(FORTUNE Magazine) – Doug Daft's intended retirement as Coca-Cola CEO at the end of 2004 marks the second succession crisis in five years for the soda giant. Technically, Coke's high-powered board isn't ousting its chief, as it did in 1999 when it bounced blustery CEO Doug Ivester. But Daft's "retirement" isn't mainly his decision. Coke's board has been discussing Daft's replacement since last October. Coke announced his departure earlier than planned (in part because of inquiries from FORTUNE and others) and hopes he'll have handed over the reins to a successor by summer. The board is displeased with Daft's failure to stem a seemingly endless string of problems: ongoing investigations into Coke's accounting and marketing practices; lawsuits; weak sales in key markets like North America and Japan; senior management turnover; plus lackluster 2003 earnings and a lagging stock price. Deep down, Daft, 60, is relieved his run is over, says one person close to him, adding, "The job is harder than Doug ever imagined."

But finding a replacement is proving problematic, even for the big guns Coke has on the case. (The search team includes directors Jimmy Williams of SunTrust Banks; former American Express CEO Jim Robinson; investment banker Herbert Allen; media mogul Barry Diller; Don Keough, a highly influential former president of Coke; plus, ex-officio, Warren Buffett, whose Berkshire Hathaway is Coke's single biggest shareholder.) The lone inside candidate is current president Steve Heyer, who joined Coke from Time Warner three years ago. Despite being widely cast as Daft's "heir apparent," Heyer, 51, has never achieved that status in the eyes of Coke's board. Hard-charging, he has succeeded as a change agent, realigning Coke's network of ad agencies, improving its marketing, cutting costs, and helping repair the company's strained relationships with its bottlers. Some Coke directors, however, view him as more a manager than a leader and worry that he shares Ivester's brash, abrasive ways. And Coke's problems occurred under his watch too. Heyer's chances of becoming CEO are less than 50%, say sources.

Thus Coke's board faces a conundrum. Recruiting an outsider "would turn the company upside down," says one Atlantan close to Coke, noting that it has always groomed its own top talent. Also, Heyer would surely bolt--and despite its disinclination to name him CEO, the board wants him to stay.

The board has no compelling candidates lined up. Some directors have discussed Gillette chairman and CEO Jim Kilts. A former chief of Nabisco, Kilts, 56, is a proven turnaround guy and, critically, a favorite of Buffett's. But some on the board fret that, while statesmanlike, Kilts may lack the passion to inspire Coke's troops and franchisees. Other potential candidates could include Bob Eckert, Mattel's much admired CEO, and Roger Deromedi, who recently became sole chief of Kraft. Both have yet to prove they can turn around their own companies, though.

However the search plays out, Keough is central to this drama. Coke's president for 12 years until he retired in 1993, Keough, 77, now chairs Allen's firm, Allen & Co. He's always an effective stealth force in management shakeups at Coke (including this one), and so the directors enlisted him to rejoin the board. With two CEO missteps under its belt, Coke can't afford to misfire again. --Patricia Sellers