PepsiCo accepts Dr Pepper firewall to close bottling deal

By Guy Montague-Jones

- Last updated on GMT

Related tags: Dr pepper snapple, Pepsico

PepsiCo has agreed to set up a ‘Chinese wall’ to ensure that the acquisition of its two largest bottlers does not jeopardise competition with rival Dr Pepper Snapple.

To close its $7.8bn acquisition of Pepsi Bottling Group and PepsiAmericas, PepsiCo agreed to the Federal Trade Commission (FTC) requirement that it prevent sensitive information being accessed by any of its employees who are in a position to use that information against Dr Pepper Snapple.

Pepsi Bottling Group and PepsiAmericas bottled drinks for Dr Pepper Snapple before PepsiCo announced its decision to acquire the bottlers in August last year. In December, PepsiCo then agreed to continue bottling and distributing Dr Pepper, Crush, and Schweppes for Dr Pepper Snapple in a $900m deal.

Competition concerns

The FTC expressed concern that this arrangement could harm competition in the highly concentrated and difficult to enter market for branded soft drinks.

The cause of this complaint is that Dr Pepper Snapple provides commercially sensitive plans about its marketing plans to its bottling partner. If that bottler happens to be its direct competitor PepsiCo, that could create a conflict of interest.

The FTC feared that this: “Could hurt Dr Pepper Snapple’s ability to compete, and ultimately could harm consumers by eliminating competition between PepsiCo and Dr Pepper Snapple and/or facilitating coordinated interaction in the industry.”

Completed acquisition

PepsiCo has therefore agreed to set up a ‘Chinese wall’ that prevents certain PepsiCo employees gaining access to commercially sensitive information about marketing and branding at Dr Pepper Snapple. This has enabled PepsiCo to complete the acquisition of its two main bottlers on 26th February.

Coca-Cola has now followed in the footsteps of PepsiCo, announcing last week its intention to buy the North American operations of its bottler Coca-Cola Enterprises (CCE) in a deal worth more than $10bn. Both soft drinks companies are looking to cut out unnecessary layers of management and become more flexible and responsive to market trends.

Related topics: PepsiCo

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