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

Starbucks jumps on gin bandwagon

Starbucks has become the latest company to tap into the gin craze, with the launch of Starbucks Reserve Gin Barrel-Aged Cold Brew....

BLOG

Feeling Blue on Monday? Help is at hand

It may not be scientific, but the third Monday in January has been coined 'Blue Monday' - the most depressing day of the year. Dreamed up in the UK by a psychologist commissioned by a holiday company ...

BLOG

Bad day on the beer? This'll help

If you work for a brewer and are having a rough week, take a minute to regain some perspective with this, from the good people at US craft beer producer Sierra Nevada Brewing Co....

BLOG

Brewers Association "bid" to buy Anheuser-Busch InBev strikes a chord

Is this a case of if you can't beat them, buy them?...



Forgot your password?