Reality Arrives at Pepsi as CEO Punishes Exec Responsible for Brand's Collapse

Last Updated Sep 30, 2011 10:59 AM EDT

PepsiCo (PEP) has finally removed Massimo d'Amore as CEO of its Global Beverages Group, three years after he began a disastrous, self-indulgent makeover of Pepsi that has left the brand in tatters. He is replaced by Al P. Carey, former CEO of the Frito-Lay North America snack food business.

Although Pepsi's press release states that d'Amore will retain responsibility for Gatorade, Tropicana and Latin American beverages, that's a decidedly second-rung portfolio and he now reports to Carey instead of directly CEO Indra Nooyi. It's a demotion, he's banned from meddling with Pepsi anymore, and Nooyi wants to see a whole lot less of him, in other words. The enduring legacy of the d'Amore era will be Pepsi's humiliating slip from No.2 soda to No.3, behind Diet Coke.

As I noted in June, the company has spent so long in a series of management shuffles that management shuffling is now at the heart of its strategic problems.

This most recent shuffle -- it's at least the 14th re-ordering of senior executives since 2007 -- was accompanied by the departure of Eric J. Foss, CEO of the Pepsi Beverages Company, who was only given that title in February 2010. The company said Foss's departure was "contemplated by the terms of his agreement," to which the only rational reaction can be: What idiots appoint a CEO to their most important, most troubled brand, knowing he'll leave just a few months later?

Welcome to Pepsi
So, what happened? Many of the answers can be found in a 2009 Business Week story that described the arrival of d'Amore (pictured) atop Pepsi and his decision to destroy as much of the brand's heritage as quickly as possible. The scene opens:
On Oct. 3, 2007, Nooyi and d'Amore were in Venice for meetings. During a break she asked him to walk with her in the gardens of the Hotel Cipriani. Would he run the beverages unit? she asked.
On the verge of the biggest recession in a generation, Nooyi and d'Amore were swanning through Venice like characters in a Merchant Ivory movie! D'Amore decided he wanted the seven brands he supervised, which included 1,121 different bottles, cans, and other packages, redesigned before the Super Bowl of 2009 -- a deadline that meant everything was rushed and there was no time for pre-market testing.

They called in wacky design guru Peter Arnell to handle the new logo and packaging for all Pepsi brands and Tropicana. The move was disastrous for Tropicana, comical for Pepsi and Arnell's over-reaching ego and lack of results led, ultimately, to him being fired from his own agency by holding company Omnicom (OMC).

Groupthink sets in
By this time, d'Amore, Nooyi and Arnell were talking only to themselves, BW reported:
When d'Amore and Nooyi invited Arnell in to talk cola, no other Pepsi marketing people were present. Nooyi knew exactly what she was looking for. "The iPod is an elegant product people like to be seen with," she recalls telling Arnell. "I want Pepsi to be an elegant product people like to be seen with." Arnell was jazzed.
They chose a new target market:
The demographic of people who march to the beat of their own drum, who say no even when it's unpopular, who say yes even when it's an uncomfortable change, who change a hundred-year-old brand icon because the new one is simply more beautiful and fitting for our times.
Translation: Having completely divorced themselves from the average American consumer (raising a family on an income of about $40,000 a year, far from the Cipriani Venice), they decided that Pepsi should be about themselves. Soda is a dollar-store, grocery-coupon business. It's also good for diluting rum and bourbon. Yet somehow d'Amore et al. concluded that "elegance" was the key to the brand.

The news of d'Amore's passing followed a 5 percent volume decline in North American sales of Pepsi's carbonated soft drinks in Q2 2011. D'Amore also cancelled an appearance at the Sept. 7 Barclays investor conference in Boston, Mass., because, the company said, he was "recuperating from minor surgery." I guess he needed stitches after removing Nooyi's shiv from his back.

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