Coca-Cola's Isdell to step down as CEO, being replaced by No. 2 exec but staying as chairman

ATLANTA — Neville Isdell's tenure as Coca-Cola's leader saw senior management changes, a big acquisition and a focus on improving employee morale. After his unexpected announcement Thursday that he will step down as CEO next year, Isdell said more challenges lie ahead for the world's biggest beverage company.

Isdell, 64, who has been CEO since 2004, will be replaced as chief executive by his second-in-command, Chief Operating Officer Muhtar Kent, effective July 1. But Isdell will remain chairman of the Atlanta-based company's board until The Coca-Cola Co.'s annual meeting in April 2009. Isdell's role at the company after that is unclear.

The split of the chairman and CEO roles will be a first at Coca-Cola. Isdell said the board will determine later whether to keep that arrangement or return to having the roles held by one person.

"The nature of business is there are always challenges," Isdell told reporters.

Asked why he chose now to set a date for his departure as CEO, Isdell said simply, "because it's the right time." He added, "I've been working on succession since Day 1."

Coke shares fell 39 cents to $62.66 in afternoon trading Thursday. They are still close to the upper end of their 52-week range of $45.56 to $63.44.

During Isdell's tenure as CEO, company profits have steadily risen, particularly on the international side. Also during his tenure, a Justice Department investigation of business practices at the company concluded with a settlement, and the final chapter closed in an almost $200 million discrimination settlement involving the company.

As COO, Kent, 55, has overseen significant initiatives, including the $4.1 billion acquisition of Glaceau, maker of Vitaminwater and other brands, earlier this year. He will continue to hold the title of president.

Deutsche Bank analyst Marc Greenberg said in a research note that he believes the challenges for Kent will be investor reaction if Coke merely hits its long-term growth targets, the reaction if sales volume of Vitaminater stalls in a transition year and the impact if other key executives depart.

For now, Greenberg said he doesn't expect any major changes at Coke.

"Kent has played a formative role in shaping the current course — 'steady as she goes' is likely the mantra," he said.

John Sicher, an industry expert and editor and publisher of Beverage Digest, said naming Kent as Isdell's successor is a positive move for Coca-Cola.