• Nooyi highglights dairy gains
  • Group to double Russia sales
  • Deal will add to profits from "day one"
PepsiCo to double sales in Russia

PepsiCo to double sales in Russia

PepsiCo's CEO, Indra Nooyi, has hailed the soft drinks giant's deal to acquire control of Wimm-Bill-Dann as a landmark move that will hand it a firmer footing in both nutrition and Eastern Europe.

Wimm-Bill-Dann's knowledge and scale in added-value dairy products is the key benefit that PepsiCo says it sees from its deal to acquire 66% of the Russian company for US$3.8bn. The US soft drinks giant wants to build a nutrition drinks and snacks business with $30bn in annual sales by 2020.

"Consumers and health experts want healthier food and beverages" the head of PepsiCo's nutrition business, Mehmood Khan, said on a conference call following news of the deal today (2 December).

Not only will Wimm-Bill-Dann take the firm's nutrition food and drink sales from $10bn to $13bn in one swipe, it also provides access to dairy technology considered crucial for R&D. "There's lots of runway for innovation and growth," said Nooyi. 

She hailed the agreement as a "watershed" deal for PepsiCo, which plans to launch a further offer to acquire all remaining shares in WBD if Russia's regulator approves its initial 66% stake. The offer for the stake values WBD's entire business at $5.4bn.
 
Nooyi denied that the WBD deal signalled the beginning of a series of "mega acquisitions" to help the firm achieve its goals in nutrition. "The majority of the growth that we're looking at comes from existing business, joint ventures and collaborations," she said.

Outside of nutrition, PepsiCo said that WBD will make it the leading food and beverage group in Russia, doubling its annual sales in the country to $4.6bn. In a merged PepsiCo-WBD business, dairy would contribute to 47% of annual sales, juice would contribute to a quarter of sales, soft drinks 18% and snacks 10%. Zein Abdalla, PepsiCo's CEO for Europe, highlighted that Russia is expected to be Europe's second biggest economy, behind Germany, by 2013.

WBD will also add to PepsiCo's profits "from day one" and is expected to produce $100m in annual, pre-tax synergies by 2014. Synergies will largely come from supply chain savings and backroom facilities, such as IT, PepsiCo said.

PepsiCo expects to gain clearance for its 66% stake in WBD by June.