PepsiCo Sees Power in Combined Business

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Despite pressure to split up, PepsiCo execs believe the combination of its snack and beverage portfolios creates significant value for shareholders. (Photo: Felipe Wiecheteck)
Despite pressure to split up, PepsiCo execs believe the combination of its snack and beverage portfolios creates significant value for shareholders. (Photo: Felipe Wiecheteck)

BUSINESS

  • PepsiCo creates new marketing initiatives: Global Snacks Group and Power of One Americas Council
  • PepsiCo aims to expand global influence in snack and beverage industries
  • Groups to be led by John Compton, CEO Americas

Already a leader in the global soft drinks market, PepsiCo has created two new marketing initiatives: the Power of One Americas Council and the Global Snacks Group.

The Power of One Americas Council aims to expand the company’s complementary beverage and snack businesses in North, South and Central America, further building its global brand. While coordinating the food and beverage systems, the Power of One Americas will also examine different areas of both industries, including packaging, marketing, sales, office operations, distribution and manufacturing.

Specifically, members of the council will look to identify opportunities to better link these businesses and sell more combined food and beverage products to retailers and consumers.

The Global Snacks Group will focus on promoting innovation among PepsiCo’s snack foods portfolio to strengthen the company’s foothold in the global snacks industry. It will imitate existing focus groups in its beverage and “nutritional” product lines – e.g., Tropicana orange juice and Quaker oatmeal – to improve its snack food brand offerings.

CEO Leadership

The highly experienced John Compton, CEO for PepsiCo Americas Foods, will be at the helm of both new initiatives, joined by other top PepsiCo food and beverage executives in the Americas.

Compton previously served as CEO for PepsiCo North America, vice chairman/president of Frito Lay North America and president/CEO of Quaker Tropicana Gatorade. While taking on this new role, Compton will continue to run PepsiCo’s $22 billion snack and food business in the Americas.

Beverage Break Up?

Of late, several large companies, including Kraft Foods Inc., have announced break up plans. According to Bloomberg data, PepsiCo shareholders could benefit from an almost 50% gain if the company separated its food and beverage sectors.

On September 26, PepsiCo shares dropped to $60.34, a loss of around 10% from 2010, with several analysts' ratings of the company downgraded to neutral, or equivalent, in the last few weeks.

Global soft drink producer Coca-Cola Co., on the other hand, boasted a 22% gain in share price, while Kraft, the second-largest food company, rose by over 9%.

PepsiCo has suffered from rising production and packaging costs, the recession and stiff competition in the American soft drink market. Nonetheless, despite pressure to split up, PepsiCo execs continue to believe there is power in combined business.

PepsiCo chairman and CEO Indra Nooyi forsees much success in PepsiCo’s new ventures, saying: "The combination of our snack and beverage portfolios creates significant value for our shareholders through synergies driven by a common customer base and distribution platform, supplier leverage and shared infrastructure.”

Key Facts & Statistics – Global Soft Drinks Market (source: Datamonitor)

  • Since 2004, the worldwide market for soft drinks has grown at a compound annual rate of more than 3%.
  • The top commodity in the global soft drinks market was the carbonates category, with a 42% share.
  • PepsiCo and Coca-Cola Company are companies at the top of the global market for soft drinks.

By Christelle Agboka for
Christelle Agboka is a freelance journalist based in Kingston, Ontario, who covers business and economy news.

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