- The Washington Times - Tuesday, August 15, 2006

Pepsico Inc. Chief Financial Officer Indra K. Nooyi will replace Steven Reinemund as chief executive, the Pepsi-Cola and snacks company said yesterday, making her the No. 2-ranked female CEO in the Fortune 500.

With her Oct. 1 appointment, Mrs. 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,” she told analysts during a conference call yesterday morning.

Mrs. Nooyi said she felt fortunate to be taking over at a time when Pepsico was in such a strong position, with solid growth across all its business units. She and Mr. Reinemund have worked closely over the last five years, and Mrs. 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.”

A Madras, India, native and graduate of the Yale School of Management, Mrs. Nooyi stays true to her heritage by often wearing a sari to Pepsico events, according to Forbes.com. It quotes her as saying: “Being a woman, being foreign-born, you’ve got to be smarter than anyone else.”

Mr. Reinemund said 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,” he said yesterday.

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.

Mr. Reinemund was a driving force in diversifying Pepsico’s product portfolio into healthier foods, Bank of America analyst Bryan Spillane wrote. The company’s growth has been buoyed 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.

“Indra has been Steve’s right-hand woman for years,” Christopher Meeker, an analyst with Farr Miller & Washington LLC, which holds Pepsico shares among $500 million in assets, told Bloomberg News. “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.”

Mr. Reinemund, 58, will continue as chairman until his retirement in May 2007. He has worked for the Purchase, N.Y., company for 22 years, serving as chairman and CEO for five.

Mrs. 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 her at the company, Mr. 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.”

Mr. Pecoriello said he had the “highest confidence” in Mrs. Nooyi’s ability to lead the company. 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.

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 (80 cents per share) while revenue climbed 12 percent to $8.6 billion.

Mrs. Nooyi’s CFO responsibilities will be divided between Pepsico International CFO Richard Goodman and Senior Vice President Hugh F. Johnston.

The role of president will not be filled at this time, a Pepsi spokesman said.

Before joining Pepsico in 1994 as a senior vice president, Mrs. Nooyi was head of strategy at Swiss-Swedish engineering multinational ABB. From 1986 to 1990, she was director of corporate strategy at telecommunications giant Motorola.

She started her career in India as a product manager for Johnson & Johnson.

Among a variety of roles outside of Pepsico, she serves on the board of the Federal Reserve Bank of New York.

Shares of the company rose 62 cents, or 1 percent, to close at $63.95 on the New York Stock Exchange yesterday.

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