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PepsiCo shakes up North America drinks unit

Pepsi bottles are seen on display in New York
Pepsi bottles are seen on display in New York

By Martinne Geller

(Reuters) - PepsiCo Inc announced a shake-up of its beverages unit on Wednesday, appointing a new head to try to turn around the business, which has lagged behind Coca-Cola Co in North America.

Pepsi named Albert Carey, a 30-year PepsiCo veteran who most recently ran its Frito-Lay North America unit, to be CEO of PepsiCo Americas Beverages, effective immediately.

Carey, 60, will take over responsibility for all aspects of the beverage business in the Americas, including the North American bottlers that PepsiCo bought in 2010.

Carey's new role essentially combines those of Eric Foss, the former CEO of the bottler, and Massimo d'Amore, whose tenure as Americas beverage chief has been marked by several successes and one large misstep.

"PepsiCo has been underperforming Coke in North American beverages and now they've completely revamped their structure and management," said John Sicher, publisher of industry newsletter Beverage Digest. "I don't know whether this will improve their performance, but Carey is one of the strongest executives at PepsiCo."

Coca-Cola, which acquired its North American bottling operations after Pepsi did, still has a separate bottling manager in North America.

Foss -- former CEO of Pepsi Bottling Group, which PepsiCo acquired last year -- will leave the company in December. His eventual departure was expected following the integration of the bottler.

Foss, 53, plans to take a senior leadership role at a public company, PepsiCo said. A spokesman could not provide further details.

PepsiCo shares were up $1.27, or 2.1 percent, at $61.81 in midday trade on the New York Stock Exchange.

In the most recent quarter, North American drink sales volume fell 1 percent for PepsiCo. At Coke it was flat, excluding a boost from new cross-licensed brands like Dr Pepper.

CHANGING OF THE GUARD

Carey's promotion marks a partial demotion for d'Amore, who has run the Americas beverage business since November 2007. While his tenure saw the launches of various lines of Gatorade and the lower-calorie Trop 50 juice drinks, he is most often associated with a failed redesign of Tropicana Pure Premium juice packaging that was scrapped less than two months after its launch due to a plunge in sales.

"Although Foss's departure likely suggests continuing struggles in North America beverages ... we see the other management changes as likely longer-term positives for the stock," said Bernstein Research analyst Ali Dibadj, who described d'Amore as being "oft-criticized."

D'Amore will retain responsibility for Gatorade and Tropicana in North America and the Latin American drink business, and will report to Carey. He will also remain head of the "global beverages group," which focuses on innovation, research and development and global brand management. In that role, he will continue to report to PepsiCo CEO Indra Nooyi.

Tom Greco will succeed Carey as head of Frito-Lay North America.

The fact that PepsiCo is tapping a Frito-Lay executive to run the drink business raises concerns over the depth of its management bench on the drink side, according to Credit Suisse analyst Carlos Laboy.

"We believe that this is not inconsequential, given the competencies necessary to run a North American beverage business have traditionally involved intensive marketing, innovation and great franchise relationship skills, whereas the snack business has been more of a push-driven model," Laboy said.

(Reporting by Martinne Geller in New York; additional reporting by Phil Wahba in New York; editing by Gerald E. McCormick and John Wallace)

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