PepsiCo Inc. said Monday that Chief Financial Officer Indra K. Nooyi will replace Steven Reinemund as chief executive officer of the soft-drink and snacks company, making her the No. 2 female CEO in the Fortune 500.
With her Oct. 1 appointment, Nooyi takes her place in an elite group of 11 female CEOs running Fortune 500 companies. Patricia Woertz at agricultural processor Archer Daniels Midland Co. ranks first. ADM is ranked 56th in the Fortune 500, while PepsiCo, the world’s second-largest soft-drink company after Coca-Cola Co., is ranked 61st.
“I’m very excited and at the same time very humbled,” Nooyi told analysts during a conference call on Monday morning.
Nooyi said she felt fortunate to be taking over a time when PepsiCo was in such strong position, with solid growth across all its business units. She and Reinemund have worked closely over the last five years, and Nooyi described their relationship as one in which they complete each other’s sentences.
“Indra Nooyi is truly a star and has been working side by side with Mr. Reinemund over the past several years,” Citigroup analyst Bonnie Herzog wrote. “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.”
Reinemund said in a statement that he is retiring to spend more time with his family.
“I can’t tell you how excited I am to pass the baton to Indra,” Reinemund said Monday.
Wall Street analysts said they were surprised mainly at how early the transition is being made.
“While we are surprised by this move, PepsiCo’s deep bench gives us confidence that the strong momentum the company has delivered should continue,” Morgan Stanley analyst William Pecoriello wrote.
Reinemund was a driving force in diversifying PepsiCo’s product portfolio into healthier foods, Bank of America analyst Bryan Spillane writes. The company’s growth has been bouyed by strength in non-carbonated beverages and in international markets, moving its focus away from the flagship cola products. Sales of non-carbonated drinks, such as Aquafina water and Gatorade, surged 23 percent in North America in the most recent quarter.
Reinemund, 58, will continue as chairman of the board until his retirement in May 2007. He has worked for Purchase, N.Y.-based PepsiCo for 22 years, serving as chairman and CEO for five.
Fifth CEO in Pepsico's history
Nooyi, 50, has been with the company since 1994 and has been CFO since 2001. She will be the fifth CEO in PepsiCo’s 41-year history.
The announcement settles the question of whether PepsiCo could keep Nooyi at the company, Spillane said. “One question investors have consistently had the last few years was whether there would be enough to keep Ms. Nooyi interested at Pepsi,” he wrote. “This promotion would seem to suggest that there is.”
Pecoriello said that now the question is whether PepsiCo can keep Michael White, the chief executive of PepsiCo International. Pecoriello said since White is “a highly respected Pepsi executive and international is a significant driver of PepsiCo’s profit growth, there could be concern on how long we will remain with PepsiCo.”
Pecoriello said he had the “highest confidence” in Nooyi’s ability to lead the company forward. In her current position, she had a primary role in projects such as the spinoff of its bottling operations, its acquisition of Tropicana and the purchase of Quaker Oats, the company said in a statement.
Pepsi reported a 14 percent rise in profit for the second quarter, and analysts predicted further growth. Profit for the quarter ended June 17 grew to $1.36 billion, or 80 cents per share, while revenue climbed 12 percent to $8.6 billion.
Nooyi’s CFO responsibilities will be divided between PepsiCo International CFO Richard Goodman and Senior Vice President Hugh F. Johnston.
Goodman, 57, will become CFO for the corporation overseeing tax, treasury, control, risk management and audit and investor relations. Johnston,44, will be named executive vice president, adding global procurement and information technology to his duties. Both will report to Nooyi.
The role of president will not be filled at this time, a Pepsi spokesman said.
In its announcement, the company also reiterated its full-year earnings guidance of at least $2.95 a share for 2006.