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PepsiCo Names Successor to CEO

Indra Nooyi is replacing Steve Reinemund at the maker of beverages and snack foods.

August 15, 2006|Molly Selvin | Times Staff Writer

With Monday's appointment of Indian-born Indra Nooyi as chief executive, PepsiCo Inc. has positioned itself to compete for key emerging markets in Asia and the Middle East, analysts say.

Nooyi, who had been the soft drink giant's president and chief financial officer, will replace Steve Reinemund, 58, who announced that he was ending his five-year tenure to spend more time with his wife and four children.

Reinemund praised Nooyi, a 12-year PepsiCo veteran, as a talented role model.

"I'm very excited and at the same time very humbled," Nooyi told analysts during a conference call.

The 50-year-old Nooyi will be the rarest of CEOs: a wife, a mother and a woman of color. Only two other women, Patricia Woertz of Archer Daniels Midland Co. and Irene Rosenfeld of Kraft Foods Inc., lead larger (by annual revenue) U.S. corporations.

Nooyi's appointment makes her only the 11th female CEO of a Fortune 500 company, said Kara Helander, western regional vice president of Catalyst, a nonprofit group that promotes women in business.

At PepsiCo, Nooyi played key roles in the purchase of Tropicana, the public offering of Pepsi Cola bottling group and a merger with Quaker Foods.

Ken Harris, a partner at consulting firm Cannondale Associates in Evanston, Ill., called Nooyi "a world-class CEO," adding that she "has that special chromosome. She has presence."

J.P. Morgan analyst John Faucher said her challenge was to continue the company's "phenomenal" results of recent years. Over the last five years, PepsiCo's sales have increased an average of 5%, compared with 3% for archrival Coca-Cola Inc.

Nooyi's background could be an asset as the company expands internationally. She is comfortable in a variety of cultures, said Carolyn Buck Luce, a partner with Ernst & Young who chairs a task force on women executives for the New York-based Center for Work-Life Policy. Nooyi's record suggests she is able to "celebrate differences, not just tolerate them," Luce said.

Asia and the Middle East represent major emerging markets for soft drink makers. Although Coke dominates the world, PepsiCo has the edge in the Middle East, Faucher said.

Since 2003, PepsiCo and Coke have wrestled with allegations in India that their soft drinks contain pesticide levels that exceed European standards. Executives at Coke and Pepsi deny the allegations.

Faucher said the charges represented more of a threat to the companies' images than their bottom lines.

Faucher said that "it certainly can't hurt" to have Nooyi at the helm to demonstrate that PepsiCo is a global company.

Nooyi is known for her directness, wit and habit of singing in the office.

Helander credited PepsiCo with doing more than most corporations to reward women and minorities.

Catalyst research found that 16.4% of Fortune 500 corporate officers are women; at PepsiCo that number is 26.7%.

PepsiCo's success in nurturing and promoting women executives is an integral part of its business strategy, said Judy Olian, dean of the UCLA Anderson School of Management.

"It's not just about creating a diverse employment pool," she said, "but doing it while creating new customer bases and new product lines. That's the unique aspect."

Nooyi came to Purchase, N.Y.-based PepsiCo after working as a corporate strategist at Motorola Inc. and Asea Brown Boveri Inc., an electronic components maker.

Reinemund will continue to serve as chairman and a director until May. Although the timing of his announcement took some by surprise, he told analysts that he had been considering retirement for the last year.

Shares of PepsiCo rose 62 cents Monday, or 1%, to $63.95.

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Women at the top

PepsiCo is the third-largest company by annual revenue to have a female CEO. Here are others.

*--* '05 revenue Company Chief executive (In billions) Archer Daniels Midland Patricia Woertz $36.6 Kraft Foods Irene Rosenfeld 34.1 PepsiCo Indra Nooyi 32.6 Rite Aid Mary Sammons 17.3 Sara Lee Brenda Barnes 16.0 Lucent Technologies Patricia Russo 9.4

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Source: Reuters

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