Roger Enrico

Roger Enrico
Born	Roger Anthony Enrico 1944-11-11November 11, 1944 Chisholm, Minnesota, U.S.
Died	2016-06-01June 1, 2016(aged 71) Cayman Islands
Nationality	American
Education	Babson College (B.S., business administration, 1965)
Alma mater	Babson College
Occupation	Business executive
Years active	1965-2012
Employer	General Mills PepsiCo (1971-2003) DreamWorks Animation (2004-2012)
Company	PepsiCo, Inc.
Title	Chairman and chief executive officer, PepsiCo, Inc.
Term	1996-2001
Predecessor	D. Wayne Calloway
Successor	Steve Reinemund
Known for	Chairman and chief executive of PepsiCo The cola wars and the Pepsi Challenge Signing Michael Jackson to endorse Pepsi Acquisitions of Tropicana and Quaker Oats
Spouse	Rosemary Margo (m. 1969)
Children	1

Roger Anthony Enrico (November 11, 1944 to June 1, 2016) was an American business executive who served as chairman and chief executive officer of PepsiCo from 1996 to 2001, after a career at the company spanning more than 30 years.

Enrico is best known for his part in the marketing contest between Pepsi and Coca-Cola during the 1980s, which became known as the cola wars. As head of PepsiCo's beverage division from 1983, he expanded the Pepsi Challenge taste-test campaign and signed Michael Jackson to what was then the largest celebrity endorsement contract ever agreed, at the centre of a campaign called "The Choice of a New Generation". Coca-Cola responded in April 1985 by reformulating its product as New Coke, a decision reversed within three months. Enrico's assessment, delivered in a Pepsi advertisement, was that "after 87 years of going at it eyeball to eyeball, the other guy just blinked."

As chief executive of the parent company he reversed the strategy of diversification that PepsiCo had followed for two decades. He separated the restaurant businesses, Pizza Hut, Taco Bell and KFC, as Tricon Global Restaurants in 1997, and then bought the Tropicana juice business from Seagram for $3.3 billion in 1998 and the Quaker Oats Company, whose principal asset was Gatorade, for about $13.4 billion in a transaction agreed in 2000. The effect was to convert PepsiCo from a company that sold carbonated drinks and operated restaurants into a diversified food and beverage business in which snacks and non-carbonated drinks accounted for the majority of growth.

He asked the board in 1998 to reduce his salary to $1 and to direct the savings to a scholarship fund for the children of employees earning less than $60,000 a year.

Enrico stood down as chief executive in 2001, was succeeded by Steve Reinemund, and left the PepsiCo board in February 2003. He was chairman of DreamWorks Animation from 2004 to 2012. He died on June 1, 2016, aged 71, while snorkelling near his home in the Cayman Islands.

Early life and education

Family and childhood

Roger Anthony Enrico was born on November 11, 1944, in Chisholm, Minnesota, a town on the Mesabi Range, to a family of Italian immigrant descent. His father worked as a maintenance man at an ore-smelting plant.

The Mesabi Range was iron mining country, and Enrico's background was consistently invoked in profiles as an explanation for a style that remained direct and informal at the head of a company of more than 100,000 people.

Babson College

Enrico won a scholarship to Babson College in Massachusetts, where he studied business administration, graduating in 1965.

Military service

He served as a supply officer in the United States Navy during the Vietnam War in the late 1960s.

Career

General Mills

Enrico began his business career at General Mills as a brand manager working on Wheaties, the breakfast cereal.

PepsiCo: early roles

He joined PepsiCo in 1971 as an associate brand manager for Funyuns, an onion-flavoured snack made by Frito-Lay. He later handled Cheetos and Fritos before taking operational roles overseas, running businesses in Japan and in South America.

The variety of the early assignments, spanning snacks and beverages, domestic marketing and foreign operations, was unusual and it gave him an understanding of the whole company that few of his contemporaries possessed.

Pepsi-Cola and the cola wars

Appointment

Enrico was appointed chief executive of PepsiCo's beverage division in 1983, at the age of 38.

Pepsi at that point had been the second brand in American carbonated soft drinks for its entire history. Its strategy under Enrico was to decline to compete on heritage, where Coca-Cola's position was unassailable, and to compete instead on youth and on taste preference.

The Pepsi Challenge

The Pepsi Challenge, a blind taste test in which consumers were filmed choosing Pepsi over Coca-Cola, had begun in the mid-1970s. Enrico expanded it substantially and made it the centre of national advertising.

The campaign's effect was strategic rather than simply promotional. By framing the choice as a matter of measurable taste rather than of brand identity, it forced Coca-Cola to consider the possibility that its formula was the problem.

Michael Jackson

In 1983 Enrico personally negotiated a contract with Michael Jackson, then at the height of his success following Thriller, for a reported $5 million, the largest celebrity endorsement agreement made to that date. Jackson appeared in commercials set to a rewritten version of "Billie Jean" as part of a campaign titled "The Choice of a New Generation".

The approach was extended to other performers, among them Lionel Richie, Madonna, Tina Turner and Michael J. Fox. The strategy of building a soft drink's identity around contemporary popular music, rather than around the product itself, was widely imitated afterwards.

The Jackson contract also produced one of the era's most reported accidents: during the filming of a Pepsi commercial at the Shrine Auditorium in Los Angeles in January 1984, pyrotechnics set Jackson's hair alight and he suffered burns to the scalp.

New Coke

Coca-Cola reformulated its flagship product in April 1985, withdrawing the original and replacing it with a sweeter formula that had performed better in taste tests. The reaction from consumers was hostile, and the company reintroduced the original as Coca-Cola Classic on July 11, 1985, after 79 days.

Enrico treated the episode as a victory and declared it publicly, in advertisements and in a memoir. His book The Other Guy Blinked: How Pepsi Won the Cola Wars, written with Jesse Kornbluth, was published by Bantam in 1986.

The verdict has been disputed since. Coca-Cola's sales recovered strongly after the reintroduction and the episode is now often read as having reminded consumers of their attachment to the brand. Pepsi's American market share nonetheless reached about 32 percent by 1987, close to parity with Coca-Cola in supermarket sales.

Enrico's rivalry with Roberto Goizueta, Coca-Cola's chief executive, was the personal axis of the contest and was covered extensively in the business press of the period.

Frito-Lay and vice chairman

Enrico was appointed chief executive of Frito-Lay in 1991. The snack business was PepsiCo's most profitable division and he ran it through a period of expansion.

He became vice chairman of PepsiCo in 1994.

Chief executive of PepsiCo

Appointment

Enrico became chief executive of PepsiCo in April 1996, succeeding D. Wayne Calloway, who was suffering from the cancer that would cause his death in 1998. He assumed the chairmanship as well the following year.

The company he took over had a specific and well-understood problem. PepsiCo had assembled three businesses, beverages, snacks and restaurants, on the theory that they shared customers and distribution. In practice the restaurant business, which included Pizza Hut, Taco Bell and KFC, consumed capital at a much higher rate than the others, returned less, and put PepsiCo into competition with the fast food chains that were among its largest beverage customers. Its international beverage operations were also losing ground, and in 1996 the company lost a major bottling partner in Venezuela to Coca-Cola.

The restaurant spin-off

Enrico announced in January 1997 that PepsiCo would separate its restaurant division. The three chains were floated as Tricon Global Restaurants in October 1997, a company later renamed Yum! Brands.

The rationale was that restaurants required capital and management attention that would be better applied to packaged goods, and that independence would allow the chains to sell whichever beverages they chose. The separation is generally regarded as the most important decision of his tenure, and it was followed by a marked improvement in PepsiCo's returns on capital.

Tropicana

PepsiCo bought Tropicana Products from Seagram in 1998 for about $3.3 billion. The purchase gave the company the leading brand in chilled orange juice in the United States and marked the start of a deliberate move into drinks other than carbonated soft drinks, a category whose volumes were beginning to decline in developed markets.

Quaker Oats

In December 2000 PepsiCo agreed to acquire the Quaker Oats Company in a stock transaction valued at about $13.4 billion. The transaction completed in August 2001, after Enrico had handed over as chief executive, following a lengthy review by the Federal Trade Commission.

The principal object of the purchase was Gatorade, which held roughly 80 percent of the American sports drink market and which PepsiCo could distribute through its existing system. Quaker's cereals and its Rice-A-Roni and Aunt Jemima brands complemented Frito-Lay. The Federal Trade Commission divided evenly on whether to challenge the deal, which allowed it to proceed.

The acquisition is generally assessed as successful. Gatorade became one of PepsiCo's largest brands, and the combination gave the company a portfolio weighted towards food and non-carbonated drinks at a time when its principal competitor remained concentrated in carbonated beverages.

Salary and the scholarship fund

In March 1998 Enrico asked the PepsiCo board to reduce his salary to $1 a year and to consider applying the saving to the benefit of what he called the company's front-line employees. The board agreed and added $1 million to PepsiCo's employee scholarship fund, which provided educational grants for the children of employees earning less than $60,000 a year. His salary had been about $900,000.

Enrico continued to receive bonus and equity compensation, including a bonus of $1.8 million for 1997, and the arrangement did not materially reduce his total pay. He nonetheless intended the contribution to be continuing, describing it as a way to thank the company's often unsung employees, and the gesture was widely reported.

Departure

Enrico stood down as chief executive in 2001 and was succeeded by Steve Reinemund. He remained on the board until February 2003.

Later career

Enrico was chairman of DreamWorks Animation SKG from 2004 to 2012, joining the board after the studio's separation from DreamWorks and its public flotation.

He taught at the Yale School of Management and at the Cox School of Business at Southern Methodist University, continuing the practice of executive mentoring that had occupied much of his later period at PepsiCo.

He served on the boards of the National Geographic Society, the Environmental Defense Fund, the Solar Electric Light Fund and the American Film Institute.

Business philosophy and management style

Enrico's approach to marketing rested on the proposition that a challenger brand cannot win by imitating the leader and must change the terms on which the category is judged. The Pepsi Challenge and the New Generation campaigns both did this, substituting taste and youth for heritage and ubiquity. His willingness to make large and public commitments, of which the Jackson contract was the clearest case, followed from the same reasoning: a challenger has to be noticed.

As a corporate chief executive he applied a more conventional test, which was return on invested capital, and it produced the opposite of expansion. The restaurant separation, the sale of the bottling operations into a separately listed company in 1999, and the concentration on brands that could be distributed through existing systems all followed from a judgement that PepsiCo had been buying growth at prices that did not justify it.

He devoted a substantial part of his later tenure to developing executives personally, running small residential programmes for groups of managers rather than delegating leadership development to the human resources function. Among those who rose under him were Steve Reinemund and Indra Nooyi, who negotiated the Tropicana and Quaker transactions as chief financial officer and later became chief executive herself.

Colleagues described him as informal, impatient with process, and willing to commit to marketing decisions without seeking approval, a trait that was tolerated because it produced results and that became less pronounced as he moved from divisional to corporate responsibility.

Controversies

The Jackson commercial accident

Michael Jackson was burned on the scalp during the filming of a Pepsi commercial at the Shrine Auditorium on January 27, 1984, when pyrotechnics ignited his hair. He was treated for second-degree burns. The incident, and the treatment Jackson received afterwards, has been discussed in accounts of his later dependence on prescription analgesics. Pepsi settled with Jackson, who donated the settlement to a burn centre.

Claims about the cola wars

Enrico's assertion that Pepsi had won the cola wars, made in advertising and in the title of his 1986 memoir, was contested at the time and has been treated sceptically since. Coca-Cola's overall sales and share recovered after the reversal of New Coke, its international position remained substantially stronger than Pepsi's, and its market capitalisation grew faster than PepsiCo's through the following decade under Goizueta. The narrower claim, that Pepsi had forced its competitor into the most damaging marketing error in the history of consumer goods, is not disputed.

The Quaker Oats price

The $13.4 billion agreed for Quaker Oats was questioned at the time as a high multiple for a business whose cereal and syrup brands were growing slowly, and the transaction was pursued against competing interest from Coca-Cola and Danone. The Federal Trade Commission's commissioners divided two to two on whether the combination of Gatorade with PepsiCo's distribution would harm competition in sports drinks, a tie that permitted the deal to close. Subsequent performance of the Gatorade brand largely answered the criticism of the price.

Personal life

Enrico married Rosemary Margo in 1969. They had one son.

He kept a home in the Cayman Islands, where he spent an increasing part of his time after leaving PepsiCo.

Death

Enrico died on June 1, 2016, aged 71, while snorkelling in the Cayman Islands.

Portrayal

Enrico was portrayed by Tony Shalhoub in the 2023 film Flamin' Hot, which dramatises the account given by the Frito-Lay employee Richard Montañez of his role in the creation of Flamin' Hot Cheetos. Frito-Lay has disputed that account.

Publications

• Enrico, Roger; Kornbluth, Jesse (1986). The Other Guy Blinked: How Pepsi Won the Cola Wars. Bantam. ISBN 9780553051773.

External links

• PepsiCo