Blog: PepsiCo struggles to kill off split speculation

Michelle Russell | 13 October 2011

PepsiCo's formation of a 'council' last month has done little to dampen rumours of the company doing what many in the industry have termed 'a Kraft', ie splitting its snacks and beverages divisions.

While analysts have suggested that a split of the business could achieve more value for shareholders, PepsiCo has maintained that it will not do so and, inevitably, this was the line of questioning fired at the company's CFO, Hugh Johnston, on PepsiCo's third-quarter earnings call yesterday.

Understandably, both investors and the media are keen to get to the bottom of PepsiCo's thoughts on whether a split is on the horizon, or indeed, whether management has even met to discuss such a possibility. Given the sluggish North American beverages market and commodity cost increases, there is certainly pressure on the company to return value to shareholders now in any way it can.

Kraft's chairman and CEO Irene Rosenfeld insisted last month that the split of its North American grocery unit and a global snacks business would allow both to focus on growth in their respective fields.

While this may be true for the US food firm, it does not appear to be so for PepsiCo, as Johnston reiterated to journalists.

The CFO insisted that, while PepsiCo is in the process of "turning over every stone to look for opportunities of unlocking shareholder value", the company will look at a number of combinations, but splitting the business is not one of them.

"We see ourselves aas having highly complimentary businesses and taking it apart I know would be very costly and I really don't see the benefit in doing so," Johnston said. "If we saw something that would unlock significant shareholder value, then we would do it."

While Johnston's affirmations appear to suggest that this option is not on the table for the time being, analysts and investors will still be watching closely to see what material gains the company's new council can achieve.


BLOG

Flavour stick "ages whisk(e)y three years in 24 hours"

Whisk(e)y companies spend a lot of money and effort ageing their products for that premium taste....

BLOG

US lacks bottle for craft soda revolution

PepsiCo created a stir last week with the news it is testing a product called Caleb's Kola, with some in the media claiming it was the beginning of a new “craft soda” category....

BLOG

Beer cocktails abound as SABMiller gives Peroni a push

SABMiller's bid to widen the appeal of beer is very much in evidence at its latest 'House of Peroni' - with beer cocktails and a bigger bottle for the Italian lager brand on offer. ...

BLOG

The just-drinks Weekly Round-Up

Here's a round-up of the big stories on just-drinks last week, featuring PepsiCo, SABMiller, the Scotch whisky category and the US wine market....

just-drinks homepage



Forgot your password?