CBC – If you ask me...PepsiCo succession
PepsiCo has been applauded for appointing Indra Nooyi as the successor to CEO Steve Reinemund. But while the appointment has further enhanced the company's reputation for gender equality, Chris Brook-Carter believes the positive feedback owes more to Nooyi's credentials as the best candidate.
The news that PepsiCo CEO Steve Reinemund is to retire in October has come as a shock to some industry watchers. But the announcement that CFO Indra Nooyi is to step into his shoes should surprise no one.
The appointment has certainly attracted more than its share of coverage. But it's not so much the high profile nature of the post, as the head of one of corporate America's brand icons, that's driven the column inches but the fact that Nooyi is both a woman and of Indian origin.
As CEO, Nooyi will become one of the most powerful women in American business. And her appointment is being seen as the latest, and one of the most significant, signs of the growing influence of women in US boardrooms.
Nooyi will become the 11th female CEO running Fortune 500 companies at the moment, compared to none in 1994. She will rank number two in that list, behind only Patricia Woertz at agricultural processor Archer Daniels Midland Co. ADM is ranked 56th in the Fortune 500, while PepsiCo is 61st.
Commentators are also pointing to her appointment as evidence of PepsiCo's leadership in the field of gender equality. An article by Bloomberg pointed out that Nooyi follows two other female PepsiCo executives to top posts in the country.
Irene Rosenfeld, 53, who ran PepsiCo's Frito-Lay division, left in June to run Kraft Foods whilst Brenda Barnes, 52, is CEO of Sara Lee Corp having been head of Pepsi-Cola North America in the 1990s.
The article goes on to point out that last year, 27% of PepsiCo's corporate officers were women, compared with an average of 16% for Fortune 500 companies, according to numbers complied by research group Catalyst.
Her appointment has also been met with plenty of coverage in India, unsurprisingly. The Hindustan Times called Nooyi a "superwoman", whilst The Times of India referred to her "as easily the most successful Indian businesswoman ever, apart from being one of India's highest-achieving executives."
The danger with all of this is that Nooyi's capabilities as CEO will be overshadowed by her gender and race. When it comes down to it, it is Nooyi's ability to lead PepsiCo in the post-Reinemund era that matters rather than the fact that she is a woman of Indian origin.
"She not only co-authored our vision and drafted our strategic blueprint, she has a sharp talent for turning insightful ideas and plans into realities and for developing and replenishing our talent base," said Reinemund when announcing the handover.
The positive reaction seen in the PepsiCo share price following the announcement suggests that Wall Street agrees and sees little reason to worry about the appointment.
But Reinemund will be a tough act to follow. Since 2001, when he officially took the reins as chairman and CEO, the company has performed outstandingly in a tough market. The Quaker Oats acquisition, completed in August 2001, was a turning point for the snack and soft drinks giant, and PepsiCo's stock has jumped by 44% since the ink dried on that deal. By comparison, Coca-Cola's shares have fallen by 1.6% over the same period.
But as Reinemund has been keen to point out, Nooyi has been a huge influence throughout his tenure. She is credited with persuading the PepsiCo board to go after Quaker Oats as well as overseeing the sale of PepsiCo's restaurant business to create YUM! Brands Inc. Nooyi also led the initial public offering of Pepsi Bottling Group Inc., which is now the world's second-largest bottler, and masterminded the purchase of Tropicana.
"Indra has been Steve's right-hand woman for years,'' Christopher Meeker, an analyst with Farr Miller & Washington LLC, was quoted saying. "Indra has had a very keen eye on what's going on in every layer of the business, and she conveys a lot of confidence in her ability to drive the company."
Meanwhile, a note by Citigroup analyst Bonnie Herzog said: "Indra Nooyi is truly a star and has been working side by side with Mr Reinemund over the past several years. She has been very involved with every major decision PepsiCo has made over the past five-plus years and therefore we expect this transition to be very smooth."
That smoothness has already been demonstrated in the seamless way the succession has been announced. Compared with the long drawn out, and at times contentious way, rival Coca-Cola Company came to its decision to appoint Neville Isdell as Douglas Daft's heir, PepsiCo's transition has so far appeared far more assured - helping I am sure to convince the market the company has got this appointment bang on.
As Morgan Stanley analyst William Pecoriello summed up: "While we are surprised by this move, PepsiCo's deep bench gives us confidence that the strong momentum the company has delivered should continue."
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