PepsiCo Inc. (PEP) recently announced management changes in a bid to drive growth for the company.
John Compton has been promoted to the new executive position of the president of the company. His current post of chief executive officer (CEO) of the food division in the Americas will be filled by Brian Cornell, former executive of the company. Cornell rejoins PepsiCo, quitting his current job as the CEO of Sam’s Club, a division of Wal-Mart Stores, Inc. (WMT).
Cornell will be responsible for all of PepsiCo’s businesses in North and South America and Mexico including brands like Frito-Lay, Quaker Foods & Snacks, South America Foods and others. The division recorded a top-line growth of 7% in 2011. Compton will be responsible for all of the global businesses of the company. He will have to work to develop new products, build brand value and also look for ways to reduce costs. Both Compton and Cornell will report to Chairman and CEO Indra Nooyi.
Cornell who brings with him 30 years of experience in the consumer goods industry has earlier served as a CEO of Michaels, the largest specialty retailer of arts and crafts in North America, and executive vice president and chief marketing officer for Safeway.
Last month PepsiCo announced plans to reduce its workforce by 8,700 positions. The company also stated that it expects a core, constant-currency, bottom-line decline of 5% in 2012. Management plans to step up advertising and marketing spending by $500-$600 million, in 2012, especially to revive its North American operations. The management changes could provide an answer to the company’s present woes and prove to be positive for its long-term prospects. PepsiCo has in place a long-term, core, constant -currency target of high single-digit earnings growth.
Our Recommendation
We currently have a Neutral recommendation on PepsiCo. However, the stock carries a a Zacks #4 Rank (‘Sell’ rating) over the short term.
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