Snacks and beverage giant PepsiCo has said it may look at smaller acquisitions as a way of driving international scale and profit in developing markets.
Speaking at the Consumer Analyst Group of New York conference yesterday (21 February), CFO Hugh Johnston said the company might consider M&A, but “tuck-in” deals as a way of ensuring developing markets continue to contribute to profit growth.
Go deeper with GlobalData
“We may occasionally choose to do a tuck-in acquisition, and we have talked about those in the past. They are typically a few hundred million dollars in size, they are accounted for in our cash flow expectations. And the decision we’ll make on whether we choose to do a small acquisition or whether we will build purely organically will really be driven by what is the right value creation move.”
Johnston said a decision on any acquisition would also be made on a market-by-market basis.
“In some markets we may say, you know what, we believe we can do this entirely on our own as we have done in India. In some markets we may choose to do some tuck-ins as we have done in Brazil. So I think it is going to be a balancing act.”
Speaking more broadly, Johnston told attendees there are markets “yet to enter” that represent “tremendous future growth potential for PepsiCo”.
How well do you really know your competitors?
Access the most comprehensive Company Profiles on the market, powered by GlobalData. Save hours of research. Gain competitive edge.
Thank you!
Your download email will arrive shortly
Not ready to buy yet? Download a free sample
We are confident about the unique quality of our Company Profiles. However, we want you to make the most beneficial decision for your business, so we offer a free sample that you can download by submitting the below form
By GlobalDataHowever, he said the PepsiCo portfolio was “where it needs to be” and dismissed the suggestion the company might look to make any large deals.
“From an M&A perspective, consistent with our past comments, we believe the portfolio is largely where it needs to be and consequently we do not see the need for any large-scale M&A. As a result we will plan to continue to return the strong cash flow to our shareholders.”
Looking ahead, he added: “We feel good about where the business is, we have sizeable structural advantages and took actions to strengthen our business in 2012. As a result we believe we are back in a virtuous circle.”
