Costs arising from the US$14bn merger of PepsiCo with Quaker Oats depressed profits by 4.4% in the fourth quarter, the group admitted yesterday [Wednesday].
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Pepsi’s Q4 profits were 37 cents per share, or US$667m. Discounting the impact of merger costs, profits would have climbed 16% to 42 cents per share on a like-for-like basis.
Integrating the sales forces of the two large companies has proved more complicated and costly than forecast. Pepsi always knew it had a job on its hand, as Robert Morrison, Pepsi vice-chairman and Quaker CEO acknowledged before the acquisition went ahead: “Anytime you put (two different sales forces) together, there’ll always be someone who doesn’t understand the sensitivity of which brands to display.”
According to a report in the Financial Times, Pepsi’s Tropicana juice products have not gained the added impetus expected from distribution through Quaker’s Gatorade system. Sales from the Gatorade/Tropicana North America distribution area actually declined by 1.5% in the final quarter.
Despite these disappointing setbacks, Pepsi remains committed to the merger. “The Quaker integration has brought no surprises and is solidly on track,” assured Steve Reinemund, Pepsi chairman and CEO.
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By GlobalDataWorries about the performance of Gatorade have been exacerbated by the news that Sue Wellington, in charge of US beverages at Quaker North America, is taking a personal leave of absence.
While Gatorade retains an 80% share of the US sports drink market, its solid position has looked more vulnerable over the past twelve months since archrival Coca-Cola relaunched Powerade at a much lower price point. Coke is adopting an extremely aggressive stance in the soft drinks market, but Pepsi has held its own. Its North American bottler case volumes climbed 3% in the fourth quarter, an improvement on Coke’s modest 1% growth in the same period.
Just yesterday, just-food.com reported on a court victory for Pepsi as a judge ruled that fastfood chain Blimpie was allowed to switch cola supplier from Coke in favour of Pepsi – click here for more details.
