What PepsiCo’s leadership shuffle really means
It was a good week for PepsiCo and its CEO Indra Nooyi. Second quarter earnings beat expectations, with organic revenue up by 5%. And despite global uncertainty and changing tastes, the company seems to be trouncing most food and beverage companies, with organic revenues in both snacks and North American beverages up by 3%.
With all that good news, few noticed a major shift at the company—one that came with some significant leadership changes and one major departure, slipped in towards the bottom of a press release.
In a surprise, Enderson Guimaraes, only last December named executive vice president for Global Categories and Operations, and previously head of Europe, announced he was leaving PepsiCo (PEP) to become president and COO at a small, private-equity funded higher education firm, Laureate Education.
Although sources close to PepsiCo said Guimaraes has long harbored a passion for higher education, the move is a head-scratcher for someone considered to be a rising star at PepsiCo, one that some thought might have had the potential to succeed Nooyi. (Guimaraes wouldn’t comment on the matter.) Guimaraes is just another name on a very long list of top talent to leave the $67 billion company in the last few years, including new Target CEO Brian Cornell, former Pepsi President John Compton, former nutrition head Debra Crew (who is now at Reynolds American), and former president Zein Abdalla. When questioned about the string of high-level departures, PepsiCo has consistently pointed to its status as a well-known supplier of executives to other companies, a talent factory of sorts. And that is, in fact, accurate. But it’s hard not to wonder why there’s so much change at the top of the heap (for more on this, see my Fortune magazine story from June).
Perhaps to address this issue, the company split up Guimaraes’ job between two people, Brian Newman and Eugene Willemsen, who will now be EVP, Global Operations and EVP, Global Categories & Franchise Management, respectively. Along with the promotion of Laxman Narasimhan to CEO, Latin America, PepsiCo now has a lot of new faces, all in their 40s, with increasing operational responsibilities. They also meet Nooyi’s stated requirements of having top executives with global experience—certainly a good sign for the talent pipeline. Says a company spokesman: “PepsiCo has built one of the best executive leadership teams in the industry. We consistently elevate strong leaders to renew our talent pipeline and prepare executives to assume larger responsibilities. This week’s appointments further strengthen our bench and will enhance our ability to meet the future needs of our business.”
In another noteworthy move, Hugh Johnston, previously CFO at PepsiCo, was given the additional title of vice chairman and a new responsibility of handling IT for the company. This means that there are now two vice chairs—Mehmood Khan, the medical doctor who now runs all of the company’s R&D, and now Johnston. Often, that would signal a succession race, but sources close to the company caution not to read too much into the announcement. Indeed, since Khan has never been considered a potential successor to Nooyi due to his lack of operating experience, it might actually be a negative signal for Johnston to be placed at the same level.
It’s fun to read the tea leaves (yes, Lipton is an important joint venture of Pepsi), but the one thing to take from this news is that the company is working hard to develop viable CEO candidates for three to five years out—but it’s still anyone’s guess what the board has planned on the CEO succession front. Said Director Daniel Vasella in a recent interview: “I don’t believe it’s smart for any company to designate a quasi-successor. Because that person does not get the support [any longer] from others.” Clearly Nooyi, 59, has no intentions of leaving—and the board is thrilled to keep her in place without naming potential replacements. If that leads to more talent departures? So be it.
Manage This! is a regular commentary series by Fortune Senior Editor Jennifer Reingold on management and leadership. Suggestions/Comments? Email email@example.com.