It's CEO Indra Nooyi that has borne the brunt of investor criticism.Image via Wikipedia
PepsiCo is changing how its top management team functions, amid widespread investor discomfort with CEO Indra Nooyi and concerns whether the company should split its snacks and soda businesses.
Former Wal-Mart executive Brian Cornell will rejoin Pepsi to run Americas Food, which includes household staples like Lays potato chips and Doritos tortillas. The current U.S. food chief, John Compton, will become Pepsi's first-ever president.
Cornell, who once ran the Tropicana brand and Pepsi's beverage operations in Europe and Africa, will now manage the company's most profitable division. It has also been the center of contention. Despite calls for Pepsi to spin off its snacks division, the company said as recently as last month that it has no divestiture plans. Pepsi enjoys between $800 million and $1 billion in synergies between the two businesses, CEO Nooyi in February told investors.
Meanwhile, Compton will be responsible for uniting the company's varied operations, both here in the United States and abroad, the company said.
"Today marks an important and essential step in PepsiCo's journey to continue to deliver sustainable growth," Nooyi says in a statement. "John and Brian are superb executives and will both contribute enormously in their new roles to ensure that we compete effectively and efficiently in the global marketplace."
It's Nooyi that has borne the brunt of investor criticism. Pepsi has fallen to second place in the U.S. soda market, yielding the No. 1 spot to chief rival Coca-Cola. (It also competes with firms like Dr Peppper Snapple Group and Monster Beverage.) Pepsi shares have sagged in recent years, too. In the past five years, the stock has advanced just 0.5%.
Pepsi shares were up 1% at $63.82 in early morning trading today.
Nooyi, who became Pepsi CEO in 2006, outlined a new direction for the soda company last month, which includes a 3% reduction in workforce and pumping some $500 million into marketing for its core brands, like Lays, Pepsi and Mountain Dew. Pepsi expects its profit will fall about 5% this year, but anticipates $1.5 billion in savings within two years. It hopes to see "high single-digit" earnings growth in 2013.
Since Nooyi announced the plan, Pepsi stock has fallen about 1.3%.
The management reshuffle though is seen as more than a way to please weary investors. The two men, Cornell and Compton, are being positioned to compete for the chief executive spot. That race will likely also include European operations chief Zein Abdalla, The Wall Street Journal reports.
Nooyi has never signaled when she would step down—or who would replace her. With the new strategies, it makes some sense to bring in fresh blood, says Davenport analyst Ann Gurkin. "We had expected further management changes to come," she says. "We think it signals a change at the top coming coming sooner rather than late."
Cornell is a nice snag for Pepsi, analysts say. His time running Wal-Mart's wholesale-store chain, Sams Club, gave him important experience. He knows what it's like to sit on both of sides of the table, as a supplier and retailer.
Yet Compton may have the inside track for the job. By creating the president position for him, Pepsi seems to be particularly serious about his grooming, analysts say.
And take this for what you will: Nooyi seems to like him. At an analyst conference last month, Compton, Nooyi and a number of other Pepsi executives gave a short presentation, outlining the company's short- and long-term strategies. At one point, Compton took questions at the podium. Nooyi remained seated, occasionally commenting.
Reach Abram Brown at abrown@forbes.com. Or follow him on Twitter @abebrown716.
