The numbers. It all comes down to the numbers. Indra Nooyi and PepsiCo (PEP) delivered spectacular numbers and Ellen Kullman at DuPont (DD) produced hideous results. So Kullman's out and Nooyi has to be considered the best-in-class executive in the entire consumer packaged goods industry.
The contrast couldn't be greater. That's because Trian Partners, led by Nelson Peltz, the only activist I can find that if you piggy-backed off of you made money, tried to effect change with both companies.
Rather than get into a prolonged fight with Peltz, Nooyi welcome Bill Johnson, the former CEO of Heinz, to her board and then proceeded to show him why the combination of snacks and beverages can be a winning one. Peltz had wanted to break the company into two separate entities, food and beverage, and may still favor that strategy. In the meantime, though, keeping PepsiCo together is delivering superior results like we saw this morning, with tremendous organic growth, including double-digit gains in Gatorade, fabulous pricing for snacks and wildly expanding gross margins. A winner can keep any critic at bay and Nooyi's a winner.
Kullman though? She won the proxy battle with Peltz, one that was a totally needless distraction. Peltz has a huge position and wanted a board seat and suggested the company break up to bring out real value. He was not after Kullman's head, He simply wanted to be a catalyst for big change.
Unlike PepsiCo, Kullman's DuPont said no way. The possibility that Trian's suggestions could be enacted if Peltz got on the board drove the stock to $76. But when he failed to win, mostly because some big index firms voted with management -- something that's curious within its own right because they basically checked their brains at the door -- the stock plummeted. The board appointed Ed Breen, late of Tyco (TYC), to be Kullman's successor on an interim basis. The stock has jumped, in part because Kullman was perceived to stand in the way of a break-up but also because she did promise better results than she delivered and this was just one in a series of big guidedowns. Breen created tremendous value and the hope now is that he will do the same for DuPont.
Kullman had made some attempts to create value. She spun off Chemours (CC), the most commoditized chemical portion of the company. But it's been an unmitigated disaster falling from $22 to $7. She has cut costs, although nowhere near enough to satisfy Peltz.
The simple truth, though, is that this hideous guidedown, something that Peltz predicted would happen, was the last straw.
Over at PepsiCo, however, you see the exact opposite happening. Many are concerned these days about the slowing of soft drink sales. They've declined for PepsiCo for sure, 2% for regular and 6% for diet this quarter alone. However, PepsiCo's made up for it with strong sales of other beverages. Even more important, snacks are such a powerful story that they could make up for any prolonged shortfall in the bubbly business.
In the end, Nooyi wins because she puts up the numbers and Kullman loses because she didn't. You have to wonder, however, if she, unlike Nooyi, hadn't been so stubborn in fighting Peltz whether there wouldn't have been a different, more positive, outcome for both Kullman and DuPont's shareholders.