PepsiCo's CEO said Monday that the nation's No. 2 soft drink company plans no new acquisitions of North American drink manufacturers in the current economic climate, but instead will focus resources on expanding markets for drinks it has developed on its own.
"I'd like us not to make any more beverage acquisitions, tuck-in type acquisitions," Chief Executive Indra Nooyi said Monday at a Beverage Digest conference in New York. "I think our R&D pipeline is well-primed."
However, PepsiCo, which also owns the Frito-Lay snacks business, will consider acquisitions in the growing snacks sector, Nooyi said.
Purchase, N.Y.-based PepsiCo Inc. and other soft drink sellers have suffered from declining soda sales, and Morgan Stanley analyst Bill Pecoriello sees soda sales falling 6 percent next year. Third-quarter sales growth at PepsiAmericas Beverages, which sells drinks in the U.S. and Latin America, was flat with a 2.5 percent decline in the volume of drinks sold. Sales of carbonated soft drinks fell 3 percent in North America while bottled water sales volume slid by double-digits as cash-strapped consumers switched to tap water.
But the PepsiAmericas Foods division, which includes the Doritos, Ruffles and Fritos chip brands among other snacks, reported a 12 percent rise in revenue in the third quarter.
Prior to the economic slowdown, PepsiCo maintained a robust acquisitions strategy, buying drinks companies such as Izze, Naked Juice and a major juice maker in Russia. Earlier acquisitions brought the Tropicana, SoBe LifeWater and Gatorade brands to the company.
Coke made the biggest drink acquisition in the industry's history when it bought Glaceau's VitaminWater brand for $4.1 billion in June 2007. It has also taken a stake in bottled tea company Honest Tea.
Declines in soft drink sales had driven both companies to promote alternatives such as bottled water, energy drinks and sparkling juices, but the economic downturn may force them to refocus their marketing attention back to lower-priced soft drinks.
PepsiCo's top executives told bottlers in October that they would engineer a return to CSDs, or carbonated soft drinks.
"We realize we have to stick with it, and the identity change is just the first step," Nooyi told Beverage Digest at the time. The company plans new logos for Pepsi, Mountain Dew and Sierra Mist in the first phase of a multiyear campaign.
Shares of PepsiCo rose 39 cents to close at $52.42.