Beverage Industry

Bottling acquisitions spur PepsiCo growth

July 21, 2010

Aided by the acquisition of its largest bottlers, Purchase, N.Y.-based PepsiCo Inc.’s PepsiCo Americas Beverages division reported 13 percent volume growth, a 112 percent spike in net revenue and a 54 percent increase in operating profit in the second quarter of 2010. In North America, excluding the incremental volume from its agreement with Dr Pepper Snapple Group, volume declined 1 percent – a 4.5 point sequential improvement versus the first quarter of 2010.

The launch of Gatorade’s G Series line of sports drinks and Lipton’s ready-to-drink teas helped improve the company’s organic volume growth, but softness in the carbonated soft drink category and the company’s focus on growing bottled water stymied volume growth, the company said.

Across all food and beverage categories, PepsiCo saw net revenue grow by 40 percent and operating profits increase by 19 percent, it said.

"We are benefiting from both the acquisition of our anchor bottlers earlier this year and from improving trends across our global business,” said Hugh Johnston, PepsiCo’s chief financial officer, in a statement. “As planned, we have stepped up incremental investments around the world to capitalize on untapped consumer demand, including investments in marketplace infrastructure to support both our expanding China beverage business and innovation across our global snacks portfolio.  We remain confident in our ability to meet our full-year core constant currency EPS target of 11 to 13 percent."

PepsiCo will target about $400 million in pre-tax annual synergies from its bottling acquisitions, which it expects to fully implement by 2012, but a one-time cost of $650 million will be required, the company said. In 2010, the company expects to realize $125 million to $150 million in synergies.