Coca-Cola Co said on Friday that Muhtar Kent would step aside as chief executive next year and be replaced by James Quincey, a company veteran credited with several recent changes to help the company cut its dependence on sugary drinks.
Quincey's ascension was widely expected since he became chief operating officer in August 2015 after jobs that included running Coke's businesses in Europe and Mexico over two decades.
Kent, 64, will have completed nine years at the helm when he steps down in May, but he will continue as chairman of the board, a post he has held since 2009, Coke said.
Coke's shares were up 2.6 percent to $42.04 in afternoon trading, making the stock biggest percentage gainer on the Dow Jones industrial average.
Quincey, 51, is credited with several changes at Coke including introducing smaller bottles to boost profit and reducing the sugar and calorie content in drinks – initiatives he would continue to focus on, the CEO-designate said on Friday.
"The future in terms of the beverage industry in some parts of the world – yes, there'll be less added sugar, and yes, we think we need to push ahead with the smaller packages and reformulations and innovations," Quincey said.
He said Coke would also concentrate on its sparkling beverage business, push into other drink categories and continue to innovate.
Coke still gets about 70 percent of its volume sales from sodas and its sales have fallen in the last three years on sagging demand for sugary drinks, which health experts and governments have blamed for rising obesity levels.
Since Kent took over as CEO in July 2008, Coke's sales have increased by about 39 percent, while the company's shares have surged 61 percent.
VOTE OF CONFIDENCE
Quincey, who joined Coke in 1996, is also credited with streamlining Coke's bottling operations by merging its three main bottlers in Europe to form Coca-Cola European Partners Plc, now Coke's largest independent bottler by net revenue.
His latest promotion was given a vote of confidence by Warren Buffett, CEO of Berkshire Hathaway Inc, Coke's largest shareholder.
"I know James and like him, and believe the company has made a smart investment in its future with his selection," Buffett said in the statement issued by Coke.
The CEO announcement comes a day after Coke said Buffett's son Howard Buffett would retire from its board next year.
Some analysts saw the move as potentially paving the way for Buffett's firm Berkshire Hathaway to sell down its nearly $17 billion stake.
"Those counting on an eventual bid some day from 3G Capital and Budweiser for Coke, may think Berkshire Hathaway being out of the picture would make it less awkward for that group to buy Coke," Susquehanna analyst Pablo Zuanic said in a note.
Buffett teamed up with Brazilian private equity firm 3G Capital last year to buy Kraft and form Kraft Heinz Co.
That aside, Wall Street analysts hailed the succession plan.
"A move in the right direction as Quincey is a realist with a sense of urgency about diversifying the beverage portfolio and improving local execution via refranchizing," CLSA analyst Caroline Levy said.
Quincey's background and significant experience in deal making as well as strong understanding and appreciation of the consumer and current trends would accelerate Coke's growth, Wells Fargo Senior analyst Bonnie Herzog wrote in a note.
His appointment is the second instance of a company elevating its COO to the CEO role in as many weeks.
Starbucks Corp said last week that Chief Operating Officer Kevin Johnson would replace Howard Schultz as CEO.
(Reporting by Sruthi Ramakrishnan and Abhijith Ganapavaram in Bengaluru, additional reporting by Martinne Geller; Editing by Savio D'Souza)