Good morning,
It’s been a busy week for news, including reports on executives violating codes of ethics.
Earlier this week, there was the arrest of Tyson Foods CFO John R. Tyson, a month into his role. And the coffee and soft drinks company Keurig Dr Pepper Inc. (Nasdaq: KDP) announced yesterday that Ozan Dokmecioglu, the CEO and former CFO, has agreed to resign “due to violations of the company's code of conduct that were unrelated to strategy, operations, or financial reporting,” KDP said in a statement.
"Keurig Dr Pepper's code of conduct is built on a foundation of ethics, integrity, and personal responsibility,” Paul S. Michaels, lead director of the KDP Board, said in a statement. “Every employee, without exception, is accountable for knowing and following the code.”
The company did not explain the code violations and had no further comment beyond the announcement.
Dokmecioglu became CEO on July 29. He previously served as CFO since July 2018, and president of international since November 2020. Before the merger, Dokmecioglu was the finance chief at Keurig Green Mountain, beginning in May 2016. And before that, he served in CFO roles at Kellogg Inc.
Dokmecioglu succeeded Bob Gamgort as CEO at KDP. But Gamgort will now return to the chief executive role. He is also serving as executive chairman. And Sudhanshu Priyadarshi, who was selected to succeed Dokmecioglu as CFO after his promotion, begins his job on Monday.
Priyadarshi was most recently CFO at Vista Outdoor Inc., a sporting and outdoor goods company. He started his career at PepsiCo, where he spent 14 years in roles, including as CFO of global R&D and PepsiCo Global Nutrition Platforms.
As Gamgort returns as CEO, will the company face any challenges?
“This should be a seamless transition for KDP,” Gerald Pascarelli, an SVP of equity research at the investment firm Wedbush Securities Inc., told me. Since Gamgort has only been away from the role for less than four months, and since he assumed the role of executive chairman, he has “remained an integral part of the company’s operations,” Pascarelli says. Going forward, nothing should change from an operational or a capital allocation perspective, he says. “KDP will continue to focus on using its discretionary free cash flow to drive M&A and partnerships looking for ways to scale the business inorganically,” Pascarelli says.
Gamgort was the strategist behind the merger of Keurig Green Mountain and Dr Pepper Snapple to form KDP. In 2020, he explained to Fortune's Shawn Tully his vision:
"The industry viewed beverages much too narrowly,” he said. “Over half of Starbucks’ drinks have ice in them. When someone needs a boost in the afternoon, they may choose a coffee, a Dr Pepper, or our Adrenaline Shoc energy drink. Yet the industry and Wall Street looked at hot and cold as two completely different segments. When we merged, no one got it...We need to be as important as possible to a Walmart or Amazon, and we get there by offering a portfolio that meets every consumer need.”
Net sales for the third quarter of 2022 at KDP increased 11.4% to $3.62 billion, compared to $3.25 billion at the same time last year. Wedbush reiterates its outperform rating for KDP.
I asked Pascarelli if Priyadarshi will be focused on investor relations because of Dokmecioglu’s departure for violating the code of conduct. “Likely not,” he says. “This resignation would have been a much bigger issue, warranting a lot more questions for KDP if it was due to business operations or financial reporting, but that is not the case here.” As CFO, Priyadarshi will most likely be focused on delivering long-term targets to drive mid-single-digit revenue growth and high single-digit EPS growth, he says.
When Priyadarshi accepted the job offer, he may have thought he’d be the strategic partner to Dokmecioglu. But as life can sometimes be unpredictable, both he and Gamgort will be tackling roles neither could have forseen a few months ago.
Today is Veterans Day in the U.S. Thank you to all veterans for your service.
Have a good weekend.
Sheryl Estrada
sheryl.estrada@fortune.com
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