PepsiCo Removes Longtime Chief at Taco Bell Corp.

PepsiCo Inc. on Thursday ousted longtime Taco Bell Corp. President John Martin in favor of a convenience store executive, signaling yet more change in the hotly competitive fast-food industry.

Martin, who joined the PepsiCo restaurant subsidiary as president in 1983, was shifted to parent company PepsiCo’s casual-dining division, where his first duty as chairman and chief executive could be to sell off the California Pizza Kitchen and Chevy’s chains.

Martin’s replacement is John F. Antioco, 46, most recently chairman and chief executive of Circle K Co., the Phoenix-based convenience store operator. Antioco guided the 2,500-unit chain out of bankruptcy in 1993 and left in May after engineering Circle K’s sale to Tosco Corp. for $710 million.

Martin’s departure came just two days after McDonald’s Corp. tried to rev up stalled sales by appointing Chief Financial Officer Jack M. Greenburg to the newly created position of chairman at its McDonald’s USA operation.

Two weeks ago, PepsiCo Chief Executive Roger Enrico pledged to pump up corporate earnings that have “fallen short” by strengthening revenue and profit at its restaurant operations, including Taco Bell, KFC and Pizza Hut. Enrico also said he will review the possibility of selling off the California Pizza Kitchen, Chevy’s and East Side Mario’s eateries.

Martin’s departure comes at a time when Taco Bell is struggling to reverse a painful slide in sales at stores open more than a year, or same-store sales, an important measure of success in the restaurant industry. Though the chain remains profitable and its revenue is growing, most of the advances are driven by the opening of new stores.

“Taco Bell definitely has been the poor performer in PepsiCo’s restaurant portfolio in recent quarters,” said Ron Paul, president of Technomic Inc., a restaurant industry consulting company. “But John Martin has had a good, solid run. He accomplished a lot while he was there.”

A restaurant industry executive who knows both Martin and Greenburg said the moves are designed to pump up revenue in an industry where profit margins are slim and competition is increasingly fierce. Said the executive:

“Why is John Martin leaving? A year ago, Taco Bell was saying things were turning around. But it’s a year later and they’re still not turned around.”

Janet Lowder, a Rancho Palos Verdes-based restaurant industry consultant, described Martin’s 13-year tenure at Taco Bell as “an extraordinary performance. Look back just five years ago and you’ll see what he’s done. Thirteen years is an awfully long time in this business.”

Martin, 51, is credited with transforming Taco Bell from a regional player into an international powerhouse with 6,490 locations worldwide and $3.5 billion in revenue.

He drew praise from Harvard University and USC business school professors for the ground-breaking “value menu” that Taco Bell introduced in 1990 and for behind-the-scenes operational changes that boosted Taco Bell’s profitability.

But Taco Bell, like McDonald’s and other major fast-food operators, has been hamstrung in recent quarters by stalled sales.

“When you look at same-store sales, you’re not going to find many chains reporting increases,” Lowder said. “It’s important to remember that this is a cyclical business. You can’t win forever.”

Enrico said PepsiCo is “delighted to add a strong leader like John Antioco to our restaurant team. His great depth of experience in retailing will be enormously valuable in positioning Taco Bell for solid long-term growth.”

Retail industry observers credit Antioco, who wasn’t available for comment Thursday, with reviving Circle K, which entered bankruptcy in 1990. He arrived on the scene in 1991 and helped fashion the reorganization plan that was approved by a U.S. Bankruptcy Court judge in 1993.

At Circle K, Antioco preached a corporate gospel of “value and convenience, not just the value of convenience.” To that end, he added name brands that previously hadn’t been sold in convenience stores and tried to gussy up the image of Circle K.

“John was really an innovative thinker at Circle K,” said Steve Kernkraut, a New York-based industry analyst with Bear, Stearns & Co. “He was always willing to try new ideas; he’s a people person and he knew enough to recruit a great organization to work with him.”

Martin also wasn’t available to comment, but it was unlikely that he would have to leave Irvine, where he lives and works.

Industry observers immediately began speculating that Martin might now be positioned to take more than just a management role at the Chevy’s, California Pizza Kitchen and East Side Mario’s chains.

“Maybe what John does now is lead a group that formulates the capital needed to take these restaurants off of PepsiCo’s hands,” said consultant Paul. “Maybe he does his job well by helping PepsiCo get out the full-service restaurant business.”