Blog: Analysts call for PepsiCo to sell off Quaker
Katy Askew | 16 October 2014
With sales under pressure and margins precarious, PepsiCo should sell off its Quaker North America business, Jefferies analysts argued today (16 October).
The US cereal aisle is currently characterised by weak consumption trends. Consumers are losing interest in cereals and opting for alternate breakfast options that are either more convenient or offer functional health benefits - such as "naturally high in protein" staple, eggs.
Category majors such as Kellogg, General Mills and PepsiCo's Quaker have repeatedly argued that a focus on innovation and marketing can drive consumer excitement around the category. But to date, these efforts have failed to bear fruit - and investments in reinvigorating cereal offer frustratingly low returns.
So is now the time to cut and run?
In an investor note, Jefferies analysts make the case that PepsiCo should dispose of the troubled Quaker North America business and focus on its faster growth snacks arm. After all, it only generates 5% of group profits and has represented a drag on operating income growth of around 75 basis points since 2009.
The analysts highlight the low ROI offered by Quaker - and the fact that the company has struggled to maintain its market share in recent years. If PepsiCo were to sell up, it would reduce its exposure to the "secularly challenged" centre store, the analysts stress.
Indeed, in its most recent financial update, PepsiCo revealed that Quaker North America sales fell 3% in the third quarter. And, surprisingly perhaps given the challenges that the unit is grappling with, management was decidedly reticent about any plans in the offing to give Quaker a much needed shot in the arm during the analyst call to discuss the results.
Of course, only time will tell if a sale could be on the cards. But it could make a lot of sense for a company with considerable exposure to higher growth areas of the packaged foods market.
Ask any FMCG executive to list the trends shaking up the sector and digital and e-commerce will be pretty high on the list. Drill down into that and Amazon will be one of the subjects in the digital s...
Since Theresa May took over as UK Prime Minister in the wake of the country's referendum vote to quit the European Union, she and her ministers have been at pains not to divulge their negotiating posi...
Belgian ingredients firm Puratos has agreed to form a joint venture with South Africa-based foodservice group Bidcorp to develop new products targeting opportunities in South Africa's baking industry....
Greenpeace's long-running campaign against UK tuna brand John West, owned by seafood giant Thai Union, is now directing its fire against Sainsbury's....
- Unilever 2016 investor day - the top takeaways
- The key questions for digital strategists in 2017
- Wessanen's move for Spain's Biogran - analysis
- Have food promotions reached tipping point?
- Burger King, Jollibee: foodservice focus, Nov 2016
- General Mills jobs to go in business revamp
- Verlinvest, China Resources invest in Oatly
- B&G acquires pasta sauce group Victoria Fine Foods
- Japan's Nagatanien buys Chaucer Food Group
- Tyson sets up US$150m investment fund