PepsiCo Inc.
(
PEP
) in agreement with privately held, German dairy producer, Theo
Muller Group, has formed a joint venture to sell yogurt products in
U.S. This marks the company's entry into the American dairy
market.
The joint venture to be called Muller Quaker Dairy will supply a
range of dairy products like Muller Corner, Muller Greek Corner and
Muller FrutUp from mid-July 2012 through supermarkets and club
retailers in the Northeast and Mid - Atlantic States.
The deal which brings together PepsiCo's brand name and
marketing prowess and Muller's more than 100 years of dairy
expertise is expected to be beneficial for both companies. PepsiCo
will leverage Muller Group's popularity in Europe to capture a
growing share in the U.S. dairy market.
PepsiCo already sells dairy products outside U.S. In September
last year, PepsiCo acquired Russia's largest dairy company,
Wimm-Bill-Dann. It also has a joint venture with Almarai, Saudi
Arabia's largest dairy company, since 2009.
Changing consumer preferences for healthier drinks and foods are
affecting PepsiCo's carbonated soft drinks (CSD) volumes.
Accordingly, the company is looking to diversify into healthier
food and beverage categories like energy drinks, yogurt and
wholesome snacks. In fact, PepsiCo hopes to grow its global
nutrition portfolio to $30 billion in revenue by 2020. Some of its
popular health and wellness brands include Quaker, Tropicana and
Gatorade.
Our Recommendation
Currently, the stock has a Zacks #4 Rank (short-term Sell
rating). Over the long term, we provide a Neutral recommendation on
PepsiCo.
We are encouraged by PepsiCo's strong brand portfolio, its
product and geographic diversity and solid cash flow generation.
Moreover, PepsiCo's marketing support investments, brand building
innovation and cost saving efforts will boost growth in the long
term.
However, a challenging consumer spending environment combined
with higher commodity costs raises concern. Moreover, PepsiCo faces
strong competition from
The Coca-Cola Company
(
KO
). The Coca-Cola Company commands a larger share of CSD consumption
in the U.S. measured channels and also enjoys higher market share
in many markets outside the United States than PepsiCo.
COCA COLA CO (KO): Free Stock Analysis Report
PEPSICO INC (PEP): Free Stock Analysis Report
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