(FORTUNE Magazine) – Given the way Steve Heyer has muscled into Coca-Cola, you have to wonder if the new guy will roll over everyone in his path. Formerly one of Ted Turner's favorite lieutenants at Turner Broadcasting--and nicknamed "the Tank" for his ironclad aggressiveness--Heyer bid for a job at Coke this year in his typical fashion: with a hard-bargaining lawyer in tow. The Coke brass didn't know quite what to make of the Tank and his attorney; in its 115-year history, Coke had never recruited a top-level executive from another company. Heyer, apparently, knew what to make of Coke. After four months of touch-and-go negotiations, Heyer bagged one of the biggest pay packages ever granted to a Coke exec other than the CEO: a $1 million signing bonus and cash and stock worth upwards of $20 million.

"Welcome to the 21st century," says Coke Chairman and CEO Doug Daft wryly of Heyer's hire. Eight months into their union, it's looking as though Daft may be on the short end of the pre-nup. Soon after Heyer, 49, arrived in April with the deceptively narrow title "president of Coca-Cola Ventures," he urged Daft to kill a core piece of that new business unit: a partnership with Procter & Gamble that Daft had arranged only months before. Shrewd move on Heyer's part. Unleashed from a dead-end assignment, he soldiered on to the important stuff. Heyer is overhauling Coke's marketing. He is redrafting the corporate strategy. He has taken charge of a slew of functions, including concentrate production, Coke's core business. Recent buzz on Wall Street has Heyer gunning for Daft's job and taking flak inside the company for his brashness. Heyer dismisses the rumors with trademark bluntness. "There's too much Kremlin-watching," he snipes. "The speculation is starting to frost my ass."

Heyer may not like having his career dissected, but it comes with the territory. This is, after all, Coca-Cola, once America's most admired company on FORTUNE's annual list, traditionally an icon of global marketing, a mighty profit machine, and a must-have stock for quality-minded investors. It is still the world's most famous brand; in fact, it's the most valuable, according to a recent report by the marketing consultancy Interbrand. Given Coke's place in corporate history and the investing world's psyche, people care about what happens to this company, and about who is entrusted to run it. Since the death in 1997 of legendary CEO Roberto Goizueta--and the ensuing failure of his successor, Doug Ivester--they have been sorely disappointed. The once powerful stock is now trading at $47, right where it was five years ago. Sales growth of Coke-branded products has slowed dramatically. Three straight years of declining earnings have sapped the company's strength.

Under Daft, who took charge two years ago, Coke has begun a recovery, but it's slow. The CEO laid off 5,200 employees last year--20% of Coke's bureaucratic work force--and the deep cuts have laid the groundwork for better profits this year. At least one analyst, Caroline Levy of UBS Warburg, believes this is the beginning of a multiyear turnaround, and in October she raised her rating on the stock from hold to strong buy. But Daft has influential doubters. CSFB's Andrew Conway and Morgan Stanley's Bill Pecoriello, the top-ranked beverage analysts according to Institutional Investor, say that Coke's long-term goal of 11% to 12% earnings growth is probably not sustainable. And Daft already has reduced Coke's profit growth target twice, from the 15-20% range in the Ivester era.

All this means that the pressure on Daft, 58, an easygoing Australian who neither aspired to nor was groomed for the CEO job, is immense. He has the support of Coke's board--and most critically, its most powerful director, Warren Buffett. But that support doesn't make Daft's task much easier. As Heyer puts it, "Doug Daft has one of the toughest hands to play in the history of American industry."

Coke's fundamental problem is one that Daft inherited: His predecessor, Ivester, was fixated on dealmaking and financial engineering at the expense of marketing and new products. The pattern actually started under Goizueta, who, in the mid-'80s, devised a strategy of consolidating Coke's distribution system by acquiring weak bottlers and selling them to stronger ones around the world. Year after year, Goizueta delivered 17% earnings growth--magically, it seemed. In reality, Goizueta was chasing unrealistic growth targets and bolstering Coke's earnings with one-time gains from the sales of bottlers. Hoping to perpetuate the magic, Ivester stretched the system to its near-breaking point: He overcharged Coke's bottlers for cola concentrate and strong-armed them into making high-priced acquisitions. Now the bottlers--essential to Coke's success because they produce the drinks and muscle them into the marketplace--are leveraged to the hilt and earning lousy returns: an average 5% on invested capital.

Daft is making strides in repairing relations with bottlers. In December, for example, Coke unveiled a program to give flagship U.S. bottler Coca-Cola Enterprises sorely needed funding. Nevertheless, Daft is in a fix. Truly solving the bottler puzzle will be expensive, says Morgan Stanley's Pecoriello: "Over time, Coke will have to share more of its profits with bottlers around the world, and this will constrain Coke's earnings growth." The real solution, says Pecoriello, is to pump up the sales volume. "What Coke needs to do is get its marketing and innovation right." That will be no small feat. The company's core brand--the bubbly, brown, sugared water that provides the bulk of profits to Coke and its bottlers--is in trouble. The growth of the drink abroad, where the company earns three-quarters of its income, has slowed; in the U.S., sales peaked in 1998 and have been flat since. Blame poor marketing. A Morgan Stanley survey of 25,000 consumers suggests that the Coke brand is weaker today among young people than at any time in the past 16 years. At the same time, Pepsi has perked up, thanks in part to Britney Spears. While Coke is willing to spend big--this year Daft upped the $7.7 billion marketing budget by a "one-time" $300 million--the money hasn't done much for the brand. Do you even know Coke's current slogan? If you answered "Coke is it," you're two decades out of date. The answer: There isn't any slogan. Until Sept. 11, Coke was pitching the utterly forgettable line "Life Tastes Good." The company yanked the upbeat tag after the terrorist attacks, and it's probably gone for good.

Daft knows he has lots to do. "Coca-Cola is our lifeblood," he says, vowing to revive the brand. (Coke's ad people are working on a new campaign, due for the Olympics in February.) He's up against a tough competitor, however: Pepsi, the company Goizueta dismissed in 1996 as "less relevant." If only Goizueta could see what has happened since: Pepsi has grabbed market share from Coke in the U.S. by aggressively pushing new products like Mountain Dew Code Red and Sierra Mist, which have sapped the growth of Coke's Sprite. And while Coca-Cola stuck stubbornly by soft drinks--loath to invest aggressively in any product with lower returns--Pepsi happily seized the No. 1 U.S. share in noncarbonated beverages. Health-conscious consumers love bottled water and sports drinks, and the market for noncarbonated beverages is expanding at least 60% faster than that for soft drinks. Good for Pepsi, which owns Tropicana, Gatorade, and Aquafina, all bestsellers in their niches. Tricky for Coke, which, under Daft, has just begun spending heavily to expand its Dasani water, Powerade energy drink, and long-neglected juice business (Minute Maid). Daft sees global opportunities in all these segments--and since Coke's real strength against Pepsi lies outside the U.S., he may well grab share in foreign territories. But as a laggard in these less profitable categories, Coke is playing an expensive game of catch-up.

"Coke's growth wheel is stuck," says Pecoriello. Sure, the company is still a profit machine: Its expected net income is $4 billion on $20 billion in revenues this year, vs. PepsiCo's estimated $3 billion on $27 billion in sales. But future growth is what really counts, especially to investors eyeing the stock. Pecoriello and CSFB's Conway recommend PepsiCo shares because they expect Pepsi's profits to increase at least 12% annually. Pegging Coca-Cola's growth at 10%, both analysts are neutral on Coke stock.

Given these kinds of challenges, you see why Daft needs help. Besides Heyer, two other characters--ghosts of Coke's glory days--are playing key roles. One is Don Keough, 75. Keough was Coke's president for 12 years under Goizueta and retired in 1993. Still an icon inside Coca-Cola, Keough is fully vested psychologically and financially: He owns close to five million shares of Coke stock, worth $235 million. He is also well connected. Two years ago, Keough was a background instigator as two directors, his lifelong friend Warren Buffett and his business partner Herbert Allen (whose investment firm, Allen & Co., Keough chairs), forced out CEO Ivester. Today Keough is an official advisor to Daft; the CEO says they talk "two to several times a week, as we've done for 30 years." Keough has also counseled Heyer. He has told Heyer to learn the business and "keep your head down"--and if he does so, he'll have a "great opportunity." Keough won't be more explicit than that, but here's one translation: Heyer is the leading candidate to be Coke's next CEO if he controls his impatience and ambition. That's a big "if," but more on that later.

The other ghost of old Coke is Brian Dyson, who came back as vice chairman and chief operating officer in July. It's a surprising move. A dapper, patrician Argentine, Dyson, 66, headed Coke's domestic arm through ups (the launch of Diet Coke) and downs (New Coke) during the Goizueta-Keough era. Then he had an unimpressive run at bottling giant Coca-Cola Enterprises. "To tell you the honest truth, I did not want to come back," says Dyson. But when Daft called and Keough prodded, he caved. Given that Daft sacked or lost 21 of 76 senior executives, Dyson acts as the in-house old hand, directing and mentoring the troops. He's signed on for just two years--no longer, he vows. However temporary, Dyson is key to Daft's recovery plan. Daft calls him part of "the triumvirate"--the other two members being Heyer and himself.

As any student of Roman history knows, if you're part of a triumvirate, you'd better watch your back. But if Daft fears an internecine battle, he's not letting on. By nature, he's more statesman than schemer. He's a diplomat--an assessment echoed by no less an authority than Richard Holbrooke, the former U.S. ambassador to the United Nations, who is now an advisor to Daft. "Doug's style is so different from most American CEOs," Holbrooke says. "He's much more low-key than hard-charging." Daft, who spent most of his Coke career in Asia, taught high school math almost 40 years ago. Holbrooke sees Daft as still a teacher at heart: "Doug doesn't like to give orders. He leads by setting a goal and encouraging people to learn for themselves how to move toward it."

When asked to name his business-leader heroes, Daft looks (diplomatically) no further than Coke itself. He says he strives to combine Don Keough's skill at building relationships with Roberto Goizueta's masterful strategic vision. Almost two years into the job, the accidental CEO has proven himself on the relationship front. He dutifully rebuilt bridges that the bullying Ivester had burned. He's apologized to foreign regulators and Coke bottlers, settled a racial discrimination suit filed by black Coke employees for $188 million, and extended an olive branch to the African-American community.

"Doug Two," as Heyer calls Daft, is the anti-Ivester. He is adamant that Coke be a good citizen. After the Sept. 11 tragedies, the company gave $12 million, one of the largest corporate contributions, to the Red Cross and to New York City and Washington, D.C.--and Daft refused to issue a press release about it. (Granted, he did tell FORTUNE.) Daft isn't bothered that Coke spent $150 million for its exclusive Harry Potter tie-in and was required by Warner Brothers to downplay its drink in its own ads. "You don't need to go and beat your chest," Daft says. (Heyer, for one, disagrees; he gripes that you can hardly tell that the ads, which offer only a three-second glimpse of the Coca-Cola logo, are Coke spots.) Daft says he's particularly proud that Coke, as part of the Potter partnership, is putting libraries in America's 10,000 poorest schools and donating books in 40 countries.

Daft's gift for building bridges is impressive, and would mean a great deal were Coke at the top of its game. But at this critical juncture, Coca-Cola needs more than diplomacy. It needs leadership and, just as important, great execution. On that front, Daft has often failed. Example: Coke's joint venture with P&G, the deal Heyer scotched, would have given Procter's declining food brands, including Pringles and Sunny Delight juice, a free ride on Coke's distribution system without giving much of anything back to Coke. It was, on P&G's part, "a brilliant sales job," says Emanuel Goldman, a consultant and former top-rated securities analyst who has followed Coke for decades. "The decision-making in the past two years has been terrible," Goldman adds.

Daft seems to have neither the financial acumen nor the internal political savvy to carry out his broad vision. Witness Coke's $16 billion bid for Quaker Oats, Gatorade's owner, a year ago. The strategy behind the deal--to get a lead position in the noncarbonated-drink market--was endorsed by the board. But Daft handled the deal clumsily. Not only did Daft pose in the press with Quaker CEO Bob Morrison before Coke's board had discussed the deal, but he then showed up at the board meeting without having reviewed the due diligence. "We completed the due diligence Tuesday"--the day Coke's directors met--"and we literally sat through the board meeting and heard the due diligence together," Daft explains. Director Peter Ueberroth spoke both first and loudly against the deal. On the spot, Warren Buffett did the math, and when he didn't like the price, the board concurred that Coke should not buy Quaker. (PepsiCo subsequently did.) Most CEOs would have felt embarrassed or rebuked. Not Daft. He still doesn't. "I have a board to advise me," says Daft, who adds that he agreed with the board's decision, "and I'll continue to use them that way."

Which brings us to Steve Heyer, Daft's newest advisor. Heyer is as defiant as Daft is deferential. While Daft insists, almost plausibly, that he has "no ego," Heyer would never be tempted to make such a claim. And while Daft is all about relationships, Heyer has apparently built a career on the premise that relationships are fine as far as they go, but they better not get in the way of a great strategy.

This is a consultant's view of the world, and Heyer started out in business as just that--a company-hopping advice man at Booz Allen. He worked with some of America's toughest bosses: Gulf & Western founder Charlie Bluhdorn, ABC-TV's Leonard Goldenson, oilman Leon Hess, and Lou Gerstner when he was at RJR and American Express. Heyer was fearless about telling these larger-than-life characters that their strategies were wrong. "He always went over and above what they expected," says Young & Rubicam CEO Mike Dolan, who worked with Heyer at Booz Allen. "In every single assignment I saw Steve in, the client offered him a job."

Heyer stayed in consulting for 15 years and scaled the ranks quickly--partner at age 29, youngest member of the executive committee, first this and best that. At 40, he left to head strategy at Y&R, where Peter Georgescu, the ad firm's CEO at the time, recalls, "He wanted everything overnight. He'd say, 'How soon can I get the top job here?' But always with a twinkle in his eye." Heyer became president of Y&R Advertising, but he didn't stay long. His big break came one day when Ted Turner, a former client at Booz Allen, phoned and said, "Steve, I'm gonna buy a broadcast network and I need a guy in New York."

Turner did not buy a broadcast network; he sold his company to Time Warner instead. Still, Heyer joined Turner Broadcasting as head of sales and made his mark by convincing advertisers to pay premium prices for viewers. His logic was persuasive and usually managed to trump his cocky delivery. "Steve thinks everything through," says Viacom CFO Rich Bressler, who worked with Heyer at AOL Time Warner (which owns FORTUNE as well as Turner). "He'd say, 'Now Rich, let me tell you the next question you're going to ask.' He was right most of the time."

Strategic in his career moves as well as his business sense, Heyer looks out for No. 1. Promoted to president of Turner Broadcasting in 1996, he moved to Atlanta and arranged a visit with someone he'd been told he should meet: Don Keough. "We were supposed to talk for 15 minutes and we spent hours together," Heyer recalls. "The moment I got in my car, I called my mother and said, 'I just met a guy who's really special. This is the kind of mentor I'd love to have.' " Around the same time, Heyer called Gerry Roche, the renowned CEO headhunter at Heidrick & Struggles, trying to insinuate himself into Roche's Rolodex. The networking paid off last fall when Roche, whom Daft had assigned to do a search, called Heyer back.

It was perfect timing. Inside Turner, Heyer was sabotaging himself by mouthing off about AOL Time Warner's top management. "I disagreed with a lot of their policies and I was vocal about it," he says. Ted Turner says a tipping point came when Heyer refused to buy into AOL's jacked-up cash-flow targets for the cable business. "Steve doesn't bow his head like some mindless slave," says Turner, who, it should be noted, has his own beefs against the company. AOL Time Warner, he adds angrily, "ran off one of the smartest people in the company." Heyer seems proud of his rebel status. "I don't roll over," he says.

Now at Coke, where the culture is more entrenched than at AOL, Heyer will have to think harder before pushing the line. It wasn't the great pay package that drew him to Coke, he says, but rather the world-class brand, the huge challenge, and the CEO, whom Heyer says is "visionary" and guided by integrity. "Doug has soul. Don Keough has enormous soul. These guys are patriots in a world of mercenaries," Heyer says. Heyer's job as "chief problem-finder" (Heyer's term) and "partner" (Daft's term) is to ask "Why do it this way?" a thousand times and then devise strategies around the CEO's vague directives. For instance, Daft's mantra to "act local" led to some embarrassing missteps, especially for a company that likes its brand image squeaky clean. One German TV spot even showed young people erotically rubbing Coke's contour bottle. With a few colleagues, Heyer wrote new marketing instructions for Coke, distilling hundreds of pages to a crisp half-page. (Sample: Coke is about optimism and authenticity; it is never cynical or funky or moody.)

Heyer also reshuffled Coke's ad agencies, insisting that Interpublic Group CEO John Dooner (who oversees Coke's main agency, McCann-Erickson) and Ogilvy & Mather chief Shelly Lazarus (who just won Sprite and Fanta) be the senior account executives on the business. Most agency bigwigs delegate the grunt work, but Dooner and Lazarus say they've agreed to serve at Heyer's beck and call. (And why not, given the $1.7 billion Coke spends every year on advertising?) "I sent John on a [Coke commercial] shoot--he hadn't been to one in 20 years," says Heyer. True, says Dooner, who adds that "Steve is a great user of this BlackBerry thing," i.e., the popular e-mail device. "So I got one too. If you want to play with Steve, it's a 24/7 commitment."

Beyond marketing, Heyer is in charge of Coke's noncarbon-ated businesses--the hot-growth segment--and also M&A. He just cut a $181 million deal to buy Odwalla, which will broaden Coke's juice business from low-profit basic drinks to higher-margin superpremiums. "My job is a movable feast," says Heyer, whose oversight has expanded to information systems, procurement, human resources--every staff function except finance, legal, and communications. Of course he's not content. "To be quite honest, I'd rather not have all that. Running a bunch of staff functions is not in my makeup." He adds, "I feel schizophrenic. I believe there's so much to be done. But I have to gait how fast I go so I can be acceptable and helpful. I want to be respectful."

You get the sense that Heyer gets up every morning, stands in front of the mirror, and says to himself, "Behave!" The rumors that he was angling for power by promoting himself as Coke's main boss started circulating in the company and on Wall Street in October, when Andrew Conway, the CSFB analyst, issued a report titled "Steven Heyer Outlines His Priorities and Strategies." Heyer denies he was trying to outshine Daft, and Daft himself calls such conjecture "nonsense." Says Daft, "His impatience is appealing to me, and I've told him, 'Don't change that.' "

How the power at Coke gets divided from here will hinge on many questions: Will Heyer's ego get the best of him? Will he and Daft get along? Which strings will Keough pull? Will the board lose faith in Daft if Coke's recovery meanders? And, if so, will the board then recruit another outsider for leadership? "I think we're not done with management changes at Coke," says Coke watcher Goldman. His scenario: "Dyson gives Heyer time to learn the business, but by the time Dyson steps down, Heyer will officially move into a responsible position like president, and maybe CEO. Daft is chairman, but the real power belongs to Heyer. If he got all this power so quickly, you think he's going to slow down now?" Goldman is not alone with his prediction. "Heyer is steering the ship," says Tom Pirko, another industry consultant. "The first impression Steve gives is that nothing will stop him from getting to the top."

For a company that desperately needs stability, such a quick ascendancy would not necessarily be something to cheer. Before he moves up, Heyer has to get operating experience--after all, pushing pop through a worldwide system of local bottlers is different from his old job of selling the planet on CNN, TNT, and the Cartoon Network. If Heyer moves up quickly to the No. 2 spot, it may be counter to Daft's wishes. The CEO says he isn't inclined to name a president until at least 2003, after Dyson leaves. Moreover, it's an open horserace, says Daft--though insiders insist that Heyer's only viable competition is Coke Americas boss Jeff Dunn, 44, who has scant international experience and probably needs at least two years to turn around the domestic operation. Daft himself bristles over the issue of leadership. Asked whether he is ceding power to Heyer and Dyson, he turns defensive for the first time: "I don't understand how people could say that I'm ceding power. I don't want to keep all the work for myself. But I'm clearly directing the work."

Though he says he feels "drained personally," Daft professes to love his job and seems determined to keep it. "I've said to the board that I'd give them at least five years as chairman and CEO--that's from this year, not from when I started," he says. Great, if he earns it, but the board has no agreement to keep Daft for any particular length of time.

It's worth observing that power at the top can be deceptive, particularly at Coca-Cola. In 1980, when CEO Paul Austin was supposedly running the company, his judgment was impaired by the early stages of Alzheimer's, and former chairman Robert Woodruff was the one actually making the big calls. Seventeen years later, Austin's successor, Roberto Goizueta, was ill with cancer; few people knew that Ivester was essentially running Coke for at least a year before Goizueta died. And then, when Ivester moved up, he thought he had the power--but he failed to cultivate the board and Keough, and learned the hard way that he didn't have the power after all. All of that is a message to Daft and Heyer and anyone else with a stake in Coca-Cola: Power at this company can be as mysterious as the secret formula itself.

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