Indra Nooyi's key challenge is to retain Pepsico top guns

NEW YORK: Indian-born corporate high-flier Indra K Nooyi, 50, who will lead PepsiCo as its first female CEO, put in a call to investors and Wall Street analysts who were caught off guard by the management change.

PepsiCo chairman and CEO Steve Reinemund, 58, surprised Wall Street on Monday by announcing his retirement after 22 years with the soft-drink giant.

While the timing of the announcement came earlier than expected, analysts said Nooyi, who is the president and chief financial officer of PepsiCo, was a shoo-in as she bore all the hallmarks of a strong internal candidate.

In 2001, she was lead negotiator on the $13.8 billion acquisition of Quaker Oats Co and was rewarded with a board seat at Pepsi which put her in direct line for the top job.
Company sources told DNA that Nooyi beat out Pepsi’s vice-chairman and head of the international business, Michael White, 54 who is a significant driver of the firm’s profit growth. But now investors will want Nooyi to prevent the departure of top executives like White.

White is keen to head up a public company but The Wall Street Journal on Tuesday reported that Nooyi had already reached out to White, reassuring him that he can be an “integral part” of her team. During her conference call with investors, Nooyi acknowledged Reinemund and White as her key advisers.   

“Both Steve and Mike have been my trusted advisers at PepsiCo and I can’t express how much that support means for me,” Nooyi said in the conference call.
White responded by describing Nooyi as a “person of passion” for PepsiCo’s business and people.

“As far as Indra is concerned the board has made an absolutely outstanding choice. I have worked with her for 12 years. While we share adjacent offices I have got to know Indra as a remarkable individual, a person of passion for our business. She is a terrific leader and a great friend,” he added.

Nooyi not only got a warm peer review from her perceived rival, but she also got endorsement from her boss and subordinates. PepsiCo said that Nooyi’s current job as chief financial officer will be split between executives Richard Goodman, 57, and Hugh Johnston, 44.

“Let me be the first to publicly say that we do recognise that it has taken two great men to replace one great woman,” remarked Johnston, drawing peels of laughter from Nooyi.

Nooyi will belong to a small band of female CEOs heading up Fortune 500 companies that include Meg Whitman of eBay, Patricia Woertz with grains giant Archer Daniels Midland, and Anne Mulcahy at Xerox.

Nooyi assured investors that there would be a smooth transition although there are no concerns on this score.

The market does not expect sharp changes in strategy as Nooyi and Reinemund have worked closely to craft PepsiCo’s current strategy which focuses on two pillars — growing the business outside the US and developing new product lines outside its core sodas and chips such as healthy fruit snacks and drinks.

The business dailies said that while major acquisitions could take place, Nooyi was likely to remain focused on filling in “geographic holes in Pepsi’s drinks and snacks” business.

“I am extremely fortunate to be assuming my new role at a time when PepsiCo is in such a terrific position. Our businesses are performing well,” Nooyi told investors.

PepsiCo revenues rose by more than $9 billion, earnings per share rose 80% and market capitalisation passed Coca-Cola for the first time in December, when it hit $100 billion.

“Steve and I have worked very closely for the past five years on everything related to PepsiCo, from its long-term strategy to the day-to-day decisions that come with running a business. Over the weekend someone even described Steve and my relationship as “one where we complete each others’ sentences” so I am very confident that the transition will be very orderly,” Nooyi said while ruling out major shifts in strategy.

Aware of the weight investors put on management, Nooyi said PepsiCo would hold a two-day analyst meeting on October 25-25 in New York.

“I think the timing is very opportune to have you spend some time and bring you up to date on the business. We will have a particular focus on our international strategy,” said Nooyi, who has called region heads from around the world, including India for the meeting in New York.

Reinemund, meanwhile, beamed at his Indian protégé who has shot up the corporate ladder in 12 years. 

“I could not have been more delighted to pass the baton to someone as talented as Indra,” said Reinemund, referring as much to Nooyi’s quant skills as her karaoke talent. Nooyi herself has always teased Reinemund about being “clueless” about American pop culture and teen heartthrob Paul Abdul.