PepsiCo and The Coca-Cola square up in Russias juice market

PepsiCo and The Coca-Cola square up in Russia's juice market

PepsiCo's deal for Wimm-Bill-Dann will see the group leapfrog its old foe The Coca-Cola Co in Russia's juice market.

A combined Wimm-Bill-Dann (WBD), PepsiCo operation is expected to account for between 40% and 50% of juice sales by volume in Russia, according to varying analyst estimates. PepsiCo's decision to purchase a 66% stake in WBD and its intention to acquire the rest of WBD's shares will, therefore, put the group ahead of Coca-Cola in a key emerging market for both soft drinks companies.

Coca-Cola boosted its presence in Russia earlier this year by acquiring the Nidan juice group, but the firm's total juice sales in the country are only thought to account for 30% of the market, according to analyst group Sanford Bernstein.

Even though PepsiCo views added-value dairy as the main benefit of the WBD deal, Bernstein said today (3 December) that PepsiCo's move on WBD "will likely make Russia a new focal point in the race between PepsiCo and Coca-Cola for global juice supremacy".

Both companies see juice as a key ingredient of their efforts to create healthier product portfolios in response to consumer and regulator demands around the world. 

According to Euromonitor and Bernstein figures, PepsiCo's existing Lebedyansky business leads Russia's juice market with a 27% volume share. WBD will add 12% to that share. Meanwhile, Coca-Cola's Multon and Nidan subsidiaries control 19% and 12% of the juice sector respectively.

With Russia's economy tipped to become Europe's second biggest behind Germany in 2013, we can expect some fierce competition between PepsiCo and Coca-Cola as they bid for leadership of a growing market.

For now, the sheer scale that PepsiCo will inherit via WBD puts it at an advantage against its old adversary. The US$3.8bn WBD deal, if approved, will make PepsiCo the largest food and beverage company in Russia by net sales, and almost twice as big as its nearest competitor. The combined business will have nearly 60 production sites, although it remains unclear as to whether all of these will remain open, as well as 31,000 employees.  

PepsiCo will lead Russia's juice category even though the WBD acquisition will actually reduce the proportion of sales that juice contributes to the company's business in the country. Currently, PepsiCo Russia gets around 35% of annual net sales from juice, but this will fall to 25% if the WBD deal goes through. Dairy will contribute to almost half of the combined company's annual sales.