Coca-Cola Co. elevated an insider to the No. 2 job amid board concern that Chairman and CEO Muhtar Kent needed a powerful deputy to help manage the far-flung business empire and try to reverse flagging soda sales.
The company said it named James Quincey president and chief operating officer, a surprise move that makes the 19-year Coke veteran the leading internal candidate to eventually succeed Mr. Kent.
The board has been encouraging the 62-year-old Mr. Kent to appoint a No. 2 for some time. Discussions between the board and Mr. Kent had “gotten intense and focused” in the last six to eight months, according to lead independent director Sam Nunn.
“The board has had the view for a good while that Muhtar was stretched too thin in many respects and he needed operational assistance,” Mr. Nunn said in an interview.
Mr. Kent, who has been chief executive since 2008, is a detail-oriented executive, who is sometimes reluctant to give up the reins to other executives. In February, Mr. Kent told The Wall Street Journal that he believed Coke had “the right structure” with a chief executive and numerous executive vice presidents reporting to him—but no official chief operating officer or clear No. 2.
In announcing the change, Mr. Nunn said Mr. Quincey, who is 50 years old, “will complement Muhtar’s skills and qualities.”
Mr. Quincey joined Coke in 1996 and had held leadership positions in Latin America and Europe. He has been president of Coke’s Europe Group since 2013, overseeing 38 countries. Most recently he played a major role in forging the proposed merger of Coke’s German bottling business with European bottlers Coca-Cola Enterprises Inc. and Coca-Cola Iberian Partners into a combined bottler with more than $12 billion in annual revenue.
As president of Coke’s Mexican division from 2005 to 2008, he also oversaw the acquisition of Jugos de Valle, a major juice company.
In a call after the announcement, Mr. Kent said that he will focus more on long-term strategy, talent management and innovation while Mr. Quincey will focus on driving growth and productivity throughout the company.
Mr. Kent added in a conference call with reporters that “it’s very early days’’ and “inappropriate to speculate” on CEO succession but that he looks forward to working closely with Mr. Quincey. “I have every intention and commitment to make this a great success and partnership,” he added.
Mr. Nunn said the board remains “fully confident” in Mr. Kent’s leadership and that it expects him to remain in charge for a long time.
Coke is in something of a rough patch, as it has missed its growth targets the past two years and has warned it will fall short again this year as it grapples with sales slowdowns in key markets around the globe. Weakening foreign currencies also are weighing on results.
Last October the company announced a $3 billion cost-cutting program aimed at redirecting savings toward stepped-up investments and marketing in its brands, which include Sprite and Fanta soft drinks, Minute Maid juices and Dasani water in addition to its flagship cola.
Mr. Quincey’s ascension might cause some management headaches for Mr. Kent as the new COO leapfrogs over Mr. Kent’s top three operations executives. One of them, Ahmet Bozer, 55—the head of international operations, and until now Mr. Quincey’s boss—will be retiring next March, Coke said Thursday.
It is unclear how Sandy Douglas, 54, who heads North America, is likely to react to the change. Although he sent a memo to his employees praising Mr. Quincey and saying how much he looked forward to working for him, Mr. Douglas is the one credited with the moves that have helped reverse sales declines in the U.S. recently. He is also engineering the complicated refranchising and reorganization of Coke’s North American bottling and distribution operations.
It’s also unclear how the change will affect Irial Finan, 58, who is head of bottling investments and supply chain.
Mr. Kent has called them his “three COOs” as recently as February. All three have been viewed at various times as potential succession candidates.
The role of president and chief operating officer at Coke has historically been a significant one. Not only did Mr. Kent hold it before becoming CEO, but Coke had one of the most famous and powerful president and chief operating officers ever in Donald R. Keough, who was number two to CEO Roberto C. Goizueta during the 1980s and early 1990s. Together the two men—with Mr. Keough as global salesman—presided over a period of unprecedented growth.
But Mr. Kent, himself, has often acted more like the company’s COO. He has long immersed himself in operational details, carrying a red paint chip in his wallet to ensure the packaging of his company’s namesake cola is the exact proper hue the world over. He has said he suffers “withdrawal’’ after a few days if he hasn’t walked through a store.
“There’s a lot of concern he’s too deep into the weeds,’’ said a former longtime employee.
Mr. Kent has made several moves to diversify Coke beyond soda, spearheading the company’s $4.1 billion acquisition of Energy Brands Inc., maker of Vitaminwater and Smartwater, in 2007 before becoming CEO. Since last year Coke has spent more than $4 billion to acquire minority stakes in coffee maker Keurig Green Mountain Inc. and Monster Beverage Corp., a maker of energy drinks.
But he also has doubled down on soda, spending $12 billion to acquire Coke’s biggest U.S. bottler in 2010. Soda still represents about 70% of company sales—which is a big risk when Americans are cutting back due to obesity concerns and soda sales are slowing in other parts of the world.
Mr. Quincey is familiar with the health questions attached to soda consumption. During a 2013 appearance on the BBC, host Jeremy Paxman asked if the company was doing enough to alert the public to the amount of sugar in a Coke fountain drink. Mr. Paxman poured 23 sugar packets onto a coffee table to illustrate the issue and asked if Coke’s promotion of smaller serving sizes and lower-calorie sodas was akin to tobacco companies promoting light cigarettes decades ago.
“There’s a very clear distinction between tobacco and any food and drink because in the end there’s no amount of tobacco that’s good for you,” Mr. Quincey said. “Whereas with food and drink, anything with moderation can work within your lifestyle.”
Coca-Cola shares edged down 16 cents to $41.10 in Thursday trading on the New York Stock Exchange.
By Mike Esterl
