PepsiCo Moves Closer to Uncapping Spinoff

PepsiCo Inc. on Tuesday took another step toward spinning off its $11-billion restaurant business by appointing new presidents at the Taco Bell, KFC and Pizza Hut chains.

The appointments came one day after the soft drink and snack food giant named the chairman and vice chairman of the restaurant company that will be spun off to shareholders later this year.

Restaurant industry analysts noted that all of the newly named executives have strong ties to PepsiCo, and that most made their mark in advertising and marketing rather than restaurant operations.

“They’ve obviously decided that there’s a lot of talent inside PepsiCo’s restaurant operations,” said Carlsbad, Calif.-based consultant Hal Seiling. “And they’re thinking that hiring Joe from McDonald’s or Pete from Burger King didn’t make a lot of sense.”

PepsiCo named Peter Waller to lead its Irvine-based Taco Bell operations; Mike Rawlings to head the Dallas-based Pizza Hut chain; and Jeff Moody to run its Louisville, Ky.-based KFC chain. Each executive will hold the title of president and chief concept officer.

On Monday, the Purchase, N.Y.-based company selected Andrall Pearson, a former PepsiCo president, as chairman and chief executive of the restaurant company, which has yet to be named. David Novak, most recently president of the Pizza Hut and KFC chains, was named vice chairman and president of the new company.

The marketing savvy of the new leadership will be tested as the three chains, with 29,000 company-owned and franchise locations worldwide, struggle to see consistent sales and profit growth.

“It’s been sort of like an eight-cylinder car at PepsiCo, with only six of the cylinders working,” said Ron Paul, president of Technomic Inc., a Chicago-based consulting firm. “And, unfortunately, it’s not always been the same six cylinders that have been working.”

During the late 1980s and early ‘90s, for example, Taco Bell’s sales and earnings continued to grow while KFC and Pizza Hut occasionally stumbled. In recent quarters, KFC has been on track, and Taco Bell seems positioned to reverse a two-year slump.

In an interview Tuesday, Waller said a 4% sales gain at stores open at least a year--the first such advance in two years--will carry through into the second quarter.

“This isn’t just a one-shot thing,” he said. “Our new ‘Batman & Robin’ promotion just started three days ago, and sales are off the charts.” Waller was referring to a toy giveaway tied to the latest “Batman” movie, opening later this month.

Waller attributed Taco Bell’s much-needed sales revival to a corporate decision to reemphasize food quality, a major change for the chain that revolutionized the fast-food industry during the late 1980s with its low-cost “value menu.”

“We’ll still deliver value,” Waller said, “but we know that it all comes back to the food. In the past, you’ve heard us talk about pricing and the number of outlets we have. You’re going to hear more now about food--the quality and great taste.”

Waller, who joined Taco Bell 18 months ago after a stint with KFC, succeeds John Antioco, who resigned last week to become chairman of Dallas-based Blockbuster Entertainment.

In a related matter, PepsiCo executives said they are meeting with economic development officials in California, Kentucky and Texas to discuss possible locations for the new restaurant company’s headquarters.