While PepsiCo sees greater inroads into Russia, all that experts can see is a marriage going bad
In love with a Russian... and married soon after – that’s the
latest at PepsiCo. This $115.6 billion giant (nyse), which today commands an incredible global market share of 31.1% (as per Beverage digest) has fallen in love with a healthy, juice producing Russian company, christened ‘JSC Lebedyansky’ (world’s sixth-largest juice manufacturer). The marriage dowry however is ‘beyond’ fair at $1.4 billion for a 75.53% stake in Lebedyansky.
Justifying the takeover, Michael White, CEO and Vice-Chairman, PepsiCo International states, “This agreement provides us with a strong platform for continued expansion in one of the world’s fastest growing juice markets and advances the global transformation of PepsiCo’s product portfolio.” According to ubs ag, Russia’s juice market is currently valued at $2.5 billion and is expected to grow by 10% a year through 2010. Even Euromonitor International has stated that the fruit and vegetable juice sales volume in Russia has grown by 73% (in terms of volume) from 2002 to 2007. So does this prove that this bait is all fleshy?
Well, not really! The Russian hat which appealed heavily to PepsiCo also has a torn feather attached to it. And what’s the proof of it? Lately, Lebendyansky has been suffering from shrinking profits with a surge in its advertising and warehousing costs. Moreover, if we are looking at divisions which appear lucrative, it’s got to be either the baby food or its mineral water units, which are growing faster than its maturing juice business.
Of greater concern is the fact that many experts and research agencies, too, have forecasted that this deal would not reap any big fruit in the mid-to-long term. “Consistent measures of Pepsi system credit rating benchmarks are expected to remain unaffected with this deal,” explains an analyst at s&p. Another challenge lying ahead for the company is to perform in the face of high cost inflationary pressures, something which looks difficult to imagine at the moment.
This apparent counterattack on its rival Coca-Cola, which also owns a Russian juice-maker, Multon (which it bought in April 2005 and which then had a market share of 25%), does appear to be a risky proposition. And with bcg’s July 2007 report proving how M&As value beyond $1 billion destroy twice as much value, wonder – could PepsiCo have just perhaps overdone it a bit?
In love with a Russian... and married soon after – that’s the
latest at PepsiCo. This $115.6 billion giant (nyse), which today commands an incredible global market share of 31.1% (as per Beverage digest) has fallen in love with a healthy, juice producing Russian company, christened ‘JSC Lebedyansky’ (world’s sixth-largest juice manufacturer). The marriage dowry however is ‘beyond’ fair at $1.4 billion for a 75.53% stake in Lebedyansky.Justifying the takeover, Michael White, CEO and Vice-Chairman, PepsiCo International states, “This agreement provides us with a strong platform for continued expansion in one of the world’s fastest growing juice markets and advances the global transformation of PepsiCo’s product portfolio.” According to ubs ag, Russia’s juice market is currently valued at $2.5 billion and is expected to grow by 10% a year through 2010. Even Euromonitor International has stated that the fruit and vegetable juice sales volume in Russia has grown by 73% (in terms of volume) from 2002 to 2007. So does this prove that this bait is all fleshy?
Well, not really! The Russian hat which appealed heavily to PepsiCo also has a torn feather attached to it. And what’s the proof of it? Lately, Lebendyansky has been suffering from shrinking profits with a surge in its advertising and warehousing costs. Moreover, if we are looking at divisions which appear lucrative, it’s got to be either the baby food or its mineral water units, which are growing faster than its maturing juice business.
Of greater concern is the fact that many experts and research agencies, too, have forecasted that this deal would not reap any big fruit in the mid-to-long term. “Consistent measures of Pepsi system credit rating benchmarks are expected to remain unaffected with this deal,” explains an analyst at s&p. Another challenge lying ahead for the company is to perform in the face of high cost inflationary pressures, something which looks difficult to imagine at the moment.
This apparent counterattack on its rival Coca-Cola, which also owns a Russian juice-maker, Multon (which it bought in April 2005 and which then had a market share of 25%), does appear to be a risky proposition. And with bcg’s July 2007 report proving how M&As value beyond $1 billion destroy twice as much value, wonder – could PepsiCo have just perhaps overdone it a bit?
Read these article :-
ZEE BUSINESS BEST B SCHOOL SURVEY
B-schooled in India, Placed Abroad (Print Version)
IIPM in Financial times (Print Version)
IIPM makes business education truly global (Print Version)
The Indian Institute of Planning and Management (IIPM)
IIPM Campus
Top Articles on IIPM:-
'This is one of Big B's best performances'
IIPM to come up at Rajarhat
IIPM awards four Bengali novelists
IIPM makes business education truly global-Education-The Times of ...
The Hindu : Education Plus : Honour for IIPM
IIPM ranked No.1 B-School in India, Management News - By ...
IIPM Ranked No1 B-School in India
Moneycontrol >> News >> Press- News >> IIPM ranked No1 B-School in ...
IIPM ranked No. 1 B-school in India- Zee Business Survey ...
IIPM ranked No1 B-School in India :: Education, Careers ...
The Hindu Business Line : IIPM placements hit a high of over 2000 jobs
Deccan Herald - IIPM ranked as top B-School in India
India eNews - IIPM Ranked No1 B-School in India
IIPM Delhi - Indian Institute of Planning and Management New Delhi ...domain-b.com : IIPM ranked ahead of IIMs
No comments:
Post a Comment