PepsiCo CEO Indra Nooyi, in a press release, said the purchase of PepsiAmericas and Pepsi Bottling Group could “unlock significant cost synergies” for the conglomerated organization – increasing flexibility, versatility and the speed of decision making.
“We would be able to present a more unified face to our retail and food service customers,” she said.
The release noted that the beverage environment has drastically changed in the past decade. Retail accounts continue to consolidate and non-carbonated beverages now play a larger role in the marketplace. Unifying the organization, the release said, would allow PepsiCo to better deal with those large accounts, and also better leverage packaged deals with its Frito-Lay snack-food division.
PepsiCo’s consolidation would, according to its release, give it company distribution control of 80 percent of its North American beverage products and mirrors moves taken by Dr Pepper Snapple Group prior to its spinoff from Cadbury-Schweppes.
Between 2006 and 2007, then-named Cadbury Schweppes Americas Beverages bought total control of the Dr Pepper/Seven Up Bottling Group and other third-party bottlers in a bid to increase its ability to leverage its brands. As the carbonated soft drink market has contracted over the past year, DPSG has held its ground better than its larger rivals and increased its share. CSD sales dropped by three percent in 2008 according to CNNMoney, while DPSG’s sales fell by one percent.
Deutsche Bank analyst Marc Greenberg noted that the company he “felt most urgently needed to ‘fix itself’ by buying its bottler was Coke, not Pepsi.” Moving before its larger rival, Greenberg said, could give Pepsi an advantage, presuming that PepsiCo completes the transaction before Coca-Cola initiates and completes a merger with its largest bottlers.
Both Pepsi bottlers confirmed receipt of the offer, Monday, and issued releases saying their boards of directors will carefully consider it. Their fates, though, are in each other’s hands. PepsiCo said in its release that the offers are cross-contingent. It will not buy one bottler if it cannot buy both.