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Pepsi Launches Takeover Bids For Two Bottlers

PepsiCo launched a $6 billion takeover bid for its two largest independent bottlers late Sunday, signaling its intention to overhaul how it makes and distributes its products to consumers, Betsy McKay, Dennis K. Berman and Valerie Bauerlein report. Combining Pepsi with Pepsi Bottling Group and PepsiAmericas would give it control of about 80% of its North America beverage distribution volume.

A decade ago, Pepsi sought to separate itself from its bottlers; now it wants more control over production and distribution in order to squeeze out costs. "When you have a flat-to-shrinking profit pool, slicing it 20 ways to Sunday is not the answer," says Pepsi chairman and CEO Indra Nooyi.

Pepsi and its bottlers are being squeezed by changes in consumer habits, whose manufacturing assets are geared mostly toward producing soda rather than the types of drinks that are growing now, such as "enhanced water."

PepsiCo's move is likely to put pressure on Coke. Like Pepsi, it is aggressively developing its presence in noncarbonated beverages, which don't always fit well with a bottling business.

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