Coca-Cola M&A Activity: PepsiCo M&A Portfolio Analysis (Largest Competitor)

PepsiCo Chairman and CEO Indra Nooyi accurately recaps the changing industry dynamics which have resulted in the two major beverage company business model trends previously identified:

“Our operating environment has changed dramatically in the last decade. Retailers have continued to consolidate. New companies have emerged. And non-carbonated drinks, which have different economics and different distribution systems than carbonated soft drinks, have become a much bigger factor in the industry and in our own portfolio.”[ Platt, Gordon. "Pepsi Puts Some Fizz Back in M&A Market." Global Finance Magazine. June 2009. Web. 1 May 2011. http://www.gfmag.com/archives/100-june-2009/1833-regulars-finance-mergers-a-acquisitions.html#axzz1Kqmf5N9W .]

Exhibit 3 highlights significant M&A activity for PepsiCo between 1998 and 2010. The major industry trends, brand acquisition and vertical integration, are immediately apparent in this list. PepsiCo bought the Tropicana and Gatorade[ Chazan, Guy. "Pepsi to Buy Wimm-Bill-Dann of Russia for $5.8 Billion." The Wall Street Journal. 3 Dec. 2010. Web. 01 May 2011. http://online.wsj.com/article/SB10001424052748703377504575650252777195806.html .] brands to enhance the company’s variety of beverage offerings. On the other hand, PepsiCo’s acquisitions of Pepsi Bottling Group (PBG) and PepsiAmericas (PAS) were pursued strictly with operational efficiency in mind.

For many smaller players in the beverage industry, M&A means acquiring other small companies and achieving both gains in market share and streamlined operations. At the world’s largest beverage companies like Coca-Cola and PepsiCo, M&A activities tend to focus on one goal or the other. For example, PBG and PAS are in the business of bottling and distributing beverages only, with no actual brand ownership to their names. Conversely, PepsiCo’s acquisition of South Beach Beverage Company was designed to offer customers all across the country a healthy alternative-type beverage under the umbrella of Pepsi’s already highly efficient system of franchising with bottlers. In this way, the largest beverage companies of today are pursuing very focused M&A deals with narrow goals in mind.

Exhibit 4 presents abridged details of two PepsiCo M&A deals featured in Exhibit 3, Wimm-Bill-Dann (2010)[ Ibid. ] and Quaker Oats (2001).[ "Pepsi Buys Quaker in $13.4B Stock Deal." ABC News. 4 Dec. 2001. Web. 01 May 2011. http://abcnews.go.com/Business/story?id=88989 .] Of these acquisitions, Tom Pirko, CEO of beverage company consulting firm Bevmark, says “Pepsico is building a formidable package of leading brands.”[ Ibid. ] These are just a few of PepsiCo’s many M&A deals over the last decade, but they highlight the company’s participation in the beverage industry’s overall trends.

More posts from a paper on Coca-Cola M&A Activity (including merger with CCE):

Coca-Cola M&A Activity, CCE Acquisition: Executive Summary
Coca-Cola M&A Activity: Introduction
Coca-Cola M&A Activity: Product Trends
Coca-Cola M&A Activity: Demand and Economic Trends
Coca-Cola M&A Activity: Business Model Trends in the Beverage Industry
Coca-Cola M&A Activity: Beverage Industry Business Model Trends (2)
Coca-Cola M&A Activity: Company Strategic Objectives
Coca-Cola M&A Activity: Company Strategic Objectives (2)
Coca-Cola M&A Activity: Company Portfolio Analysis
Coca-Cola M&A Activity: Company Portfolio Analysis (2)
Coca-Cola M&A Activity: Company Portfolio Analysis (3)
Coca-Cola M&A Activity: PepsiCo M&A Portfolio Analysis (Largest Competitor)
Coca-Cola M&A Activity: PepsiCo M&A Portfolio Analysis (Largest Competitor) (2)
Coca-Cola M&A Activity: Other Beverage Industry M&A Activity
Coca-Cola Acquisition of CCE North America: Deal Structure
Coca-Cola Acquisition of CCE North America: Deal Structure (2)
Coca-Cola Acquisition of CCE North America: Major Legal and Financial Players
Coca-Cola Acquisition of CCE North America: Regulatory and Shareholder Approval of the Transaction
Coca-Cola Acquisition of CCE North America: Implementation Analysis: Likelihood of Acquisition Success
Coca-Cola Acquisition of CCE North America: Implementation Analysis: Likelihood of Acquisition Success (2)
Coca-Cola Acquisition of CCE North America: Conclusion to M&A Deal Analysis
Coca-Cola CCE Merger: Table of Contents and Works Cited List