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PepsiCo buys bottlers for $7.8bn

By Rory Harrington , 05-Aug-2009

PepsiCo Inc has agreed the takeover of two of its bottle makers in a deal worth $7.8bn that will see the consolidation of 80 per cent of its North American beverage volume.

The world’s second largest soft drinks manufacturer said yesterday the acquisition of Pepsi Bottling Group Inc and PepsiAmericas Inc would net the company annual savings of $300m by 2012. The buyout would result in speedier decision-making and help bring products to market more quickly, said Pepsi.

The agreement was reached after a previous bid worth $6bn had been rejected earlier this year.

Changing market dynamics

The company said the previous arrangement – with a separation of bottling and distribution from product development and marketing - had been effective but needed to be adapted to suit changing market dynamics.

While the existing model has served the system very well, it is clear that the changing dynamics of the North American liquid refreshment beverage business demand that we create a more flexible, efficient and competitive system that can drive growth across the full range of PepsiCo beverage brands,” said PepsiCo Chairman and Chief Executive Officer Indra Nooyi.

He added: “The fully integrated beverage business will enable us to bring innovative products and packages to market faster, streamline our manufacturing and distribution systems and react more quickly to changes in the marketplace, much like we do with our food business.”

Greater control

One analyst said the advantage of owning their bottling operations meant Pepsi could now control how its products were distributed, priced and even displayed in retail outlets.

Another report indicated that competitor Coca-Cola was also seeking to complete a similar move with its bottling operations.

Pepsi said the deal, which is expected to go through late this year or early next, was subject to approval from the usual regulatory authorities as well as shareholders from both Pepsi Bottling Group Inc and PepsiAmericas Inc.

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