Speculation that PepsiCo (PEP) may be headed for a separation of its drinks and snacks businesses may be just that. On the heels of Kraft Foods (KFT) and Sara Lee's (SLE) moves to slim down for profits by spinning off parts of their businesses, some analysts wondered if PepsiCo might do well to take similar action.
But "PepsiCo isn't on the road to Splitsville any time soon," said IBISWorld beverage analyst Agata Kaczanowska. Its "dual portfolio [of snacks and beverages] allows PepsiCo pricing flexibility in its highly competitive beverages business because it is balanced out by a strong market position in the snacks business."
Pepsi CEO Indra Nooyi has commented that the company's Frito-Lay operations could thrive as an independently run company, but has also said that marketing and distribution synergies for its dual snacks-beverages portfolio are too beneficial for the company to break the two up.
Kaczanowska pointed out that "in the US Soda Production industry the company has a 33.6% market share. It is second behind Coca-Cola (KO) (41.2%) and is facing increasing competition from private labels and Dr. Pepper Snapple (DPS) (15.4%) ... Comparatively, Frito-Lay has a 48.4% market share in the Snack Food Production industry, with Kraft and General Mills (GIS) far behind with just 5.2% and 5.1% market share, respectively. "
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