PepsiCo completes transformative bottling acquisitions

RP news wires

PepsiCo announced March 1 that it has completed the $7.8 billion strategic acquisitions of its two largest bottlers, The Pepsi Bottling Group Inc. and PepsiAmericas Inc.

With the completion of the mergers, PepsiCo today is the largest food and beverage business in North America and the second-largest in the world, with nearly $60 billion in annual revenues and approximately 285,000 employees. It also is the global leader in savory snacks.

"Today marks Day One of the new PepsiCo," said chairman and CEO Indra Nooyi. "Bringing together these three great companies enables us to create the industry's fastest, most flexible and most efficient food and beverage system. It will leverage the capabilities of our entire enterprise – what we call The Power of One – to achieve many years of healthy, profitable growth. This investment opens up a broad range of new growth opportunities around the world, particularly in North America, which accounts for the majority of our revenues and offers the prospect of significant growth. We have approximately 115,000 employees in the U.S. alone, and we are committed to continuing to invest in this critically important market."

PepsiCo reiterated previous guidance that it expects to achieve 11 percent to 13 percent core constant currency EPS growth in 2010. It also said it expects to achieve low-double-digit core constant currency EPS growth in 2011 and 2012. (Please refer to the glossary for definitions of constant currency and core. Core results and core constant currency results are non-GAAP financial measures that exclude certain items. Please refer to "Reconciliation of GAAP and Non-GAAP information" for a description of these items).

"We have devoted the last 10 months to meticulously planning the integration of our companies, and we are fully prepared to launch our new enterprise starting today," Nooyi said. "Most important, we have an exceptionally strong and experienced leadership team in place and ready to go."

Strategic Advantages
With the mergers, PepsiCo will have a unique set of strategic advantages which will provide the greatest benefits in North America and Europe, where the bottlers have operations:

  • It is the global leader in savory snacks, and those snacks can be paired with its beverages in the marketplace. Those pairings will enable PepsiCo to provide unique offerings to retail and foodservice customers.
  • 80 percent of its North American beverage manufacturing, sales and distribution system will be consolidated under one roof, enabling greater operating efficiencies and speed-to-market.
  • It consolidates three public companies into one, creating significant cost savings.
  • It can leverage across its bottling business the vast scale and operating experience associated with its Frito-Lay, Quaker, Tropicana and Gatorade operations.
  • It will be well positioned to leverage its total scale and breadth – through joint promotions, shared display space, product bundling, shopper insights and programs that address consumers' strong desire for greater value.
  • In Europe and Mexico it will have much more integrated operating systems, with the ability to more quickly implement and execute marketplace programs. The combined company will be especially well positioned to capture the clear growth opportunity in the dynamic non-carbonated beverage segment.

The transactions are expected to create pre-tax synergies of approximately $125 million to $150 million in 2010 and approximately $400 million annually once fully implemented by 2012. The initial synergies are due principally to greater cost efficiencies, but later years are a balance of cost savings and new revenue-generating opportunities.

The company said some of the synergies will be reinvested in high-growth emerging markets, global research and development, and new operating capabilities.

After more than 10 months of planning with The Pepsi Bottling Group and PepsiAmericas for the integration of the three companies, and leveraging the experience gained in its 2001 merger with Quaker, PepsiCo has named a full management team for the new beverage organization.

In light of the merger, the company's PepsiCo Americas Beverages (PAB) segment has been reorganized to ensure operating speed and accountability. PAB, which encompasses PepsiCo's beverage businesses across the Americas, will be comprised of two business units.

Eric J. Foss will lead the newly combined bottling operations, called Pepsi Beverages Company (PBC) and Massimo F. d'Amore will continue to lead Gatorade, Tropicana and Latin America Beverages as CEO of PepsiCo Beverages Americas (PBA). He also remains responsible for PAB marketing and franchise management. The operations of The Pepsi Bottling Group and PepsiAmericas in Europe will be consolidated into PepsiCo Europe, led by CEO Zein Abdalla.

The Pepsi Bottling Group and PepsiAmericas common stock ceased trading on The New York Stock Exchange at the close of the market on Friday, February 26 and have been delisted.

About PepsiCo
PepsiCo offers the world's largest portfolio of billion-dollar food and beverage brands, including 19 different product lines that each generates more than $1 billion in annual retail sales. Its main businesses – Frito-Lay, Quaker, Pepsi-Cola, Tropicana and Gatorade – also make hundreds of other foods and drinks to consumers in more than 200 countries. 

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