PepsiCo has told just-drinks that it has no plans to break up the company

PepsiCo has told just-drinks that it has no plans to break up the company

PepsiCo has said that it has no plans to split its snacks and beverage divisions, despite analyst suggestions that it may follow Kraft in its decision to break up its business this week.

Earlier this week, Kraft announced that it will separate its drinks brands as part of a plan to split the company in two. The firm will break up its business in order to create a global snacks company and a North America-based grocery firm.

Earlier today, Bernstein analysts suggested that PepsiCo may be closer to splitting into snacks and beverages than it had been previously. The analysts added that they, and most investors, often discuss PepsiCo as a "tale of two companies" - snacks and beverages.

However, speaking exclusively to just-drinks today (5 August), a spokesperson for PepsiCo told just-drinks today (5 August) that the company has no plans to follow Kraft.

"We would always consider our strategic options but we have a very different portfolio to Kraft and their decision does not change our strategy," the spokesperson said. "We are comfortable that our business model is right for today and right for moving forward."

However, Morningstar analyst Philip Gorham said it was not "ridiculous" to think that the company could follow the likes of Kraft and US consumer goods group Fortune Brands in pursuing a split.

"There's very little advantage in terms of distribution to owning drinks and snacks," Gorham said this afternoon. "They can't/don't distribute both on the same truck in most markets. It makes sense to combine distribution in some remote markets but the weight and temperature differences for drinks and snacks makes it unpractical in most markets."

However, Gorham said a combined business does give PepsiCo greater bargaining power with its customers. "The advantage to having a combined business, I think, is the leverage it gives Pepsi over retailers and quick service restaurants," he said. "A single supplier for single serve, fountain drinks and snacks can make life a lot easier and give Pepsi some pricing power."

Nevertheless, the Morningstar analyst said a split could provide value to PepsiCo shareholders.

"From the market's perspective, I suspect that a split would unlock value. The snacks business is great, and has significant competitive advantages in brand equity and distribution, but the stock is being weighed down by the soft drink business. If Pepsi see Fortune Brands and Kraft unlocking value after their splits, it's not ridiculous to think they could follow suit."