STRONG REACTION TO COKE'S CHAIRMAN-CEO DECISION

Isdell Damned as 'Daft Redux' and Praised as 'Celtic King'

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CHICAGO (AdAge.com) -- Reaction to the surprise announcement that former Coca-Cola bottling executive E. Neville Isdell had been named the company's new chairman-CEO came fast and furious tonight.
The battle to be king of Coke ultimately came down to two insiders. New Age marketing guru Steve Heyer, left, lost out to former bottling executive E. Neville Isdel, right.
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Some veteran industry observers instantly mused that the board selected Mr. Isdell because nobody else wanted the job. "They were looking for a candidate who would say yes," said Tom Pirko, president of Bevmark. A Coca-Cola board member, Jimmy Williams, said in an interview on Monday that "nobody's turned [the job] down," but he conceded that "some people have asked to be taken out of consideration for the job."

'Old company' problems
Mr. Pirko said the question is now whether Mr. Isdell is "going to be a force of change to help create a new company and revitalize a tired company or is he going to be someone that looks backwards and is tied to the past? All the problems we've seen in past years comes from this being an old company."

Another executive close to the beverage giant said the selection "means Don Keough [the board member who headed the CEO search committee] is running the company, and they hired a placebo. He's old Coke in every sense. He's very much a Doug Daft redux."

Douglas Daft is Coca-Cola's outgoing chairman-CEO.

'Could slow transition'
Bonnie Herzog, beverage analyst for Citigroup Smith Barney, considers the decision a positive one as it "removes the uncertainty surrounding the lack of leadership at the company," she said. "We are pleased with the board's choice given Mr. Isdell's extensive background and experience with the Coca-Cola system that could result in a seamless transition with the bottlers. Nevertheless, Mr. Isdell has been away from Coca-Cola for a few years, which could slow down this transition."

And virtually everyone contacted was speculating about the future of the company's president and chief operating officer, Steve Heyer, who was viewed by many as the innovative marketing guru and heir apparent who would lead the company into the sunshine of the modern age in the post-Daft era. But, it turned out, Mr. Heyer and his vision were out of step with the more conservative board of directors who passed him by.

Mr. Heyer didn't return calls seeking comment on this latest development.

Heyer's situation
Manny Goldman, a former analyst turned consultant, said the situation for Mr. Heyer does not look promising. "It means that he's not going to become chairman, and there's a question of what is the place for him. It doesn't look positive."

"Bye bye Steve," mused another observer.

An executive close to the company said Mr. Heyer has contractual covenants that guarantee that if he doesn't get a job the company has to "pay him off."

As weeks passed in the search that began with the February announcement of Mr. Daft's retirement, James Kilts, CEO of Gillette Co., emerged as the board's No. 1 candidate, although few observers thought he would take the job. As more names were revealed, Mr. Heyer's odds of getting the job decreased even further. Other top contenders included Carlos Gutierrez, CEO of Kellogg Co.; Robert Eckert, CEO of Mattel; R. Kerry Clark of Procter & Gamble Co.; and Mr. Isdell, whose candidacy was dismissed by most observers although Coke has had a history of making surprising appointments. As external finalists for the job publicly pulled themselves out of contention, the odds for Mr. Heyer and Mr. Isdell increased.

Board division
At the time, Bill Pecoriello, a beverage analyst for Morgan Stanley, was still supporting a Heyer appointment. "We continue to view Steve Heyer as the best choice for the Board given his role at Coke over the past 3 years and evidence the strategy he helped architect is beginning to pay off," he wrote in an April 22 note to investors. "The issue is that there is clearly division on the Board with some Board members making it clear that Steve Heyer is not their first choice. Aside from Neville Isdell, other outside candidates would be new to the soft drink industry and would take some time, in our view, to get up to speed with the significant issues that still face Coke."

Mr. Goldman was one of those who dismissed Mr. Isdell as a serious contender. "The fact that they hadn't chosen him right from the beginning and his name didn't come up as one being seriously considered" made people overlook him, he said. "It wasn't that he wasn't the best; the board didn't seem interested." Now Mr. Goldman said the board has made the best choice.

"They should have picked him in the first place," he said. "He's better qualified for the chairmanship of Coke than any of the outside candidates -- or inside candidates for that matter. Sometimes its better to be lucky than smart. They had the best person in front of them but the grass is greener, so they were looking at others. They're lucky."

'Celtic King'
Mr. Goldman described Mr. Isdell as a perfect match for the company's culture and its board. "A thousand years earlier he would have been a Celtic king. He makes you feel good."

One thing's for sure, with his reputation tied to the bottling system, Mr. Isdell will have to rapidly make clear whether he is focused on the brand or on distribution. "This is a company that needs to be fixated on marketing, not on sales and distribution efforts," Mr. Pirko said. "It has to be creating new brands and revitalizing old brands and focusing on how young consumers pop from one brand to another. If this company is about sales and distribution, it's a step backwards."

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