While PepsiCo sees greater inroads into Russia, all that experts can see is a marriage going bad
Well, not really! The Russian hat which appealed heavily to PepsiCo also has a torn feather attached to it. And what’s the proof of it? Lately, Lebendyansky has been suffering from shrinking profits with a surge in its advertising and warehousing costs. Moreover, if we are looking at divisions which appear lucrative, it’s got to be either the baby food or its mineral water units, which are growing faster than its maturing juice business.
Of greater concern is the fact that many experts and research agencies, too, have forecasted that this deal would not reap any big fruit in the mid-to-long term. “Consistent measures of Pepsi system credit rating benchmarks are expected to remain unaffected with this deal,” explains an analyst at s&p. Another challenge lying ahead for the company is to perform in the face of high cost inflationary pressures, something which looks difficult to imagine at the moment.
This apparent counterattack on its rival Coca-Cola, which also owns a Russian juice-maker, Multon (which it bought in April 2005 and which then had a market share of 25%), does appear to be a risky proposition. And with bcg’s July 2007 report proving how M&As value beyond $1 billion destroy twice as much value, wonder – could PepsiCo have just perhaps overdone it a bit?
Well, not really! The Russian hat which appealed heavily to PepsiCo also has a torn feather attached to it. And what’s the proof of it? Lately, Lebendyansky has been suffering from shrinking profits with a surge in its advertising and warehousing costs. Moreover, if we are looking at divisions which appear lucrative, it’s got to be either the baby food or its mineral water units, which are growing faster than its maturing juice business.
Of greater concern is the fact that many experts and research agencies, too, have forecasted that this deal would not reap any big fruit in the mid-to-long term. “Consistent measures of Pepsi system credit rating benchmarks are expected to remain unaffected with this deal,” explains an analyst at s&p. Another challenge lying ahead for the company is to perform in the face of high cost inflationary pressures, something which looks difficult to imagine at the moment.
This apparent counterattack on its rival Coca-Cola, which also owns a Russian juice-maker, Multon (which it bought in April 2005 and which then had a market share of 25%), does appear to be a risky proposition. And with bcg’s July 2007 report proving how M&As value beyond $1 billion destroy twice as much value, wonder – could PepsiCo have just perhaps overdone it a bit?
Source : IIPM Editorial, 2012.
An Initiative of IIPM, Malay Chaudhuri
and Arindam Chaudhuri (Renowned Management Guru and Economist).
and Arindam Chaudhuri (Renowned Management Guru and Economist).
For More IIPM Info, Visit below mentioned IIPM articles.
2012 : DNA National B-School Survey 2012
Ranked 1st in International Exposure (ahead of all the IIMs)
Ranked 6th Overall
Zee Business Best B-School Survey 2012
Prof. Arindam Chaudhuri’s Session at IMA Indore
IIPM IN FINANCIAL TIMES, UK. FEATURE OF THE WEEK
IIPM strong hold on Placement : 10000 Students Placed in last 5 year
IIPM’s Management Consulting Arm-Planman Consulting
Professor Arindam Chaudhuri – A Man For The Society….
IIPM: Indian Institute of Planning and Management
IIPM makes business education truly global
Management Guru Arindam Chaudhuri
Rajita Chaudhuri-The New Age Woman
IIPM B-School Facebook Page
IIPM Global Exposure
IIPM Best B School India
IIPM B-School Detail
IIPM Links
IIPM : The B-School with a Human Face
