Beverage Industry

PepsiCo completes acquisition of two largest Pepsi bottlers

March 1, 2010

PepsiCo, Purchase, N.Y., has acquired two of its largest bottlers for $7.8 billion, boosting its annual revenue to nearly $60 billion and making the company the largest food and beverage business in North America, it said.

The company will combine The Pepsi Bottling Group Inc. and PepsiAmericas Inc. bottling operations under the name Pepsi Beverages Co., said Indra Nooyi, PepsiCo’s chairwoman and chief executive officer.

“With the completion of this acquisition we will have a unique set of strategic advantages,” Nooyi said. “Clearly, we can pair our snacks with our beverages in the marketplace to provide unique offering to retail and food service customers. Eighty percent of our North American sales and distribution system is now under one roof and this will enable us to realize greater operating efficiencies and speed to market.”

Eric J. Foss, previously chairman and chief executive officer of Pepsi Bottling Group, will lead the new operation as its chief executive officer, Nooyi says. Massimo F. d’Amore will be chief executive officer of PepsiCo Beverages Americas, which is composed of Gatorade, Tropicana and Latin America Beverages. The company will consolidate The Pepsi Bottling Group and PepsiAmericas in Europe into PepsiCo Europe, which will be led by chief executive officer Zein Abdalla.

The acquisition of the two bottling companies will open up more opportunities for joint promotions, product bundling and shared display space, Foss said. For example, the company could pair its Frito-Lay snacks with beverages in the marketplace.

“One of the things you’ll see us do is really be able to unlock The Power of One,” he said. “All of those, I think, are big opportunities that you’ll see us activate very quickly in the transition.”

“The Power of One” is how the company will refer to its ability to leverage the abilities of its entire enterprise, Nooyi said. Retailers will see a streamlined supply chain and faster speeds to market for innovations, Foss said.

Foss also said he does not think bringing two large bottlers under the umbrella of PepsiCo will alienate independent franchise bottlers.

“I think one of the things that hopefully they’ll view as a result of this deal is that at the end of the day, myself and a lot of the leadership team on Pepsi Bottling Co. are bottlers,” he said. “So we’re one of them and we now have a big seat at the table. I would expect that the relationship would just get better as a result of that.”

Acquiring Pepsi Bottling Group and PepsiAmerica, which distribute some brands for Dr Pepper Snapple Group Inc., Plano, Texas, will not affect the bottlers’ business with DPSG, Nooyi said.

“The bottling system manages the relationship with Dr Pepper completely separately than the relationship they manage with the franchise company, which is the Pepsi Beverages,” Nooyi said. “They decide what to put on display, how to take this to the marketplace … We want to make sure the bottling company continues to operate business as they have. There’s no reason for us to even see the marketing plans for the Dr Pepper business because it’s not relevant to what we’re doing.”