Coca-Cola Co., the world's largest soft-drink maker, promoted international chief Muhtar Kent to president and chief operating officer, putting him in line to succeed Chief Executive Officer E. Neville Isdell.
Kent, 54, assumes his new duties immediately, the Atlanta- based company said today in a statement. Kent has worked for Coca-Cola or its bottlers for almost 30 years, and he previously oversaw international operations that account for 80 percent of Coca-Cola's profit and $15 billion in sales.
Isdell has increasingly relied on Kent to improve Coca- Cola's relationship with Mexican bottler Coca-Cola Femsa SA, to consolidate bottlers in Germany and to negotiate to buy a majority stake in Philippines bottler San Miguel Corp. Kent becomes a likely successor to Isdell, 63, as the company tries to boost growth of healthier drinks as consumers cut back on soda.
``Kent knows the Coke system inside and out, from both the bottler side and the Coke side,'' said Keith Patriquin, an analyst at Lookis Sayles & Co. in Boston, which holds Coca-Cola shares among $70 billion in assets. ``He's as advanced as anyone on the learning curve. Coke needs more people with the experience to know what bottlers really want and need.''
Kent's promotion raised concerns from some investors over his short sale of Coca-Cola Amatil Ltd. stock a decade ago, when Kent was a manager at the Australian bottler.
``Why in this post-Enron era would a company consider a candidate who has these allegations buzzing around his head like bees?'' said James Berman, CEO of JBGlobal LLC, a New York-based hedge fund that manages $28 million and has Coca-Cola among its top five holdings. ``They've not given a full explanation, they've not given all the records. I think it's inexcusable.''
Retirement Plans
The company hasn't had a president since 2004, when Isdell came out of retirement to run Coca-Cola and assumed both CEO and president duties.
Isdell hasn't said when he plans to retire. Coca-Cola spokesman Ben Deutsch said neither Isdell or Kent would be available for comment today.
Shares of Coca-Cola rose 34 cents to $48.72 at 4:02 p.m. in composite trading on the New York Stock Exchange. They have gained 21 percent this year, while PepsiCo Inc., the second- largest soft-drink maker, has climbed 7 percent. PepsiCo in August promoted finance chief Indra Nooyi to succeed Steven Reinemund as CEO of the second-largest soda maker.
Coca-Cola's growth has lagged behind PepsiCo, which leads in noncarbonated drinks with Gatorade and Lipton tea. Sales at Coca-Cola, which depends on soda for 80 percent of its volume, have increased an average of 3 percent over the past five years, while PepsiCo's sales have gained an average of 5 percent.
Isdell said today in an internal memo that Kent is ``one of our system's most dedicated and loyal associates.''
Analyst Speculation
Analysts have speculated for months about Kent's promotion, creating the company's first succession plan since former Chairman Roberto Goizueta died suddenly of cancer in 1997.
Both John Faucher, a J.P. Morgan Securities Inc. analyst, and Mark Swartzberg, an analyst with Stifel Nicolaus & Co., said in notes today that the appointment makes Kent the likely successor.
The heads of all geographical regions, including J. Alexander Douglas of the North America unit, will now report directly to Kent. The leaders of other functions, including Chief Financial Officer Gary Fayard and Marketing and Innovation Chief Mary Minnick, will continue reporting directly to Isdell.
Kent began working for Coca-Cola in 1978, and has overseen several of the company's key regions such as Eastern Europe and North Asia.
Short Sale
Kent shorted 100,000 shares of Australian Coke bottler Amatil in November 1996, just hours before the company said profit would miss Wall Street's estimates, sending shares down 12 percent the next trading day. Short sellers are investors who sell borrowed shares with the hope of profiting by buying them back after a decline.
The trade was investigated by Australian regulators and Kent later resigned from Amatil. Kent, who wasn't charged, paid the equivalent of $260,000 to settle the case and cover the cost of the regulatory investigation.
Kent has said the short sale was made by his financial adviser, whom he had given authority to make trades on his behalf to diversify his investments beyond Coca-Cola and Amatil stock.
Coca-Cola's board hired an outside law firm to do an investigation before Isdell re-hired Kent in 2005 from Turkish Coke bottler Efes Beverage Group. Coca-Cola hasn't made the results of its investigation public.
`Not an Issue'
Isdell said in January that the short-selling was ``not an issue anymore'' and that he ``wouldn't have rehired him if I had any discomfort whatsoever about what happened.''
``If it didn't give the board cause for concern, it doesn't give me cause for concern,'' said Patriquin.
Kent was born in New York and received a bachelor's degree in economics from the University of Hull in the U.K. and a master's from London City University Business School.
Coca-Cola has been without a president since Steve Heyer left in 2004 to become CEO of Starwood Hotels & Resorts Worldwide Inc.
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