On the move: Compton exit sparks PepsiCo successor talk

By Michelle Russell and Andy Morton | 12 September 2012

Compton, who has worked for PepsiCo for 30 years, will become CEO of Pilot Flying J Oil Corp

Compton, who has worked for PepsiCo for 30 years, will become CEO of Pilot Flying J Oil Corp

The announcement that PepsiCo's president John Compton is to leave the group after less than eight months in the role has sparked fresh speculation over who will succeed Indra Nooyi as CEO.

Nooyi, who has been at the helm of PepsiCo since 2006, came under pressure last year amid concern over the company's strategy and perceived lack of focus on its core areas of snacks and soft drinks.

Following a strategy review in February, the PepsiCo chief has dispelled some of the criticism. However, Compton's exit will set tongues wagging over who will one day replace her.

PepsiCo revealed this morning (12 September) that Compton, who has worked for the US food and beverage giant for the last 30 years, will become CEO of Pilot Flying J Oil Corporation, which operates truck stops in his home state of Tennessee.

As a result of his departure, CEO of PepsiCo Europe, Zein Abdalla, has been appointed the group's new president, with immediate effect.

Compton moved into the newly created president position in March in a bid to add fizz to its performance. His promotion from head of PepsiCo's Americas Foods division and his status as a company lifer meant he was seen as the "heir apparent" to Nooyi.

"Earlier in 2012 he was being positioned to be one of the front runners to potentially be CEO of PepsiCo whenever Indra would decide to step down," Morningstar analyst Thomas Mullarkey told just-food. "This was because, one he took a very active role at the CAGNY conference in Florida and I though he did a great job at that event, and second he was promoted to the newly created position of president which was very much like a COO position, so he was really being groomed for it."

However, Compton's sudden departure may now have pushed back by a couple of years the date Nooyi steps aside, analysts said today.

"We think this evidences the board's support for Indra's leadership of PepsiCo's 'reset'," Stifel Nicolaus said in a note referring to the company's plans in February to overhaul its business and claw back market share from rivals Coca-Cola and Kraft Foods.

"We also believe Indra is more likely to pass the baton a year or two from now, once the 'reset' is more firmly established," the note said.

Mullarkey echoes the same sentiment.

"Indra is chairman of the board so she definitely has her own vote but even when John left he had a message of support for the company's direction and long term strategy... I believe the board is definitely giving Indra the opportunity to see through the executive the strategic changes that were announced this year. The board is definitely going to be giving her at least a couple of years for these changes to be passed through."

Mullarkey believes that despite Compton's departure, PepsiCo still has "a very deep bench" and analysts at Stifel Nicolaus suggest PepsiCo's next CEO is likely to come from the team leading Nooyi's "reset", including CFO Hugh Johnston, Cornell, and Abdalla.

Nevertheless, analysts are speculating about who could replace Nooyi.

Vasu Majumdar of Grant Thornton UK, told sister site just-drinks that new president Abdalla had been successful in his previous role as PepsiCo CEO Europe, where he doubled the division's revenues from US$7bn to $14bn since 2008.

"He grew the European portfolio by focussing on the emerging markets in the region," Majumdar said. "Starting from a low base, he led PepsiCo to become the largest food and beverage company in Russia. That happened during his tenure."

PepsiCo's share price slid 1.51% to $70.50 today at 11:44 ET today.

Sectors: Baby food, Cereal, Dairy, Financials, Snacks

Companies: PepsiCo

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