PepsiCo Not Poised to Split: Analyst
On the heels of Kraft Foods
But "PepsiCo isn't on the road to Splitsville any time soon," said IBISWorld beverage analyst Agata Kaczanowska. Its "dual portfolio
Pepsi CEO Indra Nooyi has commented that the company's Frito-Lay operations could thrive as an independently run company, but has also said that marketing and distribution synergies for its dual snacks-beverages portfolio are too beneficial for the company to break the two up.
Kaczanowska pointed out that "in the US Soda Production industry the company has a 33.6% market share. It is second behind Coca-Cola
Kraft, which said in early June it would separate its snacks business from its North American grocery business by the end of 2012, highlighted a trend that consumer foods and goods makers need to focus on higher-growth emerging markets as the outlook for expansion in developed markets remains sluggish. The snacks business, with estimated revenue of about $32 billion, will consist of the current Kraft Foods Europe and developing markets units as well as the North American snacks and confectionery businesses. The North American grocery business would consist of the current U.S. beverages, cheese, convenient meals and grocery segments and the non-snack categories in Canada and food service.
Sara Lee said in January it would split itself into two by 2012 following unsatisfactory takeover bids, spinning off its North American retail and food service business, a company that will trade publicly and retain the Sara Lee name. That business includes brands such as Hillshire Farm lunch meat, Ball Park hot dogs and Jimmy Dean sausages. The other company, Sara Lee's remaining international bakery and beverages businesses, which includes Douwe Egberts and L'Or brands, was as yet unnamed but referred to as CoffeeCo and could be based overseas.
Any type of Pepsi split would be more likely along the division of snacks and beverages, "and that doesn't make sense given Pepsi's long-term investments," Kaczanowska said. Still, speculation of a split circulated following these other major split announcements, overall market uncertainties and increasing commodity prices.
Kaczanowska believes that Pepsi is "poised to handle the increases in raw materials prices as it continues to grow in emerging markets," she added."The flexibility that diversified Pepsi's portfolio would be really compromised if it spun off ones of its divisions."
-- Written by Miriam Marcus Reimer in New York.
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