Marketing Meddling Sparks Brain Drain at Chaotic Pepsi

Top Talent Exits in Droves, Citing Micromanaging, No Love from D'Amore

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NEW YORK ( -- It all started with Pedro the Dog.

Early in 2008, Pepsi marketers were still figuring out their new top executive, Massimo d'Amore, recently named head of PepsiCo Americas Beverages. But they quickly got a taste of what was to come as Mr. d'Amore did an end run around the brand's marketing team and then-Gatorade agency Element 79 by working with Peter Arnell to create a Super Bowl ad. The spot, which consisted of little more than a big, black dog lapping Gatorade from a bowl, was widely criticized.

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Since then, an exodus of key marketing and brand executives has plagued a company once known for incubating top talent. Former executives and company insiders paint a picture of a dysfunctional organization that has lost its marketing mojo, where marketers are both fearful and dissatisfied with a meddling and micro-managing culture. It's a far cry from Pepsi's glory days, when Ad Age, in a 2005 article, trumpeted it as a "fast-paced, act-first, get-permission-later culture that breeds executives who can fix problems and fill voids in a hurry."

The departed include: Dave Burwick, Chief Marketing Officer-North America Beverages; Cie Nicholson, senior VP-CMO, Pepsi-Cola North America; Rick Gomez, CMO-hydration brands; Russell Weiner, VP-colas marketing; Jim McGinnis, VP-marketing, Tropicana; Todd Magazine, president-Gatorade; Jeff Urban, senior VP-sports marketing, Gatorade; Matt Knott, VP-marketing, Gatorade; Susan Wagner, VP-Pepsi-Cola North America; Meena Mansharamani, senior VP-innovation and insights, Pepsi-Cola North America; Chuck Maniscalco, CEO, Quaker, Tropicana and Gatorade.

One former executive described the past 18 months as a "blood bath." Voicemail at the company's Chicago office is outdated as quickly as it's updated.

Volume down
In the meantime, in 2008, volume at Pepsi Beverages Americas was down 3%, while sales slid 1%. In the most recent quarter, volume fell 6% and sales were down 7%. At Coca-Cola, volume declined 1% and sales increase 6% for full-year 2008 at its North American beverage business. During the second quarter, Coke's volume slid 1% and sales 2%.

PepsiCo maintains that its initiatives are on track. And it says turnover in the marketing division is mirrored across the company in "all functional areas," ranging from supply-chain management to human resources. In October of last year, the company announced it would shed 3,300 jobs. The majority were lost from the North American beverage business, said Julie Hamp, senior VP-communications at PepsiCo. But the company counters that it has brought in new talent, such as Jill Beraud, who hails from Limited Brands; Sarah Robb O'Hagan, a Nike veteran; Tom Silk, who was a senior marketing director for the "Guitar Hero" franchise; and Jennifer Storms, former senior VP of Turner Sports Marketing and Programming. New executives have also been brought in from McKinsey & Co., DuPont and Dr Pepper Snapple Group.

"It's a period of change. A lot of people deal with change and go along with change better than others," Ms. Hamp said. "Through times like that you're going to have some talent refresh."

But several former executives, who did not want to be identified, said they left the company in part because Mr. d'Amore's tight control over the brands has led to a chasm between those who agree with his views and those who don't. For example, executives said Mr. d'Amore has had a firm hold on the Gatorade brand since his arrival, and the "G" rebranding effort was the fruit of his collaboration with TBWA/Chiat/Day, Los Angeles.

As a result of ensuing Wall Street scrutiny -- in the first half, Gatorade volume dropped 18%, according to Beverage Digest -- PepsiCo CEO Indra Nooyi is said to be involved day-to-day on the Gatorade business. By most accounts, this has led to further alienation of the brand's marketing middle management.

"Enough already," said a former executive. "Are you going to hold me accountable for the decisions? In which case, I should be empowered to make them."

'We've turned a corner'
PepsiCo declined to make Mr. d'Amore available for comment, but Ms. Hamp disputed the stories. "Massimo runs the organization as a team organization. People are fully empowered, and that's why they come work here," she said. "One person isn't going to make all the decisions around the brand."

That view is backed up by Robert Lewis, VP-worldwide packaging innovation and equipment development, who said he's been intimately involved in the changes made at the company as a part of Mr. d'Amore's team, which he says also includes executives from marketing and brand management. "Not only do I have the ability to speak out, it's expected that I speak out," he said. "We did go through a transition, in terms of people understanding what the change means in their lives, but we've turned a corner."

Still, others close to the company said Mr. d'Amore continues to shut out many of the executives who have spent years, sometimes decades, shepherding various PepsiCo brands. Indeed, the departure of Mr. Burwick, a Pepsi fixture and respected executive, was a particular blow for many inside and outside the company. (Mr. Burwick declined to comment for this story.) "They've lost a lot of institutional knowledge and a lot of deep bottler connections," said another former executive. "I'm talking to a lot of headhunters, and they seem to indicate that they don't view Pepsi the same way that they used to."

Mr. d'Amore has managed to deflect criticism stemming from the Tropicana rebranding disaster and the lack of a turnaround at the Gatorade brand, the executives said. Tropicana packaging was redesigned earlier this year but was quickly pulled and changed back to the original orange-and-straw motif amid a consumer outcry.

Ms. Hamp defended the Tropicana rebranding, while acknowledging a "slight dip in sales." Sales plunged 20% at supermarkets, drug stores and mass merchants, excluding Walmart, between Jan. 1 and Feb. 22. But PepsiCo said sales fell only 14% including retailers Information Resources Inc. doesn't track.

Ms. Hamp said,"Massimo is definitely, at the end of the day, responsible for and accountable for the North American beverage business." She also said, "The people responsible for Tropicana are the ones driving the brand and helping Tropicana to reposition itself."

Given the sweeping changes made to Pepsi's stable of brands, there's a growing consensus that accountability rests at the top. For that reason, Ms. Nooyi is said to be taking a more hands-on approach to Pepsi's marketing. "Massimo couldn't do any of this without Indra's support," said one former executive. "People very much want [Ms. Nooyi] to succeed. But there's a lot of churn and a lot of upheaval, and at some point, when do the benefits of that come?"

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