Why Wrigley and Perez Need Each Other
After finding he couldn't get along with a mercurial company founder who has trouble giving up power, ousted Nike Chief Executive William Perez is trying again. This time, he's looking for redemption by sharing the executive suite with a fourth-generation top executive who says he wants to focus more on strategy than day-to-day management. On Oct. 23, William Wrigley Jr. Co. (WWY) announced that Perez would take over the CEO post at the 115-year-old company, which is family controlled though it has publicly traded shares.
Perez is succeeding William Wrigley Jr., who will remain chairman of the board of directors and will take on the newly created post of executive chairman.
The two men have known each other—and gotten along well—for eight years. Perez promises that he and the ex-CEO will speak with "a single voice." Yet it's clear that Wrigley will remain very much involved in the company. "I'm not retiring," Wrigley, 43, said at a press conference in a hotel near the company's Chicago headquarters. "I'm going to be very present and very active…I'm energized by this."
Battles with Knight
Perez, 59, who had thrived as CEO at privately held, family-controlled S.C. Johnson Co. for eight years before going to Nike in 2004, gained notoriety early this year because of his unusually public spat with Nike (NKE) founder and Chairman Philip Knight. The passionately involved Knight had reached outside the company to stir up the insular culture, but Perez apparently went too far, alienating longtime staffers with such moves as bringing in consultants for a sweeping review of the company's practices. Knight told reporters and analysts that Perez had failed to "wrap his arms around" Nike's culture, and he promptly tapped a longtime company veteran to take Perez's place.
For his part, the quiet, analytically oriented Perez—a self-described introvert—faulted Knight's resistance to change. Such plans, urged by consultants, included opening outlet stores and cutting costs by outsourcing the likes of day-care services. These ideas got him nowhere with the at-times prickly founder. They even jousted over whether Nike should sue the city of Beaverton, Ore., in a highly charged political battle about annexation—with the aggressive Knight pressing for court action, even though a friendly state legislature had bowed to Nike's resistance to annexation (see BusinessWeek.com, 1/26/06, "Inside the Coup at Nike").
Success with S.C. Johnson
Perez prefers to hark back to his happier days at S.C. Johnson to shed light on how he'll do at Wrigley. The Akron (Ohio) native joined the maker of Glade, Windex, and other consumer brands as a salesman in 1970, after collecting a graduate degree from the American Graduate School of International Management. Raised in Colombia, South America, where his father worked, he made his name first in running Johnson's operations in Latin America and then proved his value to the company as a top executive in consumer products in the U.S. He was named president in 1993.
Once there, he worked hand in hand with Samuel C. Johnson, the fourth-generation leader who had greatly expanded his family-controlled company, which dates back to 1886. The pair were so tight, Perez recalls, that staffers couldn't tell whether directives had come from Johnson or Perez.
Perez will now have to build similar good chemistry with Wrigley at the $4 billion a year chewing-gum giant. The scion says the choice to bring in an outsider to take part of his job was his decision, though it's one he talked over with his board. He says he wanted someone to handle daily oversight responsibilities so he could focus on strategic issues such as expansion into growing markets like China—a country he'd personally like to spend much more time developing as a market. Wrigley has long been keen on expansion, and he made an unsuccessful run a few years ago at chocolate giant Hershey (HSY).
Perez doesn't seem to be approaching the job with a mandate for change. He says he'll spend six months "listening" and getting to know the confectionery outfit. The low-key company, which doesn't share much information with Wall Street or the press, even though it is publicly held, is likely to keep to its publicity-wary ways, according to Wrigley—very much like news-shy S.C. Johnson did. And Perez says he's been so struck by how well-managed the outfit is that he doesn't see a need for any kind of overhaul. "I have no plans at this time to bring in my own team," the new CEO says.
Wrigley, for his part, says he's bringing in the new chief at a time of strength for the outfit. The company on Oct. 23 also announced a 14% rise in net income, to $148 million, on an 11% rise in sales, to $1.18 billion, for the quarter ended in September—results that analysts and investors cheered. Together, the appointment of the outside CEO and the quarterly gains hiked Wrigley's stock 13.67% to $53.23 a share, the highest level it's reached since dipping to $43 in July. "Any company, public or private, can sometimes do with some new thinking at the top," says analyst Lynn Dornblaser of the consumer research firm Mintel. "But Wrigley is certainly not in a rut."
Still, Perez will disappoint some people if he doesn't make some changes at the gum giant. Some analysts have criticized the outfit for relying too heavily on the namesake CEO to make decisions, arguing that this slowed the company's responsiveness to market changes. Lately, analysts such as those at Credit Suisse (CS), have faulted Wrigley for a dearth of new product introductions. "The biggest positive here is that management now seems to recognize that it's needed to change from a paternal culture to a professional one," wrote CS analysts Robert Moskow and David Nelson. Indeed, both Perez and Wrigley pointed to the need for innovation, with Wrigley suggesting several times that he's looking to his new CEO to help drive new product development.
Wrigley cautions that Perez' appointment shouldn't be viewed as a signal that the outfit intends to go on an acquisition spree. The company last year bought Altoids and Life Savers from Kraft Foods (KFT), and the Altoids business, in particular, has been a disappointment, losing market share in the first half of this year. Making such acquisitions pay off may be a big part of Perez' job. "Bill Wrigley as chairman will be able to better take on an inspirational role at the company, while the CEO can make sure that the company delivers on its financial goals," says Dornblaser.
Perez and Wrigley should have a far happier time together than Perez had with Nike's Knight—so long as the pair at Wrigley can figure out where management ends and inspiration begins.