Coca-Cola Co. Chief Executive Officer Muhtar Kent will hand the reins to top lieutenant James Quincey next year, entrusting the job to an executive credited with steering the company toward less sugary beverages.
Quincey, Coca-Cola's 51-year-old chief operating officer, will assume the CEO role on May 1, the company said in a statement Friday. Kent, who turns 65 next year, will remain chairman.
The move puts the London-born Quincey in charge of the world's largest soft-drink company at a time when it is adapting to shifting tastes. Many consumers in the U.S. and other developed countries are shying away from sugar and artificial ingredients, putting pressure on Coca-Cola to diversify its lineup. During his two decades at the Atlanta-based company, Quincey helped introduce smaller package sizes and other initiatives to cut the calories of its beverages.
Coca-Cola also is offloading more of its bottling operations around the world, a move that will dramatically cut its head count and let the company focus on product development. And it embarked on an effort to cut costs by $3 billion under Kent. When the transformation is complete, Coca-Cola will primarily be a seller of concentrates and syrups to other companies, which manufacture, package and distribute the drinks.
"Having worked closely with James during the past 10 years of his 20-year career with our company, I know that his vast industry knowledge, expertise with our brands, values and system, coupled with an acute understanding of evolving consumer tastes, make him the ideal candidate," said Kent, who has been CEO for eight years.
Investors endorsed the move, sending the stock up $1.02, or 2.5 percent, to close Friday at $42 in New York trading. Coca-Cola had fallen 4.6 percent this year through Thursday, hurt by concerns about slowing growth.
Kent's total return through his tenure was 108 percent through the end of trading on Thursday, compared with 103 percent for PepsiCo Inc. and 417 percent for Dr Pepper Snapple Group over the same period. As of the end of last year, Kent's pension was worth $40.1 million.
Quincey's early days will be focused on completing the final year of a previously announced three-year transformation program. After that, he will continue to push the company's attention toward the changing consumer landscape, he said during a conference call Friday.
"What's clear is we need to complete the transformation of the bottling system that makes us a stronger system, a more focused system through 2017," he said. "As we look beyond that, we're going to continue to focus on being consumer-centric, driving sparkling revenue responding to the consumer with smaller packages, less sugar in some beverages, more no-calorie products."
Most analysts had predicted that Quincey would be Coca-Cola's next CEO, Sanford C. Bernstein & Co. analyst Ali Dibadj said in a note.
"We view Quincey's succession of Kent as CEO as a positive for the stock," Dibadj said, noting that Quincey has been a proponent for cost cutting and shifting to more profitable products.
Quincey also will be nominated for a board seat at the annual meeting next year. The executive was named to the operating chief role in August 2015, after stints as head of the company's European group and Mexican division. He also led the 2009 acquisition of Innocent juice, a brand that is now sold in more than 14 countries.
Quincey was born and raised in the U.K. and studied electrical engineering at the University of Liverpool. After realizing that engineering wasn't his calling, he turned his eye to business, working as a consultant in Asia and the U.S. before being recruited by Coca-Cola.
Warren Buffett, Coca-Cola's biggest investor, praised the incoming CEO.
"I know James and like him, and believe the company has made a smart investment in its future with his selection," Buffett said.
Buffett's approval comes as some analysts question whether he may be planning to get out of the soda business. His comments haven't always been positive toward Coca-Cola's leadership decisions, as when he joined critics of Kent's stock compensation plan. Coca-Cola cut the executive's pay last year in the wake of the controversy.
Buffett's son, Howard Buffett, announced plans on Thursday to resign from the Coca-Cola board. Though he said the move would allow him to spend more time working at his foundation, it could put a cloud over the CEO transition, Bernstein's Dibadj said.
Warren Buffett didn't return a message left with an assistant seeking comment.
"While Kent stepping down is a positive, and the stock should go up in the short term, we are also careful to watch if Berkshire liquidates its position," Dibadj said.
Business on 12/10/2016