How Seven CEOs will Change the Food Industry

Pepsi’s entrepreneurial, non-bureaucratic, risk-oriented environment has nurtured many talented executives, including a handful of CEOs who now are at other food companies: Irene Rosenfeld (chairman/CEO at Kraft), Brenda Barnes (chairman/CEO at Sara Lee), Gary Rodkin (CEO at ConAgra), as well as others who have gravitated to other fields.

One who didn’t get away is Indra K. (Krishnamurthy) Nooyi, who became the fifth CEO in PepsiCo's 41-year history in October 2006. Born and educated in India, Nooyi moved to the U.S. in 1978 to earn a master’s degree from Yale University. She joined PepsiCo, Purchase, N.Y., which claims to be the world’s largest convenient food and beverage company, in 1994.

Named CFO in 2001, she helped spin off Pepsi’s restaurants into Yum! Brands and the company-owned bottling operations into Pepsi Bottling Group. She was instrumental in the $3.3 billion acquisition of Tropicana in 1998. And she led negotiations on the $13.8 billion PepsiCo merger with Quaker Oats in 2001.

Her reward was a seat on the board and the title of president, placing her in line to succeed CEO Steve Reinemund, who already was turning PepsiCo from a soda company to an international food and beverage company stressing health and wellness in new product development.

As president and CFO from 2000 to 2008, Nooyi was credited by analysts with transforming the company's global strategy when both Coke and Pepsi faced a challenging environment in their core market for carbonated soft drinks, as more health-conscious consumers switched to juices and water.

Since becoming CEO (only 2 percent of the CEOs of Fortune 500 companies are women), Nooyi has reorganized PepsiCo to accommodate international growth by dividing operating units into PepsiCo International, PepsiCo Americas Foods and PepsiCo Americas Beverages. She doubled her executive team to 29, and wants better nutrition to be part of PepsiCo’s DNA.

Acquisitions are Nooyi’s mantra, analysts say, and mostly in the health and wellness sector — but so far, the company has only gone after Naked Juice in the U.S. and a handful of Eastern European companies. Joint ventures with Lipton and Starbucks are bringing new beverage opportunities to the table.

Last year, PepsiCo’s net revenue was $39.5 billion. PepsiCo’s international business grew a whopping 22 percent, triple the growth rate in the U.S., and now accounts for 40 percent of total revenue. ROI was up 29 percent, and the company announced its 36th annual dividend increase.

PepsiCo’s portfolio includes 18 megabrands which generate over $1 billion each in worldwide annual sales. Some of its leading brands include Pepsi-Cola, Aquafina, Frito-Lay, Tropicana, Quaker, Gatorade, and Naked Juice. “We are No. 1 in the fastest-growing category — non-carbonated beverages, including energy drinks, teas, juices and isotonics,” Nooyi said at PepsiCo’s annual meeting.

She recruited Mehmood Khan, a former Mayo Clinic endocrinologist, naming him chief scientific officer to head up R&D and created a vision – Performance With Purpose – that describes how she wants PepsiCo to do business both at home and abroad. She has the reputation of nurturing employees and wants the company to work toward a net-zero impact on the environment.

Known as a strategic thinker, Nooyi has been an advocate of improving the nutritional value of PepsiCo’s portfolio. Although 70 percent of PepsiCo’s products are still what the company defines as “fun for you” foods, compared with “better for you” or “good for you” products, the company is moving forward in last two categories. “PepsiCo is well on its way to achieving 50 percent or more [better-for-you products] by 2010,” Nooyi said recently.

Trans fats have been eliminated through the use of sunflower oil, sugars have been reduced or eliminated, Frito-Lay’s Flat Earth line of baked fruit and vegetable crisps has been introduced and most recently Pinch of Salt chips with less salt debuted.

Now an American citizen, Nooyi sometimes wears traditional Indian saris to company functions, and is certainly the only CEO to have played in an all-girl rock band. She has also expressed a desire to go to Washington after her tenure at PepsiCo to “give back — to work for no money for four or five years.” 

When Kellogg chairman/CEO Carlos Gutierrez was tapped to be Commerce secretary in 2004, he had pretty much completed a six-year turnaround of the company. Still, his departure must have come as a shock, because the cereal giant named a relative outsider, James Jenness, as interim CEO (also chairman) while taking a little longer to groom the eventual CEO and longtime heir-apparent David Mackay.

As COO, Mackay (he pronounces his name “McKey”) had been Gutierrez’ right-hand man. He has a wealth of international experience. Born in New Zealand and brought up in Australia, he joined Kellogg Australia as group product manager in 1985. He transferred to corporate headquarters in Battle Creek, Mich., in 1987 as category director for ready-to-eat cereals. Mackay returned to Australia in 1991 as marketing and sales director of Kellogg Australia.

From 1992 to 1998, he worked for Sara Lee Bakery in Australia, but returned to Kellogg as managing director of Kellogg Australia. He quickly moved up, to managing director of UK and Republic of Ireland, then corporate senior vice president and president of Kellogg USA, then executive vice president of Kellogg Co. In 2003, he was named president and COO. He has been actively involved in developing the growth strategy for the company.

“[Mackay’s] contribution to growing and sustaining the company’s performance has been invaluable,” Jenness said upon Mackay’s appointment.

Known for his easy style, Mackay, who sometimes calls colleagues “mates,” often breaks into an easy laugh and seems surprised at how far he’s gone professionally, reports Business Week.

With sales of almost $12 billion in 2007, Kellogg Co. is the world’s leading producer of cereal and a leading producer of many convenience foods, including cookies, crackers, toaster pastries and cereal bars. Brands include Kellogg’s, Keebler, Pop-Tarts, Nutri-Grain, Morningstar Farms, Famous Amos and Kashi. Its brands are marketed in more than 180 countries around the world.

Mackay’s challenges are many. High commodity prices translate to higher prices for cereal. Grab-and-go options are becoming more popular than cereal in a bowl. There has been increasing consumer and government pressure over sugar-laden cereals being advertised to kids. In June last year, the company announced new initiatives in how it markets to children under 12: new front-of-pack nutrition labeling and new guidelines in nutrition. The Kellogg Global Nutrient Criteria of 200 calories per serving, 2g of saturated fat, 0g of trans fat, 230 mg of sodium and 12g of sugar is the standard.

“The initiatives set a new standard of responsibility and are consistent with our 100-plus year heritage, further strengthening our commitment to helping consumers make informed food choices,” said Mackay. “Around the world, Kellogg continues to play an active role in helping consumers successfully manage both sides of the calories in/calories out equation through product choices, in nutrition education, community programs and partnerships promoting the importance of a balanced diet and physical activity.”

In April this year, Kellogg reported strong first quarter 2008 sales growth of 10 percent and operating profit growth of 9 percent. These results were driven by innovation, recent price increases and effective brand building and were achieved after absorbing significant cost inflation.

"Our continued focus on executing our business model paid off during the first quarter," said Mackay. "We posted strong results, despite the impact of higher commodity inflation as well as increased advertising and up-front investments. As a sign of our confidence, the board announced its plans for a 10 percent increase in the quarterly dividend starting in the third quarter."

Now that it has kicked the Altria tobacco habit, Kraft Foods Inc., once considered a stodgy and oversized company, is delivering stellar results. In the first quarter of this year, revenues increased 20.8 percent to $10.4 billion. In 2007, Kraft delivered its strongest revenue growth since 2001, the result of investing in new products and its most successful brands, and beat Wall Street forecasts.

“2008 is off to an excellent start and we expect our results to continue to strengthen as the year progresses,” said Chairman/CEO Irene Rosenfeld, who has been presiding over the turnaround. “Our investments in product quality, marketing and innovation are leading to better price realization, stronger top-line results and sequential improvement in margins from the fourth quarter of 2007. While input costs remain high, I am confident that our ongoing programs to lower overhead costs and invest in our brands will enable us to deliver our targeted earnings in 2008 and beyond.”

Like Mackay, Rosenfeld left Kraft, Northfield, Ill., for several years before returning as CEO in June 2006. She reportedly spent the first month talking to employees about what worked and what didn’t, then shook up the management team. Advertising Age reported she sent a memo to employees indicating her belief that the company was too bureaucratic, confused and lacked clear lines of responsibility.

At a time when many called for cost-cutting, she informed Wall Street analysts that Kraft would spend an additional $300-400 million on advertising and marketing to better connect its brands with consumers. “We will be telling the consumer that Kraft is back,” she said.

She returned to behemoth Kraft after a stint as chairman/CEO of Frito-Lay, a division of PepsiCo. Rosenfeld began her career with General Foods in 1981. She spent more than 20 years with Kraft, advancing in a variety of leadership roles. Division. She is credited with leading the successful integration of the Nabisco acquisition, and the restructuring and turnaround of a number of key businesses. She served on the senior team that led Kraft's IPO in 2001.

Last month, Rosenfeld told shareholders that Kraft will raise prices this year to offset increasing commodity costs, adding that the company needs to protect its margins and profits, which dropped last year due to the soaring costs of wheat, dairy and other commodities, reports Crain’s Chicago Business.

While that could drive consumers to private label, she also has promised more money to market its portfolio of iconic brands, including nine with revenues exceeding $1 billion which are available in more than 150 countries. With some 80 new or improved products in the pipeline, Kraft seems to be cookin’ again. Kraft’s “better-for-you” products are growing two to three times faster than others, and healthy initiatives are in place in 30 percent of its product lines (beverages, snacks, cheese, grocery and convenience), a good place to be in 2008.

Many of the top CPG companies are promoting their CEOs from within, a strategy that was out of favor in the past decade. After a 28-year career with Minneapolis-based General Mills, Kendall Powell was elected CEO in September 2007, a fine reward for his years of service and worldwide expertise in GM brands across the board.

Having earned a Harvard degree in biology and a Stanford MBA, Powell joined General Mills in 1979 as a marketing assistant and held a series of assignments: marketing director for Cereal Partners UK (a General Mills/Nestle joint venture) in 1990; president of the Yoplait Division 1996-1997; president of Big G Cereals 1997-1999; CEO of Cereal Partners Worldwide 1999-2004.

He was named an executive vice president of General Mills in 2004, with responsibility for the company’s Meals, Pillsbury USA, Baking Products, and Bakeries & Foodservice businesses; and was appointed COO-U.S. Retail in May 2005. He served as president and COO of General Mills from June 2006 until his election as CEO last September. He added the chairman title this May, when Stephen Sanger retired after a distinguished 34-year career with the company.

While General Mills, too, raised prices in the past year in response to higher commodity prices, consumers aren’t giving up their Big G cereals for less expensive private labels. Perhaps that’s partly because of the Brand Champions initiative, in place since 2003, which immerses more than 900 employees in cross-functional teams in the intricacies of building and maintaining strong brands.

For just over a year now, General Mills’ Worldwide Innovation Network (G-Win) has sought outside partnerships with entrepreneurs, inventors, universities and other food companies to generate new product ideas. Yoplait’s Fizzix carbonated yogurt started out on the Brigham Young University campus. Progresso Light, the first consumer packaged product in any grocery category to carry the Weight Watchers endorsement with 0 Points value per serving, also resulted from the G-Win program.

On the international front, Powell has targeted opportunities in central and Eastern Europe, Saudi Arabia and the lower Gulf States, Latin America and expansion in China.

Perhaps no new CEO in any category had to face as much adversity in his first two year as ConAgra Foods’ Gary Rodkin. First on his to-do list was the halving of the company. Early last year, a leaky roof at a plant caused salmonella in Peter Pan peanut butter and a huge and painful recall. Later in 2007, the bug was in Banquet pot pies.

Despite all the bad press, the Omaha, Neb., company still stands. ConAgra Foods is, in fact, a shadow of its former self … and most analysts and investors are pleased. The company was $25.4 billion in sales as recently as 2002, but last year recorded just $12 billion. More importantly, net income last year was $765 million, just $18 million shy of the $25 billion days. 

Rodkin was considered a marketing whiz at PepsiCo and General Mills. Before joining ConAgra, Rodkin served as chairman and CEO of PepsiCo Beverages and Foods North America (consumer products and manufacturing), and before that he led Pepsico’s Tropicana unit.

Earning a BA from Rutgers University in Economics and an MBA from Harvard Graduate School of Business Administration, he held marketing and general management positions of increasing responsibility at General Mills, participating in the successes of many of its leading brands from Cheerios to Betty Crocker, with his last three years at General Mills as president of Yoplait-Colombo.

When he took the ConAgra helm in late 2005, the company was besieged with underperforming brands and decentralized management. For two years, Rodkin commuted, flying in every week from his Connecticut home, because he didn’t want to uproot his daughter, a junior in high school.

Digging in his heels, Rodkin found $100 million in cost savings by closing nine manufacturing plants, decentralizing operations, replacing senior management and cutting bureaucracy. He restructuring the company’s business focus on its bestselling brands and supporting them with marketing dollars. Rolling out products every six months was also at the top of Rodkin’s list.

A year after he settled into the job, ConAgra sold its iconic Butterball brand and its turkey business to privately held Carolina Turkeys for $325 million. It also sold its Singleton seafood unit, Swissrose cheese unit, Armour, Eckrich, Cook's hams brands to Smithfield Foods, and Louis Kemp seafood brand to Trident Seafood and in the past month the Knott’s Berry Farm brand was sold to J.M. Smucker. ConAgra Trade Group, which sells and trades fertilizer, corn, wheat and energy, was also sold, for a whopping $2.1 billion.

Now ConAgra Foods is organized into three businesses: Consumer Foods (branded products to retail and foodservice), International Foods (40 global brands offered in 110 countries) and Commercial Products (which includes Food & Ingredients for foodservice and manufacturing from its Lamb Weston, Gilroy Foods & Flavors, ConAgra Mills and Spicetec divisions.

Rodkin said the company's future is in developing its stable of consumer brands, which include Act II, Banquet, Blue Bonnet, Chef Boyardee, Crunch 'n Munch, David, Egg Beaters, Fleischmann's, Healthy Choice, Hebrew National, Hunt's, Hunt's Manwich, Hunt's Snack Pack, Jiffy Pop, Kid Cuisine, La Choy, Lightlife, Marie Callender's, Orville Redenbacher's, Parkay, Pemmican, Pam, Peter Pan, Reddi-wip, Rosarita, Slim Jim, Swiss Miss, Van Camp's, Wesson and Wolf Brand.

It was a surprise to many when Neville Isdell, retired and a relative outsider, took over as chairman/CEO of Coca-Cola Co. in 2004. Observers are far less cautious about his own successor. When Muhtar Kent succeeds Isdell as CEO on July 1, analysts look for more of the same: a steady hand over a difficult business, the greatest potential for which may lie overseas.

As president/COO since 2007, Kent has been Isdell’s right-hand man. He has a strikingly similar international background. After joining Coke in 1978, he served as head of Coca-Cola’s Turkey and Central Asia business, East Central Europe Division, Coca-Cola International (with responsibility for 23 countries) and was managing director of Coca-Cola Amatil-Europe, covering bottling operations in 12 countries.

From 1999 until May 2005, he was president/CEO of the Efes Beverage Group, the majority shareholder of Turkish bottler Coca-Cola Icecek. Headquartered in Istanbul and listed on the London and Istanbul Stock Exchanges, Efes is a publicly traded beverage enterprise, and its Coca-Cola and beer operations extend from the Adriatic to the Pacific Ocean. Under Kent's leadership, Efes experienced extraordinary growth, with triple-digit revenue growth and a 250 percent increase in market capitalization.

Returning to Atlanta-based Coca-Cola in 2005, Kent was president/COO of the company's North Asia, Eurasia and Middle East Group; in 2006 those responsibilities were broadened to include key countries China, Japan and Russia. He served as president of Coca-Cola International through most of 2006, responsible for the Company's operations outside of North America before becoming corporate president/COO.

Kent holds a bachelor of science degree in economics from Hull University, England, and a master of science degree in administrative sciences from London City University.

The Atlanta-based company, which gets 78 percent of its sales abroad, is seeking more acquisition opportunities in the fast-growing soft drinks market to expand its revenue sources, the company's CEO-in-waiting said in May at the Foreign Correspondents’ Club of Japan.

Sales of established soft drinks are declining in the U.S. as consumers opt for bottled water and tea, which are perceived as healthier. But Coke has responded with the 2007 acquisitions of Fuze enhanced juices and teas; Leao Junior, a Brazilian tea and beverage maker; Glaceau, the maker of Vitaminwater; and Jugos del Valle, a Latin American juice manufacturer. Coke also launched ready-to-drink iced coffees in a venture with Caribou Coffee. And earlier this year, it bought a 40 percent stake in Honest Tea.

“I'm humbled by the tremendous responsibilities that await me, and honored to be a part of this legacy of growth and sustainability that Neville has injected into our great company during the past four years,” Kent told shareholders at Coca-Cola’s annual meeting in April. “As shareowners of this great business, you have good reason to be excited about our recent performance and to be optimistic about our future.”

“Two years ago, there were those who had lost faith in sparkling beverages and Trademark Coke,” he said. “We had — and continue to have — a different point of view: Sparkling beverages are the oxygen of our company and this entire industry. Through 2007, our three-cola strategy is generating the highest growth rate we've seen in our family of Trademark Coke brands since 1998.”

At a recent meeting with Muhtar Kent, Erin Ashley Smith, consumer staples analyst at New York-based Argus Research Co., found him very friendly and open, and thinks he will be an asset to the company.

“I was impressed with his enthusiasm and honesty about the challenges Coca-Cola is facing in the next 12 months -- the weak economic environment, higher commodity costs, and profits from convenience higher-margin channels coming down,” she said.

Kent spoke about reaching out to the bottlers, and his familiarity with the company will help him in that regard, she adds. “He is also focusing on relationships within the company, and plans to bring more women into management.” Smith points out that Neville Isdell was brought in to restore faith and create a manifesto for growth. “Going forward, Kent will implement that strategy, while being accessible to investors, emphasize Coca-Cola’s sponsorship of the Olympics, international growth opportunities and new product launches.”

Since Henri Nestlé developed the first milk food for infants in 1867, and saved the life of a neighbor’s child, Nestlé has aimed to be the world's leading nutrition, health and wellness company.

For the past 11 years, that was the job of Peter Brabeck-Letmathe. Sales approach 90 billion Swiss francs (CHF) currently about $87 billion, making Nestle, based in Vevey, Switzerland, the world’s biggest food company. Twenty-seven brands enjoy sales of CHF 1 billion each, Nestlé has delivered 5.9 percent growth for the past 12 years, and the company has moved from a process and technology-driven agricultural company into a research-led nutrition and wellness company, helped by acquisitions of Novartis Medical Nutrition and Gerber.

Now that job befalls Paul Bulcke, a Belgian businessman and lifelong Nestle employee, who  took over as worldwide CEO in April. He graduated as a commercial engineer at the Katholieke Universiteit Leuven and is an alumnus of the Vlerick Leuven Gent Management School. He began working for Nestle the age of 25 in 1979. He’s worked in Switzerland, Spain, Belgium, Peru, Ecuador, Portugal and Germany. Before his appointment as CEO, he was the executive vice president of the Americas division.

With his appointment, the Nestle board concluded a process initiated in 2005, combining the roles of chairman and CEO in order to accelerate the strategic transformation process in the direction of nutrition, health and wellness.

"The board chose a strong and pragmatic business leader, ideally suited to lead the group in a period that will be marked by a phase of strategic and operational consolidation and a continued broadening of our nutrition, health and wellness business,” said Brabeck-Letmathe, now non-executive chairman of the board, who will focus on long-term strategy.

“At the same time, Nestlé will maintain its strong growth momentum in the developing and emerging world,” Brabeck-Letmathe continued. “Paul Bulcke has a proven performance record both in developing as well as in industrialized markets in Latin America and in Europe. As a member of Nestlé's executive board in charge of Zone Americas, he played a decisive role in transforming this region not only into the group's largest, but also into its most profitable one.”

Bulcke takes the helm when the Swiss giant, with some 280,000 employees, continues to outperform analysts' expectations and forecasts its annual sales will rise 7.5 percent in 2008. But Brabeck-Letmathe is a tough act to follow.

Nestlé is divided into Zone Europe, Zone Americas, Zone Asia, Oceania and Africa, Nestlé Waters, Nestle Nutrition (set up two years ago to target people with specific nutritional needs, from babies to athletes) and Other Food & Beverages (joint ventures and Nespresso). In the first quarter of 2008, sales rose 6 percent to CHF 25,700 billion ($24.8 billion), up 6 percent over the same period last year. Sales were driven by very strong organic growth and acquisitions of Gerber and Novartis Medical Nutrition in 2007.

"The strong start to the year reflects Nestlé's momentum as the world's leading nutrition, health and wellness company,” said Bulcke. “On the basis of this high-quality growth, with a good balance between real internal growth and pricing, I am confident that we will achieve our 2008 targets: organic growth approaching the 2007 level together with improved EBIT margins in constant currencies."

Bulcke’s philosophy that success is "10 percent inspiration and 90 percent perspiration," is a play on Thomas Edison’s belief that perspiration levels come in at 99 percent. Apparently he puts a little more credence in inspiration. His strategy is to grow in emerging markets, nutrition, premium products and foodservice.

"The vision of Nestlé is to be the leading nutrition, health and wellness company in the world," Bulcke told Telegraph.co., a UK newspaper. "When you have a good vision you don't change it dramatically each year. If you spoke about nutrition 100 years ago, it was about feeding people. If you speak about nutrition today, it is to feed the people with fewer calories. The vision has to evolve over time."