PepsiCo is going for a leg up in its battle with Coca-Cola Co. over the Russian market.
In its largest-ever international acquisition, PepsiCo has agreed to acquire 66 percent of Russia's Wimm-Bill-Dann dairy and juice company for $3.8 billion, pending government approval. Later, PepsiCo plans to offer to buy the rest of the company.
PepsiCo said the transaction will establish it as the largest food and beverage business in Russia, a nation of 139 million people, and boosts its plan to sell billions of dollars of healthier beverages and snacks.
It puts a sharper edge on the competition between PepsiCo and Coca-Cola, which also plans to spend serious money in Russia. Coca-Cola bought Russian juice maker Nidan this year, has spent $2 billion in Russia since the early 1990s, and plans to spend $1 billion more over the next three to five years.
Last year, Coca-Cola boasted 25 percent of the soft drink market in Russia, and PepsiCo had 20 percent, according to trade journal Beverage Digest. Coca-Cola boosted its beverage volume in Russia by 13 percent through the first nine months of this year, with the Coca-Cola brand up 34 percent in the third quarter. Coca-Cola chief executive Muhtar Kent said the company's juice business was also making steady progress.
PepsiCo said the Wimm deal will raise its annual revenue from "nutritious and functional" foods from about $10 billion today to nearly $13 billion. PepsiCo wants to build a $30 billion nutrition business by 2020. Executives indicated they would look for more additions to PepsiCo's portfolio of dairy products. Dairy is growing fast across the world.
After the Wimm deal, PepsiCo's brands in Russia will chip in about $5 billion in revenue, and company will have six of the 20 largest food and beverage brands there. Russia will pass Mexico as the biggest international market for PepsiCo, which had more than $43 billion in sales last year.
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