Markets & Finance

PepsiCo Shakes It Up


Keep an eye on Indra Nooyi. The freshly minted CEO of PepsiCo (PEP) will bring a very different style and sensibility to the top job when she replaces Steve Reinemund on Oct. 1 at the beverage and snack giant. While many were surprised at the timing of the Aug. 14 announcement that Nooyi would take over as Reinemund steps down to spend more time with his family, few doubt her ability to lead.

With her passion for globalization and sharp eye for acquisitions, Nooyi has been a major force in shaping the direction of the $33 billion company. Many predict she will accelerate the company's moves to broaden its portfolio and globalize its brands. Jeff Sonnenfeld of the Yale School of Management says he is "convinced that she will pick up a very intelligent acquisition pace," in part because she has a keen sense for where consumer tastes are moving, as well as for the challenges facing U.S. brands abroad.

Nooyi, 50, was a key driver in several key PepsiCo's decisions, from getting rid of fast-food restaurants to picking up such companies as Tropicana and Quaker. "Her abilities and insights into PepsiCo have been transformative," argues Marc Greenberg of Deutsche Bank North America DB

. "She's better and different than most." PepsiCo’s stock, which has increased about 15% over the past year, rose 1% on the news, to $63.95.

Moreover, the Chennai (India)-born executive brings a rich understanding of emerging markets at a time when they have become critical growth areas for PepsiCo—as well as areas of tension. Her background may prove helpful in dampening the current scandal in India over alleged pesticides in Pepsi and Coke KO

soft drinks (see BusinessWeek.com, 8/10/06, "India: Pesticide Claims Shake Up Coke and Pepsi"). Under Nooyi, the company's cross-cultural advisory panels have also become a true force in shaping products and marketing.

A NEW PERSONALITY. Unlike Reinemund—a man so resistant to the spotlight that he has been known to attend conferences only if he's not asked to speak—Nooyi seems comfortable in the public gaze. Her humor and candor have even brought unwanted attention at times (see BusinessWeek.com, 5/20/05, "Bloggers Finger a New Victim" and 5/20/05, "Indra Nooyi's Graduation Remarks").

Nooyi's imprint stretches back to the mid-1990s, when she joined the company in a strategic planning role after stints at Boston Consulting Group, ABB Group, Motorola MOT

, and Johnson & Johnson JNJ

. Former PepsiCo chief executive Roger Enrico was immediately struck by her ability to, as he puts it, "look over the horizon." Among other things, she pushed to spin off Yum Brands YUM

—owner of Taco Bell, Pizza Hut, and KFC—because the fit wasn't right. "She convinced me of that and was instrumental in all the deals we did," he says.

Enrico praises Nooyi for her practicality, vision, and courage—not to mention her unique presence. "This was a woman who was well-known for walking around barefoot and singing songs," Enrico laughs. "She has become a mature and seasoned executive, but she hasn't lost her spontaneity and sense of humor."

SURPRISE MOVE. Indeed, the biggest shock in the Aug. 14 announcement was the exit of 58-year-old Reinemund, who has been with the company 22 years. "Steve is still young, energetic and doing a tremendous job with a management team that works well together," says Carlos Laboy of Bear, Stearns & Co. The idea that a successful CEO would step down, of his own volition, to spend more time with his family clearly sent heads shaking and tongues wagging. "At first, I thought he might be sick," says another analyst. "But I guess he just wants to see his kids more."

Reinemund says the timing is just right. As he noted in an Aug. 14 conference call: "Indra and I have worked shoulder-to-shoulder over the past five years." And, he added, "I have great confidence that the best years are ahead."

In another move that is sure to please investors, the company made a point of showcasing Vice-Chairman Michael White, who is chairman and CEO of PepsiCo Intl. With his operational savvy and success in the fast-growing global arm, White was a clear contender for the top job. So far, it seems, he plans to stick around—at least long enough for a two-day analysts' meeting in late October. If Nooyi hopes to accelerate PepsiCo’s hot streak, she’ll need as much stability in the executive ranks as she can get.


Steve Ballmer, Power Forward
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