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.
Some people in India believe alcohol should be more difficult to purchase. Last month, the state of Bihar halted all alcohol sales as its chief minister made good on an election promise. ...
Greetings from Zurich. Here as a guest of Heineken's Amstel brand, I'm due to sit down later today with the group's senior global director for international brands, Walter Drenth....
Drinks companies spend a lot of money on trying to predict trends. At last night's Worshipful Company of Distillers City debate, any strategists in the audience got a bit of forecasting for free....
I'll admit to being partial to an Aperol Spritz now and again, more usually in the summer months, sitting outside, shades on, slowly turning more golden/rusty....
- The category today - Scotch Whisky I
- Today's Market Trends - Scotch Whisky II
- Tomorrow's Market Trends - Scotch Whisky III
- Key Brands Performance - Scotch Whisky IV
- Category Trends - Scotch Whisky V
- Brown-Forman shuffles director pack
- Diageo to accept US$1m South Korea fine
- Beam Suntory names CFO, makes structural changes
- Spirits can fill music industry gap - Jagermeister
- Diageo's Smirnoff Red, White & Berry - NPD
- Global Scotch whisky insights - market forecasts, product innovation and consumer trends
- Global RTD insights - market forecasts, product innovation and consumer trends
- Soft Drinks Global Overview: Growth Opportunities Between Category Lines
- Consumer and Market Insights: Wine Market in China
- Global travel retail insights - market forecasts, product innovation and consumer trends