PepsiCo Taps Foss to Lead Combined Bottling Unit

PepsiCo Taps Foss to Lead Combined Bottling Unit

Head of Firm's Biggest Independent Bottler Will Manage Integration and Help Pose Bigger Challenge to Coke

PepsiCo Inc. chose the head of its biggest independent bottler to lead the combined North American bottling unit when it's rolled into the company early next year, advancing a showdown between PepsiCo's new integrated business model and Coca-Cola Co.'s traditional franchise system.

The executive, Eric J. Foss, will report directly to PepsiCo's chairman and chief executive, Indra Nooyi, whom he battled for more than three months over the price and terms of PepsiCo's acquisition of its two biggest bottlers. The Purchase, N.Y.-based food-and-beverage giant agreed in August to pay $7.8 billion for the shares it didn't already own of Pepsi Bottling Group Inc., led by Mr. Foss, and PepsiAmericas Inc., led by Robert Pohlad.

By taking its big U.S. bottlers in house, PepsiCo has said it will be able to cut costs and deal more directly with stores, helping to strengthen its dominance over Coke in noncarbonated drinks.

Analysts praised the selection of Mr. Foss, especially since it wasn't certain he would take the job if it was offered. Mr. Foss had already served as CEO and chairman of Pepsi Bottling, a public company with $13.8 billion in annual revenue, so it was unclear whether he would want to work for someone else, particularly after the testy negotiations.

But Ms. Nooyi said that the rancorous deal negotiations "were in the past" and that Mr. Foss brings continuity and stability to the new unit, as well as a necessary attention to detail. "Eric Foss is the best of the best," she said. "He's the operator's operator."

The choice of an experienced operator will put additional pressure on Coca-Cola, which would benefit from any disruption tied to the integration. The Atlanta beverage giant relies on large, independent, publicly traded bottlers to distribute the bulk of its drinks in the U.S. Coke Chairman and Chief Executive Muhtar Kent has said he's committed to the franchise model, and he praised Coke's improved collaboration with its bottlers, especially on a joint supply chain.

Mr. Foss has a reputation for managing details, from getting displays in stores to wringing out pennies per case in savings.

"The bottom line is that with PepsiCo pouring $8 billion into this deal, it's essential they do it right," said John Sicher, editor and publisher of Beverage Digest, an industry publication. "Eric's appointment goes a long way to insuring that."

Mr. Foss, 51 years old, is a 27-year veteran of PepsiCo and its affiliates. He worked for PepsiCo before it spun off Pepsi Bottling in a 1999 public offering. He was named that company's CEO and a board member in July 2006, and its chairman in 2008.

Mr. Foss's initial task will be to guide the integration of the bottling unit. In the long run, his unit will be expected to improve delivery to big customers like Wal-Mart Stores Inc., to better incubate and deliver relatively small juice and tea lines, and to help boost once-hot Gatorade.

PepsiCo said an advisory committee will help oversee the bottlers' integration, which is awaiting regulatory approval. Committee members include Mr. Foss, Mr. Pohlad, Ms. Nooyi and Craig Weatherup, former head of Pepsi Bottling.

In another management decision disclosed Monday, PepsiCo named Frito-Lay marketing executive Jaya Kumar as president of its Quaker division.