PepsiCo offers to buy bottlers for $6 billion
NEW YORK - PepsiCo, the maker of drinks like Mountain Dew and its namesake soda, offered $6 billion Monday to acquire its two largest bottlers in an effort to update the way it delivers its products. It also reported a 1 percent drop in first-quarter profit.
The company, which also makes Gatorade, Aquafina and snacks like Lay's and Fritos chips, will handle about 80 percent of its total North American beverage volume if the deals for Pepsi Bottling Group and PepsiAmericas go through.
"There is a need to be more nimble given the increasing role of (noncarbonated beverages), retailer consolidation and the changing competitive landscape," PepsiCo Chairman and Chief Executive Indra Nooyi said.
The move shows how much the landscape has changed since 1999, when PepsiCo spun off Pepsi Bottling Group. Since then, soft drink sales have dropped and Pepsi bought Tropicana, Gatorade and other noncarbonated beverages.
"A move this big changes the entire landscape of the industry," said John Sicher, editor of the trade publication Beverage Digest. "Today the beverage business consists of a greater diversity of products, and PepsiCo needs more control and flexibility over the route to market for its brands."
In short, the move allows Pepsi more direction over its products, since it will not have to negotiate with bottlers about what items are distributed. However, Pepsi will have a larger stake in the more volatile bottler business, which is affected by packaging and other costs.
