PepsiCo Seeking to Expand its Dairy Business
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PepsiCo (NYSE: PEP) is home to hundreds of brands across the globe. These brands include Pepsi-Cola, Frito Lay, Gatorade, Tropicana, and Quaker. The company is separated into four major divisions: PepsiCo Americas Beverages, PepsiCo Americas Foods, PepsiCo Europe, and PepsiCo Asia, Middle East, and Africa. Currently, beverages make up the majority of PepsiCo’s revenue and brand recognition. With revenues of $60 billion, PepsiCo owns some of the world’s most popular brands available worldwide through a variety of go-to market systems. Recently, the company has been working toward diversifying even further, aiming to grow its global nutrition portfolio to $30 billion in revenue by 2020.
In 2011, the global brand acquired Wimm-Bill-Dann, Russia’s largest dairy company. PepsiCo has also been operating a successful joint venture with the Saudi dairy company Almarai, and this month it entered into a joint venture with Theo Muller Group, a German dairy company. The latter venture, named Muller Quaker Dairy, will offer three types of yogurt beginning in July. Muller Corner, Muller Greek Corner, and Muller FrutUp will be available in U.S. cities including New York, Boston, Philadelphia, and Washington D.C.
Two of PepsiCo’s largest competitors are Coca-Cola (NYSE: KO) and Dr Pepper (NYSE: DPS). Coca-Cola is strictly a beverage company, offering over 3,500 products worldwide in over 200 countries. Since Coca-Cola offers only beverage products, one could argue that it is not as diverse as PepsiCo. However, its span of beverage offerings and its product variety throughout regions across the globe are what make it diverse. Also, Coca-Cola is arguably the most popular beverage brand in the world. Its market share, customer loyalty, and sheer distribution volume are what keep it afloat. Since PepsiCo knows the difficulty of trying to beat them in the beverage market alone, they know they must look elsewhere to expand their brand and grow.
Dr Pepper is likely a less threatening competitor. Similar to Coca-Cola, it is strictly a beverage company with a considerably smaller product offering. It does offer many of the classics, though, including A&W, Snapple, Yoohoo, and Hawaiian Punch. Still, the Dr Pepper namesake is the only product in its lineup that offers any real competition to PepsiCo or Coca-Cola; the other products are simply a trip down memory lane for most. It is certainly not the most diverse of these beverage companies, although, it has managed to cultivate quite the cult following. PepsiCo lacks the type of brand loyalty that both Coca-Cola and Dr Pepper (for some) seem to have created over time.
Diversification into dairy could well be a step in the right direction for PepsiCo as it continues to develop its food portfolio. Market share is difficult to gain in the beverage industry. However, the food industry is ever-changing, and newcomers are always welcome. Hopefully, the Muller Quaker Dairy venture will help the company continue to grow on the domestic front. PepsiCo is thinking outside of the box, and the third quarter will tell whether or not this venture has paid off for the beverage giant.
MaryPosey has no positions in the stocks mentioned above. The Motley Fool owns shares of The Coca-Cola Company and PepsiCo. Motley Fool newsletter services recommend PepsiCo and The Coca-Cola Company. Try any of our Foolish newsletter services free for 30 days. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy.If you have questions about this post or the Fool’s blog network, click here for information.