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PepsiCo Vice Chairman Roger Enrico is beginning to make his mark on the company's erratic restaurant unit, cutting costs and melding the KFC, Taco Bell and Pizza Hut brands to prepare the restaurants for heavy expansion abroad.

Two recent moves to consolidate U.S. operations clearly bear Mr. Enrico's stamp, analysts say. And his new PepsiCo Restaurants International unit marked a unified course last month when it asked sales promotion agencies to drum up global promotions involving all three restaurant brands.

Leveraging the three chains as one entity could ultimately give PepsiCo's $18.5 billion restaurant unit a boost in its race to become the premier global restaurateur, a post perennially held by the $26 billion McDonald's Corp.

PepsiCo assigned Mr. Enrico to bolster restaurant performance last November, just as the three chains were about to report their first-ever decline in profits, down 6.1% for the year. PepsiCo is counting on the marketing veteran to do for restaurants what he did for Frito-Lay in the early '90s.

"Roger Enrico has a history of cost-consciousness," said Emmanuel Goldman, an analyst with PaineWebber, San Francisco. "A few years ago he cut costs significantly at Frito-Lay and boosted their new-product efforts."

The restaurant unit is primarily responsible for overseeing development outside the U.S. and Canada.

"Our North American restaurant companies are all very large businesses with strong management teams and huge opportunities of their own," Mr. Enrico said last fall. "All three chains .*.*. will continue to operate autonomously."

While analysts say they expect KFC, Taco Bell and Pizza Hut to maintain a good deal of autonomy, PepsiCo is making several changes in U.S. operations to combat two quarters of disappointing results.

To cut costs and bolster unit sales, Taco Bell and KFC will open 50 co-branded units in the Midwest by July.

Franchisee co-ops are already using outdoor boards to publicize the co-branded units, but an executive close to PepsiCo said the marketer isn't planning any national ad efforts.

Young & Rubicam, New York, handles KFC's $130 million account, while Taco Bell's $150 million account is split between Bozell Worldwide, New York, and the Richards Group, Dallas.

The prospects for dual or tri-branded marketing are much greater abroad, where the three restaurants are far less entrenched. PepsiCo Restaurants International last month issued a challenge to a roster of sales promotion agencies, requesting "great global promotional ideas that would be relevant for Pizza Hut and KFC," with the flexibility to include Taco Bell, Pepsi and Frito-Lay products.

"We aren't saying we're looking for a global promotion or advertising agency," said a PepsiCo spokeswoman. "We just have a brand new unit that's looking for ideas."

To further reduce costs in the U.S., Pizza Hut is laying off 105 employees as its corporate headquarters moves to Dallas, home of PepsiCo Restaurants International. PepsiCo said it soon will consolidate accounting, payroll and real estate services for all three chains in Pizza Hut's former Wichita, Kan., headquarters.

Still unclear is the fate of KFC and Taco Bell personnel; both chains said none of their employ-ees will move to Wichita.

Pizza Hut said the move will not affect its two main agencies: BBDO Worldwide, New York, handles the $150 million national account and Sullivan Higdon & Sink, Wichita, the $2 million local marketing account.

Pizza Hut's 160 marketing and operations executives moving to Dallas in July will share office space and test kitchens with PepsiCo Restaurants International, placing an emphasis on new-product development, the Pizza Hut spokesman said.

A lack of new products to drive traffic at all the chains contributed to the earnings drop last year, PepsiCo said. To make amends, the marketer began this year with two big introductions.

Stuffed Crust Pizza appears to be just what Pizza Hut needed to revive sales, analysts say.

"Pizza Hut has seen a tremendous surge in its business" since Stuffed Crust was launched in March with a $45 million campaign from BBDO, said Robert Cummins, an analyst with Wertheim Schroder & Co., New York.

The marketer reported unit sales were 50% higher than expected in the first week of the product's rollout. By contrast, Taco Bell's reduced fat Border Lights menu, launched in February, hasn't attracted a new customer base, Mr. Cummins said.

Marketing support for Border Lights has been sketchy, first handled by the Richards Group and then Bozell. Taco Bell resorted to a massive Border Lights giveaway in May, handing out $13 million worth of tacos and burritos.

"It's a marketing business," Mr. Cummins said. "You constantly have to have new ideas and communicate them well."



PepsiCo Restaurants International

Headquarters: Dallas

Leadership: Roger Enrico, chairmam, worldwide restaurants; Larry Zwain, president-chief operating officer; Dwight Risky, senior VP-marketing; John Martin, chairman-CEO, Taco Bell Corp.; Allan Huston, president-CEO, Pizza Hut; David Novak, president-CEO, KFC Corp.

1994 worldwide sales: $18.5 billion

Agencies: BBDO, New York (Pizza Hut); Young & Rubicam, New York (KFC); Bozell Worldwide, New York, and The Richards Group, Dallas (Taco Bell).

1994 ad spending: Pizza Hut, $150 million; Taco Bell, $150 million; KFC, $130 million.

Recent successes: PepsiCo created the international restaurant unit last November to direct overseas expansion of the three restaurant chains,

finding marketing and operations efficiencies where applicable.

Challenges for 1995 and beyond: Refine co-branded restaurant experiment

in the U.S. before exporting the concept to other countries; develop

global promotions integrating KFC, Pizza Hut and Taco Bell; streamline

U.S. operations, moving Pizza Hut headquarters to Dallas and consolidating support services for all three chains in Wichita, Kan.

Source: Advertising Age and company reports

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