A Woman to Be Chief at PepsiCo (Published 2006) (2024)

PepsiCo said yesterday that its president and chief financial officer, Indra K. Nooyi, would succeed Steven S. Reinemund as chief executive on Oct. 1, a move that makes the company one of the largest led by a woman.

“I’ve been talking to the board about retirement for a year,’’ Mr. Reinemund, 58, said yesterday in a conference call, “but the seeds of this were really sown five years ago, when Indra was named president.’’ Mr. Reinemund will stay as executive chairman until he retires in May.

Ms. Nooyi, 50, who was born in India, will be PepsiCo’s fifth chief executive in its 41-year history, and the first woman. She takes over at a time when both PepsiCo and its rival, Coca-Cola, are fighting attempts to ban their drinks in some areas of India. [Page C5.]

Ms Nooyi’s promotion will make PepsiCo, with $33 billion in sales, the largest United States company by market capitalization led by a woman, and the third-largest based on revenue, behind Archer Daniels Midland and Kraft Foods.

“This is a continuation of a positive trend of women heading up major U.S. companies,” said Thomas J. Neff, chairman of United States operations at the recruiter Spencer Stuart & Associates, which in April recruited Patricia A. Woertz to run Archer Daniels. In June, Kraft Foods named Irene B. Rosenfeld as chief executive. Ms. Nooyi will be the 11th woman running a Fortune 500 company.

Deborah M. Soon, vice president for executive leadership initiatives at the women’s research organization Catalyst, said, “We haven’t broken through the glass ceiling, but we are certainly making cracks in it.”

Still, the trend remains slow for women. Only 16.7 percent of corporate officers, the pool from which chief executives are usually chosen, are women, Ms. Soon said, a small rise from 15.7 percent in 2002.

In Mr. Reinemund’s five years at the helm, PepsiCo’s revenue increased by more than $9 billion, to $33 billion last year. Earnings per share rose 80 percent, and the stock price increased 44 percent. This year, PepsiCo’s market capitalization passed that of Coca-Cola.

Mr. Reinemund also orchestrated the acquisition of Quaker Oats, which gave PepsiCo Gatorade, the country’s top-selling sports drink. At his urging, PepsiCo removed trans fats from products of the Frito-Lay division, and otherwise placed emphasis on healthier products.

In 2003, he started PepsiCo International, which now contributes about 35 percent of the company’s overall revenue.

John D. Sicher, publisher of Beverage Digest, said that bottled water, sports drinks and bottled tea were the fastest-growing beverage categories in North America, and that PepsiCo was leading Coca-Cola in all three. Over all, Mr. Sicher said, PepsiCo’s volume of beverage shipments rose 4.2 percent last year while Coca-Cola shipments increased by 2 percent.

Ms. Nooyi takes some credit for the growth. “Steve and I have worked closely for the past five years on everything related to PepsiCo,” she said, “from long-term strategy to day-to-day business. We complete each other’s sentences.”

Indeed, analysts and others say that the two have worked so closely together that it is often difficult to figure out which one came up with specific ideas.

“They are such a team that it is almost impossible to point to specific things she has done,’’ Mr. Sicher said.

While the two may think similarly about corporate strategy and planning, they differ markedly in style. Those who know both executives say that Ms. Nooyi exudes an informality that Mr. Reinemund, an ex-marine, would not attempt.

Kenneth A. Harris Jr., a managing director of the consulting firm Cannondale Associates, recalled seeing Ms. Nooyi make a presentation at an investor conference in December.

“Other executives spoke from the podium, but she sat down at the dais and conducted the equivalent of a fireside chat,” said Mr. Harris, who has consulted for PepsiCo. That same informality shows up at meetings.

“Steve will quietly listen to his lieutenants bandy an issue back and forth,” Mr. Harris said, “but Indra openly solicits their points of view.’’

Ms. Nooyi has a bachelor of science degree from Madras Christian College in India, an M.B.A. from the Indian Institute of Management and a master’s in public and private management from Yale University. Before joining PepsiCo in 1994, she held strategic planning positions at the engineering and construction giant Asea Brown Boveri (now ABB), Motorola and the Boston Consulting Group.

“She was on every packaged-goods company’s short list in terms of C.E.O. jobs,” Mr. Harris said.

During yesterday’s conference call, Mr. Reinemund and Ms. Nooyi praised each other, their predecessors and their subordinates. Analysts asked only a few questions about whether there had been outside candidates and whether there would be a new president.

Mr. Reinemund and Ms. Nooyi gently deflected these questions — “we keep our succession discussions as private matters,’’ he said — but promised that analysts would have a chance to meet the new team at a two-day session late in October in New York.

He did say that Ms. Nooyi’s former duties were being divided between two executives: Richard Goodman, currently chief financial officer of PepsiCo International, who will be the corporate chief financial officer, and Hugh Johnston, now senior vice president for transformation, who will become executive vice president for operations.

The lack of hoopla surrounding PepsiCo’s succession was in contrast to the succession at Coca-Cola two years ago. James M. Kilts, then the head of Gillette; Steven J. Heyer, co*ke’s president; and various other executives, in and outside the company, moved in and out of the rumor mill. In the end, investors expressed surprise when E. Neville Isdell, a former co*ke bottling executive, was brought back to the company and named chief in May 2004.

Mr. Isdell faced more formidable challenges than Ms. Nooyi does. Coca-Cola had suffered an executive drain for months before he took over, and analysts said at the time that his first task would have to be rebuilding co*ke’s tiers of lower management.

William Pecoriello, a Morgan Stanley analyst, wrote in a report after the announcement that “PepsiCo’s deep bench gives us confidence that the strong momentum the company has delivered should continue.’’

But there was one worry on Wall Street reminiscent of the co*ke succession. Many analysts then were concerned that Mr. Heyer, who was known for his marketing expertise, would leave after being passed over. In fact, he quit a few months later.

Some analysts worry that Michael D. White, chief executive of PepsiCo International, will feel similarly frustrated. Mr. White, in the conference call, referred to Ms. Nooyi as “a true internationalist, a terrific leader and great friend,’’ and gave every intimation he would stay.

“International is a significant driver of PepsiCo’s profit growth,’’ Mr. Pecoriello wrote, adding that “there could be concern” about how long Mr. White would remain.

In trading yesterday, PepsiCo shares rose steadily through the day, closing up 62 cents, at $63.95.