REUTERS - PepsiCo Inc PEP.N revamped its global structure on Monday in a move that deepens its management bench and could pave the way for an eventual successor to Chief Executive Indra Nooyi.
The company named John Compton, currently CEO of its Americas Foods division, to the newly created position of president of PepsiCo.
It also named Brian Cornell, a PepsiCo alum who most recently ran the Sam’s Club unit of Wal-Mart Stores Inc (WMT.N), to replace Compton. He will be responsible for Frito-Lay North America, Quaker oatmeal and other brands.
“The management moves are about Nooyi and PepsiCo doing some ‘bench strengthening’ and bringing back a talented executive,” said Beverage Digest Editor John Sicher, citing sources who also said Compton should not be viewed as Nooyi’s sole heir apparent.
Compton, Cornell and Zein Abdalla, who runs PepsiCo’s European operations, are the three most likely internal candidates, said a source familiar the situation. Hugh Johnston, PepsiCo’s chief financial officer, is also on the list, but a little further down, the source added.
Nooyi’s five-year tenure has been hurt by the global financial crisis, recession and unprecedented commodity inflation. Still, she has been criticized for taking her eye off the core business of sodas to expand into healthier products such as hummus and drinkable oatmeal.
She has come under pressure lately from Wall Street for a stagnant stock price and a lagging North American beverage business, though she has the support of PepsiCo’s board of directors. She recently announced a broad plan aimed at boosting performance.
“We consider today’s news positive to PepsiCo’s long-term fundamentals,” said Stifel Nicolaus analyst Mark Swartzberg. “We take it as more evidence that the company is stepping up focus on execution and returns on what it ‘already has.’”
“Will Ms. Nooyi soon leave PepsiCo, paving the way for Mr. Compton or another senior PepsiCo executive to become PepsiCo’s next CEO? We consider that a reasonable outcome but have no special knowledge of the situation,” Swartzberg added.
PepsiCo shares were up 61 cents, or 1 percent, at $63.76 in morning trade on the New York Stock Exchange.
Cornell, who headed the Sam’s Club warehouse chain for nearly three years until he left last month, previously held senior roles at the Michaels arts and crafts specialty retailer, where he led a turnaround, and was chief marketing officer for supermarket chain Safeway SWY.N.
Prior to that, Cornell worked at PepsiCo in a number of positions, including president of Tropicana and of PepsiCo North America Foodservice. He will report to Nooyi, who praised him for having “what it takes to be a senior executive of a large public company.”
Compton, who has worked at PepsiCo for 28 years, will oversee the company’s existing global category groups, which include beverages, snacks, nutrition, operations marketing and corporate strategy. He will continue to report to Nooyi.
The company’s operations will continue to be divided regionally, with Abdalla running PepsiCo Europe, Saad Abdul-Latif running the Asia, Middle East & Africa division and Al Carey running the Americas beverages division.
Nooyi is one of three people on a “short list” of possible U.S. candidates to be the next head of the World Bank, a person with knowledge of the Obama administration’s thinking told Reuters earlier this month.
Nooyi has said she loves her job and would like to continue at it for as long as the board would like her there. She has said in the past, however, that she would eventually like to go into public service in Washington.
In February, Nooyi announced a plan to turn around the North American beverage division, which has lost market share to rival Coca-Cola Co (KO.N). The plan includes ramping up advertising by as much as $600 million this year, cutting 8,700 jobs and reporting a bigger-than-expected decline in near-term earnings.
Sources have said the board seems willing to give Nooyi time to execute this plan.
Reporting by Martinne Geller in Chicago; Additional reporting By Phil Wahba in New York and Mihir Dalal in Bangalore; Editing by Maureen Bavdek and Mark Porter