It is not surprising that PepsiCo announced these three things on the same day:
- It’s axing 8,700 jobs.
- It’s increasing its marketing budget by $600 million.
- And Massimo d’Amore, the former CEO of its Global Beverages Group, is retiring.
D’Amore, 56, until September 2011 was in charge of the flagship Pepsi soda brand as its sales declined. Most humiliatingly, Pepsi sank from the No. 2 brand in the U.S. to No. 3 — behind Diet Coke. The retreat came after d’Amore changed the brand’s look and advertising in an attempt to make it more trendy.
- UPDATE: Here’s the list of Pepsi managers who have left the company.
It is, however, surprising that PepsiCo is rewarding d’Amore for this colossal failure with $2 million-plus in “transition payments,” according to this SEC filing. His retirement agreement states:
“… you will receive from the Company 20-six (26) bi-weekly payments equal to $79,400 each, less applicable withholdings and according to normal payroll procedures.”
That’s a gross of about $2 million. PepsiCo previously disclosed that d’Amore had accumulated $3.4 million in retirement benefits and stock, according to its most recent proxy form. The retirement agreement states that $33,100 of each transition payment is included as pension compensation.
Either way, while d’Amore’s underlings are out looking for new jobs (because money that might have paid their wages is now going on new ads) he’ll be pocketing $40,000 a week.
PEP sunk 4.3 per cent on the news to ~$64/share. Because the Pepsi soda brands are a disaster area (with some exceptions such as Gatorade and Mtn Dew) following his meddling, PepsiCo now needs to spend an extra $600 million to turn soda sales around. The money will go on both beverage and snack brands, a spokesperson said, not just Pepsi. PepsiCo reported that in North America, net revenues at its soda unit declined 1 per cent for the most recent quarter. Total soda sales were up for the year but, PepsiCo added:
“Volume declined 4 per cent for the quarter and, on an organic basis, declined 1 per cent for the year, in part reflecting the impact on consumer demand of pricing actions taken to offset commodity cost inflation.”
The only remaining question about Pepsi is whether the sacrifice of d’Amore will be enough to stem investors’ anger at CEO Indra Nooyi. It was she who tapped d’Amore to lead Pepsi after she was seduced by his vision of an untested Pepsi redesign as they swanned through the gardens of the Hotel Cipriani in Venice back in 2007.
Perhaps PepsiCo’s continued success in its redesign of Gatorade (which d’Amore also supervised) will be enough to save her. Sales gains for G2 continued in the “high-single-digits” for the quarter, the company said.
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