Andy Morton

Analysis - Coca-Cola Co price cuts turn heat on PepsiCo

By | 25 July 2013

PepsiCo has seen volumes pressure in North America

PepsiCo has seen volumes pressure in North America

The “clock is ticking” on PepsiCo's flatlining US beverage business as Coca-Cola Co's aggressive price promotions further jeopardise volumes, an analyst has warned.

Wells Fargo's Bonnie Herzog said in a note today (25 July) that PepsiCo must prove its integrated snacks and drinks model “does more than simply subsidize ongoing weakness in North American beverages”. The beverage unit also saw negative pricing as PepsiCo followed a promotions strategy that Herzog said has offset volumes declines.

However, she added: “This strategy may fall apart if Coca-Cola maintains its heavy promotions, which we suspect could accelerate PepsiCo volume declines and lead to the acceleration of negative top-line growth.”

In Q3 results released yesterday, PepsiCo posted an increase in profits and sales, however gains mostly came from snacks and international sales, while North American beverages faced “ongoing challenges”, Herzog said.

The warning follows pressure from PepsiCo investor Nelson Peltz for PepsiCo to hive off its beverage unit and operate it as a separate company. Peltz last week said PepsiCo's structure “just doesn't work any more”, while yesterday PepsiCo CEO Indra Nooyi suggested the company is to announce structural changes early next year.

Stifel analyst Mark Swartzberg said today that the changes are only likely to affect PepsiCo's North Amercian beverage unit and not alter its global structure. 

Expert analysis

PepsiCo, Inc. - Mergers & Acquisitions (M&A), Partnerships & Alliances and Investment Report

MarketLine's Company Mergers & Acquisitions (M&A), Partnerships & Alliances and Investments reports offer a comprehensive breakdown of the organic and inorganic growth activity undertaken by an organization to sustain its competitive advantage.

Sectors: Company results, Soft drinks

Companies: PepsiCo, Coca-Cola Co

There are currently no comments on this article

Be the first to comment on this article

Related research

PepsiCo Inc in Soft Drinks (World)

PepsiCo has not made any major acquisitions for its soft drinks in the past 12 months and it saw slow recovery in US beverages in 2012. The company aspires to lead the future health and wellness trend and needs to develop new products to capture cons...

PepsiCo Inc in Health and Wellness (World)

While PepsiCo has lost ground to Coca-Cola in some HW soft drinks categories, including RTD tea, bottled water and carbonates, PepsiCo is in a much stronger position in HW packaged foods. The company’s Quaker brand, its recent acquisition in Russian ...

PepsiCo do Brasil Ltda in Hot Drinks (Brazil)

Ranked sixth in hot drinks in 2012, the company has a strong presence in other hot drinks, in particular in chocolate-based flavoured powder drinks under the Toddy brand. Competing for the same target audience as Nescau, the company often introduces ...

Related articles

just the Round-Up - The week in drinks

The top ten stories published on just-drinks this week:

just the Research

Here's a run-down of some of the top research reports currently available in the just-drinks research store:

Comment - Soft Drinks & Water - NPD in Europe in 2013: And the Winner is…

Ahead of the Oscars, due to be handed out in just over a month's time, Richard Corbett has some gongs of his own to hand out. In recognition of the best new soft drinks products in 2013, who will win a Corbett?

just-drinks tagline

Not a member? Join here

Decrease font sizeDecrease font sizeDecrease font size Increase font sizeIncrease font sizeIncrease font size Comment on this article Email this to a friend Print this page