PepsiCo Inc chairman & CEO Indra K Nooyi has told the India team to push hard for buyouts in milk-based beverages, juices and convenience foods this year to build the wellness portfolio.
Since PepsiCo worldwide generates $5 billion surplus cash every year, there’s no limit on the number of acquisitions and the amount that it would pay as long as they add value to the portfolio. The India office has begun work on this and is in the process of identifying potential targets and making their shadow profit & loss accounts, a top source told ET.
Ms Nooyi, an old hand in mergers and acquisitions, built the company’s health and wellness portfolio by leading the PepsiCo team that acquired Quaker Oats —in a $13.8-billion deal—as well as Tropicana juices.
The soft drink company is also looking for alliances with milk co-operatives to jointly explore milk-based drinks, such as cold coffee, lassi and milk shakes.
Pepsi has made only two acquisitions in India so far, the last being Uncle Chipps, which it bought seven years ago for around Rs 10 crore. Though the budget this time is several times more, it remains to be seen how many takeover candidates actually sell out.
Potential acquisition targets:
- Dabur’s Real — the market leader in juices with annual sales of Rs 240 crore — has been pursued by suitors, including Coca-Cola, but the owners are not ready to play ball.
- Another potential candidate Frito-Lay could be looking at is Haldiram’s, a dominant player in snack foods after Frito-Lay.
A top industry source said inorganic growth in new product categories is the only way forward for soft drink companies in India to push for growth.
If they were to depend solely on fizzy and flavoured drinks in their respective portfolios, the growth is likely to be in single digits and that too only if the weather is conducive and NGOs don’t train their guns on them. Not surprisingly, cola companies are hedging risks by entering wellness and new-age segments that can be had throughout the year.
(Source: Economic Times)
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