PEPSICO'S NEW GENERATION ROGER ENRICO, PEPSICO'S NEW CEO, HAS TRAVELED A CAREER PATH AS CURIOUS AS THEY COME. BUT THEN, HE SAYS, "I THINK 'CAREER PATH' ARE THE TWO WORST WORDS INVENTED."
(FORTUNE Magazine) – ROGER ENRICO has done about everything you're not supposed to do to reach the top. The son of a small-town factory foreman, he never earned an MBA. He's drifted around PepsiCo, running a huge business, then a smaller one, then detaching himself altogether from operating management to become a sort of roving leadership guru. Nevertheless, one day in late January, PepsiCo Chief Executive Wayne Calloway, who is suffering from prostate cancer, asked Enrico to take over as CEO. Enrico didn't say yes. The proposition rattled inside Enrico's head for two full weeks.
"He's a reluctant debutante," says a close friend of PepsiCo's new man at the top. Another observer, Jeff Campbell, who used to be senior vice president of marketing at Pepsi-Cola, says: "It's like the Republican Party going to Colin Powell and saying, 'We need you to save the country from Pat Buchanan. You gotta do it.' " Campbell figures, "Roger Enrico's becoming CEO is great for PepsiCo. He's the embodiment of what Pepsi is supposed to be--aggressive, creative, in your face on a global scale, really tough. He's a stud."
The news that Enrico, 51, is Pepsi's choice to lead a new generation of management helped the company's stock market value bubble up by $2 billion the day after it was announced. Yet Enrico didn't want to say much to anybody about his new role or his plans for the $30-billion-a-year company. Strange: the company is cranking--its shares, at $65, are up 70% from where they were a year ago--and Enrico, by reputation, is a shameless promoter. A decade ago, when he was heading the beverage business, he presumptuously proclaimed Pepsi the victor in the Cola Wars. He even published a self-congratulatory memoir. Now that Enrico had something legitimate to crow about, what did he do? He disappeared. A few days after PepsiCo announced the promotion, the anointed one jetted off to his remote vacation hideaway on Grand Cayman island in the Caribbean.
We chased him. He agreed to talk--impressed, no doubt, by the sense of commitment it took to make the trek from the frozen northeast to the Caribbean in February--and once started, he covered a gamut of curiosities.
How will Enrico change PepsiCo? Should we get set for Cola Wars II? Might he forge some big global venture to strengthen the company abroad, where lie the real profit margins and where Pepsi gets outsold by Coke three to one? Will he spin off PepsiCo's restaurants--Pizza Hut, Taco Bell, and KFC, all relatively low-return businesses? Some people believe that Enrico will be an interim CEO, a relief pitcher closing Calloway's game while a trio of PepsiCo all-stars--Craig Weatherup, Chris Sinclair, and Steve Reinemund--wait on the bench. Is the new boss in for the whole season? Who is Roger Enrico?
PepsiCo's new CEO is broad-minded, mercurial, hyperactive. Usually he's effective. Sometimes he's dangerous. Always he's surprising. "Big changes to big things is the way you build a business," Enrico says. "The CEO's role is to articulate that message, because change is unsettling. Change is risky. Change is going to result in failure as well as success. The CEO has to provide a safety net."
Personally, he tends to perform without one. Mr. Cola Wars during the Eighties, Enrico is regularly given credit for instigating the Pepsi Challenge. Actually, he's the guy who axed it. Soon after he became president of Pepsi-Cola USA at age 38, Enrico decided that the celebrated marketing campaign--Pepsi vs. Coke taste tests, which you-know-who typically won--was tired. He changed the strategy: without consulting his superiors, he paid Michael Jackson $5 million, ushering in the age of celebrity soft drink endorsements. Some people thought Enrico was burning money (Jacko's hair got torched instead, remember?), but it turned out to be a great time for Pepsi. Enrico positioned the brand as the hip, cutting-edge alternative to Coke. Coca-Cola struck back with New Coke.
Enrico has blown a few too, though not on the scale of New Coke. "Madonna was a mistake," he says. He put the Material Girl in a commercial that did well overseas but so offended religious groups in the U.S. that it aired only once. Still, Enrico never shrinks from the big idea. "So many of us in business tend to overcomplicate things, making every single component right, squeezing out the last drop of profit," he says. "Sure, it's important to run a business smoothly. That's the art of management. But 'management' means working on the right side of the decimal point. I want people to work on the left side of the decimal point. That means taking chances."
AUDACITY has rewarded Enrico, but there's plenty more to his success. In 24 years at PepsiCo, he has rejuvenated each division--drinks, snacks, and recently restaurants. Every time, he simplifies the business, then passionately rallies supporters. "Roger is at once one of the warmest and most personable people, and so cold," says a former PepsiCo executive. "His strength is his ability to charm you and get you on his side, and also dispassionately evaluate a business and fix it. He never gets sucked into the culture, the history of a business. So he's not afraid to cut the fat, storm ahead, reorganize, shut the factory, kill the product line. He's agile and he's cunning."
He challenges everything and assumes nothing. For example, when Enrico took charge at PepsiCo's Frito-Lay division five years ago, the numbers looked fine. But Enrico smelled something rotten at the food company. Profits were rising, it turned out, because management was pumping up prices on Doritos and other snacks. Frito was scrimping on product quality. Enrico slashed costs, firing 1,700 workers and sweeping out management. He promised the employees who remained that he would funnel every penny of savings into making Frito grow.
"There's not a single thing that PepsiCo makes that anybody needs," he told the workers. To win back consumers, he lowered prices, cranked up product introductions, and spent heavily on fresh ads. He focused everyone on a single competitor, Eagle Snacks. Rubber chickens with pasted-on eagle wings hung, corpselike, around the factories. "You can't shadow-box your way to victory," says the veteran cola warrior.
Enrico did win the snack war, belatedly. This past February, three years after Enrico exited Frito, Anheuser-Busch, Eagle's owner, gave up on snacks.
Focused as Enrico is when he's fixing a business, he is astoundingly haphazard in managing his career. "That's quite correct," he says, obviously enjoying the character analysis. "I think 'career path' are the two worst words invented," he explains. "I've always believed you ought to go with the flow. Be a bit fatalistic. Don't overprogram yourself. A career adventure is the better way to think about life. You should do what seems exciting, even if there's a lot of perceived risk."
Enrico has led a wayward life since he was a kid in Chisholm, Minnesota, a small town in the Mesabi Iron Range. As he recalls in his memoir, he wanted to be an actor at first, an idea that was unsettling to his father, a maintenance foreman in a taconite processing plant. When young Roger volunteered for John Kennedy's presidential campaign, he caught the political bug. It didn't last. He got his first job in the local soft drink bottling plant, but he never envisioned pushing pop for a living. After high school--Enrico was smart, not brilliant--he had no clue where to go. He simply wanted to get away from Minnesota. Babson College in Massachusetts offered him a full scholarship, and he was off.
Enrico sped through Babson in three years. Running his fraternity and editing the college yearbook, he never thought much about his future. He knew he was people-oriented, and he figured, "Why not personnel?" An opening at General Mills brought him back to Minnesota, where his high school sweetheart, Rosemary Margo, was living. But he decided the personnel department was boring; he wanted to be in the action. He didn't have an MBA, though, so he applied to business school. He was accepted, but at the last minute he was seduced by advertising: "Join the Navy and see the world." Enrico quit General Mills and enlisted.
In the Navy officer candidate program, he figured he'd soon be riding a ship across the ocean. But he flunked the Navy's test for colorblindness. Dreading a tour of office duty, he volunteered for Vietnam. This was 1967. Enrico, 23, got stationed in the northernmost part of South Vietnam. His assignment was to help transport millions of gallons of fuel from unreliable sources to hundreds of destinations. Mortars, rockets, and Viet Cong sabotage made the job terribly difficult. Enrico had a commander--Bill Aldenderfer, "the Supply Corps version of Rambo," he says--who taught him to break rules and pass on paperwork to get the job done. Enrico wrote that this was his first lesson in "delivering precious liquids to his consumers."
After Vietnam, Enrico returned to General Mills. He snagged a job in brand management, and he loved it. But he felt that he was being passed over for raises simply because he didn't have an MBA. So he plucked the names of headhunters out of the yellow pages and sent out his resume. PepsiCo's Frito-Lay division, in Dallas, offered him a position. He and Rosemary, by now his wife, hesitated--because Kennedy had been shot there. But when Enrico took his first trip to Texas, he sensed that Dallas and Frito both were set to boom. So he began his PepsiCo career as a 27-year-old associate brand manager for a tiny brand of onion-flavored snacks, Funyuns.
FRITO WAS a tough, unbureaucratic boot camp, and Enrico fit in perfectly. At 31 he was offered the presidency of PepsiCo Foods Japan. "People thought I was crazy to go to Japan, because the business was terrible," says Enrico. "And I didn't turn it around. I never saw Japan as a steppingstone. I saw it as a fabulous life learning experience."
While the Japanese operation lost money under Enrico, PepsiCo's top brass deemed that market too perplexing to be a fair test of managerial skill. So they moved him to the company's beverage division, where he served in Brazil and was boss to Sergio Zyman, now Coke's marketing honcho. He then went to the U.S., and thrived. John Sculley, Pepsi-Cola's president at the time, prized Enrico for his brash point of view on marketing issues. And when Sculley left Pepsi for Apple Computer, Enrico was appointed his successor.
The Eighties seemed to be a fabulous stretch for Enrico--he was the Cola King, clinking glasses with Michael and Madonna. But a couple of epiphanies dampened his desire. First, he got scorched in the spotlight surrounding his 1986 book, The Other Guy Blinked: How Pepsi Won the Cola Wars. The title refers to Coke's decision to change its formula after 99 years. As things turned out, The Other Guy Kicked My Butt might have been a more accurate title (see chart). Anyway, Enrico's book got panned. He was branded an egomaniac. "I shouldn't have done the book," he says. "We did the book to sell Pepsi. It became a personal publicity thing. Now I'm really sensitive to not cross over the line." During the past decade Enrico has done only a handful of interviews. He rarely talks to the press about himself.
Also, there was the heart attack. Enrico had a coronary in 1990--in Turkey, during one of his many whirlwind tours for Pepsi-Cola. "I don't feel that my heart attack was such a dramatic life experience," he says. "It was a mild thing. But I suppose there has been some influence, subliminally." He quit smoking. And ever since the heart attack, Enrico has seemed less certain than ever what to do with the rest of his life.
For example, five years ago, after heading worldwide beverages, he jumped back to Frito-Lay, to run a much smaller business. Wayne Calloway says, "People outside PepsiCo were wondering, 'What happened to Enrico? Who has Roger made mad?' " The retiring chief executive puts Enrico's career in perspective: "At PepsiCo, we just don't have clear career paths. We never have. It's a little confusing when people join us, after they've read all sorts of books about career paths. Or they've been at other companies where you move from brand manager to group brand manager to vice president of marketing. We don't think that kind of progression makes for broad, freethinking leaders."
Enrico's weirdest career move--mystifying even to some Pepsi people--came in 1993. He quit operations and decided to be teacher/coach to the company's hotshot young managers. Enrico says that his mentor, Don Kendall, who was PepsiCo's CEO for 21 years before Calloway, called him frequently and hounded him, asking, "Are you working? What are you doing, Roger? Why does this make sense from your perspective?" Says Kendall, who is 75 and a sort of ambassador-at-large for PepsiCo: "I've needled the hell out of him." Enrico laughs and says, "Once Don understood what I was doing, I think he still thought I was a little flaky. But I had this idea that we should be doing a whole lot more to accelerate the development of our high-potential people. And I could contribute more to PepsiCo doing this than I could running a business on a day-to-day basis."
Enrico relished his time off the firing line, taking PepsiCo's young studs to offsite retreats. It was a brief vacation. Calloway asked Enrico in the summer of 1994 to take charge of the restaurants. Taco Bell was striking out. Pizza Hut was suffering. KFC wasn't doing any better. A friend says he didn't like going back into the pressure cooker, though Enrico says, "I didn't hate it when I got into restaurants." Once again he was an irrepressible Mr. Fix-It. Enrico decided that PepsiCo had been investing too much money in its restaurants, and he overhauled the strategy--more franchising, a la McDonald's. Big ideas in marketing, like stuffed-crust pizza, revived Pepsi's largest chain, Pizza Hut. Wall Streeters say the ongoing restaurant-division turnaround is the No. 1 reason for the recent rise in PepsiCo's stock.
EVERYTHING seemed to be humming along. Then, a couple of months ago, Calloway said to Enrico, "The time's come. Are you ready?" Calloway, 60, was getting sicker (see box). "I needed more time to take on the challenge of cancer," says Calloway, who headed PepsiCo for ten years. When he asked Enrico to become PepsiCo's new CEO, Enrico replied, "Well, that's pretty daunting." Calloway urged him: "Think about the challenge, what it takes, the personal commitment, the joy and fun, the impact you can have. Roger, you should think of this in terms of how proud you'll be."
Why didn't Enrico want to be CEO? "It was never something I lusted for," he says. People who know Enrico intimately say this is the truth. A big consideration for Enrico was lifestyle. He and Rosemary really liked living in Dallas, and they treasured their escapes to Grand Cayman, a 22-mile sliver of sand south of Cuba. Enrico scuba-dives there. "It's another world to me," he says. "It's fascinating and extraordinarily peaceful. Time is suspended. I find it energizing in a cocoony type of way. When you're out there against a 6,000-foot wall, it's like being in outer space." Adds Pepsi ad veteran Alan Pottasch, who taught Enrico to dive: "More than most people, Roger has a disdain for well-traversed areas, where the tourists go."
Enrico also owns a ranch in Montana. He and Rosemary, whose one son, Aaron, is 24, simply didn't want to move back East near PepsiCo's suburban New York City headquarters. "The main question inside my head," says Enrico, "was whether I felt comfortable with an open-ended commitment--to be CEO for an indefinite period of time, until you get the corporation positioned in the right way for many years of growth after you're gone." He says, "In the wee hours of the night, I decided it's the right thing to do."
So now PepsiCo is in the hands of a man who always turns on the fire--despite initial reluctance. Enrico will run PepsiCo differently than Calloway did. Calloway is a reticent, mild-mannered financial man. His hallmark was hiring great people, setting stretch targets, and hanging back while they built their businesses. Once he becomes CEO on April 1, roll-up-his-sleeves Roger will stay personally in charge of the worldwide restaurant division. "I'm thinking it's probably a good idea to keep running the restaurants for a while," he says. Apparently he's undaunted at the prospect of leading America's 15th-largest corporation while directing the world's largest restaurant operation. "We started an awful lot of things in restaurants. We set up a modus operandi. I'd like to see this change of direction through."
Staying in restaurants also is supposed to help him deal with a nasty habit: meddling. "Can I avoid meddling? I know the answer: Yes." He laughs. "But it's something I need to be conscious of. By running restaurants, I'll have a place to funnel my excess energy. I won't bother my senior team so much."
INVESTORS are wondering: Will Enrico unload PepsiCo's 28,000-plus restaurants? They don't seem to fit well in the PepsiCo portfolio, and they generate much lower returns than snacks and soft drinks. They also require lots of capital. "A spinoff of the restaurants is on my radar screen because people keep asking me about it," says Enrico, smiling. "But it isn't in my consideration set." He savors international opportunities. In Asia, for example, PepsiCo has over 2,000 eateries. Its typical unit there brings in more than twice the revenues of its average outlet in the U.S. "On a global scale, no question, McDonald's is a better operator than we are," says Enrico. "But there's no reason that we can't do internationally what McDonald's has done."
PepsiCo's overall financial recipe is changing significantly. Since Enrico determined that restaurants eat too much of PepsiCo's capital, management has decided to feed more money to the snack division. "In the snack-food business, there is no Coke," says Enrico, who adores a rivalry but doesn't mind a rout, either. During the next few years, he's expected to spend billions to spread Doritos and Fritos and Cheetos around the globe.
Enrico doesn't anticipate earthshaking acquisitions or global ventures. But he needs to do something to strengthen Pepsi-Cola abroad. The profits Pepsi earns from selling drinks outside North America are less than 7% of revenues. Coke's international margin: about 30%. "Our margin is low because we're making big-time investments," says Enrico. "As they pay off, the margins will come up smartly." He won't sit still in the meantime. Enrico says he might overhaul PepsiCo's organizational structure. Currently, in snacks and beverages, domestic and international operations are run separately, each with its own CEO, marketers, and finance people. In a global corporation, which PepsiCo is supposed to be, does this setup make sense? "I don't know where we'll come out on this question," Enrico says.
Expect major management changes. The same day Enrico got appointed CEO, three people were promoted to PepsiCo's board of directors: Chris Sinclair, the international snack and beverage boss; Craig Weatherup, who runs Pepsi-Cola North America; and Steve Reinemund, the chief enchilada at Frito-Lay. "I hope we'll be the most powerful leadership team in American business," says Enrico. The frontrunner of the trio--the man most say would have been made CEO had Enrico said no--is Sinclair, 45. He comes across as quiet and reserved, a Calloway type, but he's an inspiring leader and fearless marketer. Sinclair also is a true international, born in Hong Kong and raised in India. If Enrico reorganizes PepsiCo, Sinclair probably will be chief of worldwide beverages.
The sleeper is Reinemund--though his style is anything but laid back. Reinemund, 47, is a gung-ho ex-Marine who ran Pizza Hut successfully and then took over Frito-Lay after Enrico left. "Steve is the most effective driver of a business that I've ever seen," says Enrico. Reinemund is the top candidate to oversee worldwide snacks. The third lieutenant, Weatherup, 50, has had ups and downs at Pepsi-Cola--some say he reacted slowly to private-label competition--but Enrico prizes him for his earnestness and integrity. With PepsiCo's chief financial officer, Robert Dettmer, retiring, Weatherup could fill the slot and possibly get other corporate duties as well.
Once Enrico gets his team aligned, a big question will be, How long is Roger in the job? "No way more than three years," says a close friend, who believes Enrico might move on to a position in the entertainment industry or perhaps teach at a university. "That's dead wrong," says Enrico. "I recognize this job is an open-ended commitment. I hope I have the wisdom not to shortchange PepsiCo. Or to stay too long."
Shareholders should hope he stays a good while. But what can anyone know about Roger Enrico, except that he'll surprise once again?
REPORTER ASSOCIATES Suzanne Barlyn and Kimberly Seals McDonald