion behemoth will have to create innovative products and ways to sell them. Pepsi has made some smart acquisitions; now it must absorb the revolutionary thinking of such prizes as SoBe, purveyor of edgy beverages such as Zen Blend. "We're a very good suburban-oriented marketing company," says Reinemund. "That's where we've grown over time. But there's a huge opportunity in urban markets." To seize it, Reinemund says, the company has to broaden its management. He has made a start. The rate of retention and promotion of women and minorities is expected to be the same as that of white men, and senior managers' performance reviews now take that into account

But more than anything, Pepsi's success will depend on Reinemund and Nooyi. The two bring very different skills, not to mention personalities, to the job. Reinemund built his career at Pepsi reorganizing its pizza business and then ramping up its snack division, and he likes nothing better than to roll up his sleeves and pitch in. Colleagues still recount how he spent one Christmas Eve helping a Frito-Lay delivery man stock a convenience store in Colorado. Reinemund, who has a house in nearby Steamboat Springs, had run to the store to pick up a few things. When he found the delivery man still at work, he jumped right in loading chips on the shelves. "Steve comes from an operational point of view. Nooyi has a very different background, and that's why the combination works," says Brock H. Leach, the head of Pepsi's Tropicana Products Inc. unit and a longtime colleague of Reinemund's. "She brings a lot to the party, things I don't think he'd say he does well."WING TIPS AND SARIS. On a more personal level, the two are even more distinct. Reinemund "always looks like he's ready to go on the cover of Gentlemen's Quarterly," says Craig E. Weatherup, CEO of Pepsi Bottling Group Inc. A marathon runner and U.S. Naval Academy grad, Reinemund prefers his crisp shirts monogrammed and his wing tips with a high shine. After college, he spent five years in the Marines; on one tour of duty he guarded the White House during part of the Nixon and Ford administrations. No glad-hander, he generally maintains a reserved, serious demeanor.

That's an impression Nooyi has never been accused of making. In college in her native India, she played lead guitar in an all-girl rock band. She still likes to test conventions and often dresses in what her friend Gordon J. Davis, president of New York's Lincoln Center for the Performing Arts, calls "business Indian." That can be anything from a flowing scarf to a sari.

A tough negotiator who closed both the $3.3 billion 1998 purchase of Tropicana and last year's acquisition of Quaker, she has the unsettling habit of humming during meetings "to calm herself," according to one investment banker. She'll make offbeat comments you would never expect a high-level executive to utter, like mentioning that she has music flowing through her head all day long or that she knows her bosses' astrological signs (Enrico is a Scorpio, which explains why he's so outgoing; Reinemund is a detail-oriented Aries). "She has a sort of guileless, unencumbered quality," says Davis, who first met Nooyi when they both served on the board of Phoenix Home Life Mutual Insurance Co. "She'll say something almost naive, very personal and romantic in a sense, but totally truthful."TOUGH DECISIONS. Most people think this odd couple is up to the task of redefining Pepsi, mainly because they've both proven they can make tough decisions. Nooyi pushed Pepsi to bid for Seagram Co.'s Tropicana juice business despite initial skepticism from a team of executives and negotiators exhausted from the just-completed restaurant spin-off. Soon after joining Pizza Hut in 1984, Reinemund decided the chain had to break into the fast-growing delivery business pioneered by Domino's Pizza. His staff thought it undignified to deliver pies. So he hired new senior execs. Within two years of its 1985 launch, Pizza Hut had the No. 1 delivery business in the country.

Driven is one way to describe Reinemund. "Some may say he burns people out," says Alan Feldman, former head of U.S. restaurant operations at Pizza Hut and now president of McDonald's USA. "But I worked for him for eight years and am the better for it." Nonetheless, Reinemund heard the complaints. Since moving from Dallas to New York as COO in 1999, he has learned to communicate more effectively. "Before, if people asked what his top three skills are, managing people wouldn't have been there," says Enrico. "Now, I'm sure people would say that right away."

Part of what connects Reinemund and Nooyi are their attempts to integrate their family and working lives. Nooyi's younger daughter, Tara, sometimes draws pictures in the executive conference room, and more than once her mother has found her chatting in Enrico's office. Reinemund has been bringing his children on business trips since his eldest, now 20, was 18 months old. "I'm not sure the balancing is particularly successful," remarks Reinemund. "I think it's more like the pendulum of a clock, constantly correcting." Come spring, the pendulum is going to be swinging even faster for both of them.By Nanette Byrnes in Purchase, N.Y.Return to top


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