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07-08-2018, 12:55 PM
PepsiCo Indra Nooyi's departure could pave way for split of snack and beverage businesses
Lauren Hirsch
August 7, 2018
"The investment bankers have been knocking on our door forever," outgoing PepsiCo CEO Indra Nooyi told analysts earlier this year when peppered about the possibility of splitting its snack business from its drink business.
With Nooyi stepping down on Oct. 3, will incoming CEO President Ramon Laguarta let them in?
Pepsi's North American beverage business, which includes Gatorade and its namesake cola, is its largest unit and has posted declining revenue as sales of carbonated drinks fall and upstart brands eat into the market share of its non-cola drinks. Its Frito-Lay snack business, meantime, is a $15.8 billion unit that has delivered 3 percent sales and 6 percent profit growth in the three years leading to February.
The differing fortunes of the two have attracted the attention of bankers, analysts and activist investor Nelson Peltz, who had a three-year run in the company in which he pushed for a split. Under Nooyi, though, the company adamantly maintained that keeping the two together gave it necessary combined leverage over retailers.
That stance may change under the company's new leadership. Laguarta, 54, is a 22-year veteran of the company, who has been president since September, overseeing global operations, corporate strategy, public policy and government affairs.
"This transition could open a wider door to Pepsi considering a variety of potential alternatives, including stepped up refranchising ... even potentially splitting up the company," wrote Bonnie Herzog, an analyst at Wells Fargo.
Pepsi has contended that owning both snacks and beverages creates a formidable opportunity to cross-promote, a capability it can highlight in events like the Superbowl when in-store displays pair its soft drinks with snacks such as its Tostitos tortilla chips and Lay's potato chips. It also gives it bargaining power in Europe, where its drinks business dwarfs its snacking offerings.
But the food and beverage giant has struggled to grow both equally.
Pepsi's beverage business last quarter dropped 1 percent, an improvement over a 2 percent fall the previous quarter. Its Frito-Lay snack business, by contrast, last quarter grew 4 percent, up from 3 percent growth the prior quarter.
More details in https://www.cnbc.com/2018/08/06/pepsico-...ck-an.html
Lauren Hirsch
August 7, 2018
"The investment bankers have been knocking on our door forever," outgoing PepsiCo CEO Indra Nooyi told analysts earlier this year when peppered about the possibility of splitting its snack business from its drink business.
With Nooyi stepping down on Oct. 3, will incoming CEO President Ramon Laguarta let them in?
Pepsi's North American beverage business, which includes Gatorade and its namesake cola, is its largest unit and has posted declining revenue as sales of carbonated drinks fall and upstart brands eat into the market share of its non-cola drinks. Its Frito-Lay snack business, meantime, is a $15.8 billion unit that has delivered 3 percent sales and 6 percent profit growth in the three years leading to February.
The differing fortunes of the two have attracted the attention of bankers, analysts and activist investor Nelson Peltz, who had a three-year run in the company in which he pushed for a split. Under Nooyi, though, the company adamantly maintained that keeping the two together gave it necessary combined leverage over retailers.
That stance may change under the company's new leadership. Laguarta, 54, is a 22-year veteran of the company, who has been president since September, overseeing global operations, corporate strategy, public policy and government affairs.
"This transition could open a wider door to Pepsi considering a variety of potential alternatives, including stepped up refranchising ... even potentially splitting up the company," wrote Bonnie Herzog, an analyst at Wells Fargo.
Pepsi has contended that owning both snacks and beverages creates a formidable opportunity to cross-promote, a capability it can highlight in events like the Superbowl when in-store displays pair its soft drinks with snacks such as its Tostitos tortilla chips and Lay's potato chips. It also gives it bargaining power in Europe, where its drinks business dwarfs its snacking offerings.
But the food and beverage giant has struggled to grow both equally.
Pepsi's beverage business last quarter dropped 1 percent, an improvement over a 2 percent fall the previous quarter. Its Frito-Lay snack business, by contrast, last quarter grew 4 percent, up from 3 percent growth the prior quarter.
More details in https://www.cnbc.com/2018/08/06/pepsico-...ck-an.html
Specuvestor: Asset - Business - Structure.