On August 6, PepsiCo Chairwoman and Chief Executive Officer Indra Nooyi announced that she would be stepping down after 12 years at the helm and a total of 24 years at the company. “Twelve years is a long time,” Nooyi told the Wall Street Journal. “This wasn’t a discussion out of emotion or anything of that sort.” In a decade, Nooyi grew the company impressively; PepsiCo and its strategic acquisitions allowed the company to grow approximately 80% in revenues ($63.5 billion last year) from when she started. More importantly, Nooyi leaves behind a company that has significantly invested in healthier eating, having predicted the decline of soda.
Under Nooyi’s leadership, PepsiCo successfully segmented its brand into three categories: Good For You, Better For You and Fun For You. Nooyi expanded Good For You (including Quaker oatmeal, Sabra hummus) and Better For You (Pure Leaf tea, Stacy’s Snacks pita chips) to make up half of revenues last year, compared to just 38% in 2006. As CEO, Nooyi introduced two key positions that had never been offered before at the global beverage and food company; the first Chief Scientific Officer and the first Director of Global Health Policy were hired under her leadership. In addition, Nooyi was on the forefront of changing behavior in the food and drinks industry, shifting from trans-fat and increasing focus on lowering carbon footprint as well as on recycling. “At PepsiCo, we have been investing in recycling for almost 10 years through the PepsiCo Recycling Program… committing a total of approximately $55 million to recovery efforts in the U.S. alone,” Nooyi wrote in a Fortune column this year. In addition, the PepsiCo Foundation has invested $10 million in what the company hopes will become a $25 million industry-wide fund.
To put Nooyi’s legacy in perspective, we compare to the performance of Coca-Cola Company during her era. Since 2006 when she became CEO, PepsiCo’s total return gained 141% (including impact to dividend boosts) compared to Coca-Cola’s 194%. Moreover, on a long-term basis, Coca-Cola has performed with higher net margin compared to PepsiCo. Yet, revenue grew about 35% in Coca-Cola while, under Nooyi’s leadership, PepsiCo grew approximately 80%.
Although on the cola trenches, PepsiCo and Coca-Cola continue to vie for soda customers, the companies as a whole are hardly apples-to-apples. An “asset-light model” as coined by Dividend, Coca-Cola has concentrated on its namesake. With Diet Coke declining annually since 2006, the company has strived to gain the attention of soda drinkers, recently launching flavored, skinner bottles geared towards Millennials. PepsiCo, on the other hand, has expanded its food and drinks product mix. In fact, in recent history, PepsiCo encountered activist investors including Nelson Peltz of Trian Fund Management who advocated for the split of PepsiCo into, in Peltz’s words, “a beverage giant and a snack king.” Nooyi’s firm hand prevented the break up despite a two-year challenge from aggressive investors.
When Nooyi took the helm, she was one of just 11 female CEOs at Fortune 500 companies. Now, the number has doubled, but still hovers around 5% out of all top executives. Last year, the number of female leaders was at an all-time high at 32 women. By middle of this year, the number of female chiefs were falling rapidly; including Nooyi’s departure, female CEO membership has fallen by 25% despite several new entrants, including Kohl’s Michelle Gass and Yum China’s Joey Wat.
Recent female CEO departures include: Denise M. Morrison at Campbell Soup, Sherilyn S. McCoy at Avon (beauty company), Irene Rosenfeld at Mondelez (Oreos maker) as well as Meg Whitman at Hewlett-Packard. While toy maker Mattel is not a Fortune 500 company (making the list at #533), its CEO Margo Georgiadis also stepped down this year. All departing female CEOs have been replaced by males.
It’s difficult to draw a comprehensive conclusion about why this was such a tough year for female chiefs with a sample size as small as 23 women, the total to date. For one, the departures could be attributed to the fact that many women were leaders of food and beverage companies, whose industry has been become increasingly difficult for business. Today, companies struggle to adjust to changing consumer taste buds. Nestle, for instance, the world’s biggest food group, experienced the slowest sales growth rate in more than two decades last year. Analysts have suggested in the Financial Times that “consolidation is inevitable… as the incumbents battle for sales.”
For Jeffrey A. Sonnenfeld, Associate Dean of Leadership Programs at Yale School of Management, the story is more straightforward. “A lot of women have been easy targets when their performance weakens,” Sonnenfeld told the New York Times. “Maybe unconsciously, institutional investors get weak-kneed and don’t back them up and boards of directors collapse like lawn furniture.” While a bold hypothesis based on some existing biases at the top, it does bring to attention how the declining number of female executives may hurt progress made over the last decade.
In June, Nooyi was a favored speaker at the 2018 Forbes Women’s Summit, where she echoed advice given in previous years about women helping each other. “We need an environment where our sisterhood does not judge us but gives us constructive feedback,” Nooyi said. Despite the decline of female CEOs, the market’s unanimous appreciation of Nooyi’s achievements at PepsiCo will, undoubtedly, serve as a guide for women chasing the top.
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