That idea was quickly trumped by Coca-Cola Co., which offered $2 billion more than Pepsi to buy Quaker. Coke executives figured that Quaker's Gatorade sports drink was worth the price. But Coke's board, led by investor Warren E. Buffet, killed the deal.
Pepsi, and Nooyi, refused to match the higher bid and still landed Quaker. Her belief that sales of carbonated beverages had peaked was prescient. Last year, the growth in carbonated beverages sales, which had been slowing since 2000, were essentially flat, while sales of bottled water, health and sport drinks such as Gatorade, which has a market share of nearly 80 percent, were higher.
Getting Quaker for less "was a double win for PepsiCo and a double loss for Coke," said Matt Riley, the beverage analyst for investment research firm Morningstar Inc.
Yesterday, PepsiCo announced that Nooyi, 50, who developed what many now say is a keen sense of corporate strategy at Motorola Inc. and the Boston Consulting Group, would become the company's fifth chief executive Oct. 1.
Nooyi, who began her career in India, will become the nation's 11th female CEO of a Fortune 500 company, and PepsiCo the second-largest U.S. company headed by a woman.
And come October, PepsiCo women will be running three major U.S. companies.
The appointment puts Nooyi in charge of a company with a market value more than double and sales that are nearly equal to those of Kraft Foods Inc., where Irene Rosenfeld, former chairman and chief executive officer of PepsiCo's snack division FritoLay, is chief executive.
PepsiCo is eight times larger than Sara Lee Corp., where PepsiCo alum Brenda Barnes is chairman and CEO.
Steve Reinemund, the current chairman and CEO of PepsiCo, stunned the business world yesterday by announcing that he will retire next year. Reinemund, 58, has been a key force in propelling PepsiCo's strong performance during the past five years, a time when the company eclipsed longtime rival Coke by many measures, including on Wall Street.
"The time is right for me to turn the page," Reinemund said in a conference call with analysts and investors. He also said that Nooyi was a key to the snack and beverage company's success.
"I have considered her my partner in leading PepsiCo over the past five years," said Reinemund. He will remain chairman of the company until May 2007.
No decision has been made about who will succeed him as chairman.
Nooyi, currently president and chief financial officer, has presided over a strategy that shifted PepsiCo's focus from soft drinks to healthier alternatives while revving up its international marketing arm. Her current job is to be split. The operations portion of her job will be given to a new senior vice president, and the company named the chief financial officer of its international division as the company's corporate CFO. Both are men.
"I want to note," Reinmund said, "that it has taken two great men to replace one talented woman."
Nooyi engineered the spinoff of the company-owned Pepsi Bottling division, the divestiture of its restaurants to YUM! Brands - which include KFC, Taco Bell, and Pizza Hut - and the acquisition of Tropicana, the nation's top-selling orange juice.
Coke, which clung to its carbonated beverage heritage, has felt the shift. Shares of PepsiCo now trade nearly 70 percent higher than six years ago, while Coke shares trade 30 percent lower.
Shares of PepsiCo closed yesterday at $63.95, up 62 cents on the New York Stock Exchange. On July 1, 1999, PepsiCo shares closed at $37.81. Coke's shares have headed in the opposite direction.
John Schmeltzer writes for the Chicago Tribune. Cox News Service contributed to this article.
top female ceos
Fortune 500 companies, ranked by revenue, who have women CEOs:
Indra Nooyi (as of Oct. 1), PepsiCo Inc., No. 61, Revenue: $32.56 billion
Brenda Barnes, Sara Lee Corp., No. 111, Revenue: $19.73 billion
Mary Sammons, Rite Aid Corp., No. 129, Revenue: $16.82 billion
Anne Mulcahy, Xerox Corp., No. 142, Revenue: $15.7 billion
Patricia Russo, Lucent Technologies Inc., No. 255, Revenue: $9.44 billion
Susan Ivey, Reynolds American Inc., No. 280, Revenue: $8.26 billion
Andrea Jung, Avon Products Inc., No. 281, Revenue: $8.15 billion
Marion Sandler, Golden West Financial Corp., No. 326, Revenue: $6.66 billion
Paula Rosput Reynolds, Safeco Corp., No. 339, Revenue: $6.35 billion
Meg Whitman, eBay Inc., No. 458, Revenue: $4.55 billion