The chips are staying with the soda.
CEO Indra Nooyi put to rest chatter the Purchase, N.Y., giant would be splitting off its lucrative snack business, saying the companies “together create a lot more shareholder value than apart.”
Keeping Fritos, Doritos, and other snacks with Pepsi and the company’s other beverages is worth between $800 million to $1 billion to the company, the CEO said.
“The cost of splitting them is enormous and would create untold disruption,” she added.
It took six months to reach this decision after discussions involving Pepsico management, the board of directors and “external advisers,” she told CNBC Thursday after the company reported a 4 percent increase in earnings and plans to cut 8,700 jobs in a restructuring.
“The overwhelming conclusion from that analysis is that shareholder value is maximized with Pepsico as one company because, especially in emerging and developing markets, the two businesses depend on each other to grow,” she said.
The issue is scale, she said.
“We cannot have a successful snack business in many emerging markets unless we have the beverage market scale ... If you don’t have geographic diversity, if you don’t have product diversity and scale to really have heft in these emrging markets, you really can’t succeed.”
I guess you really do need a cold drink to wash down those salty chips.
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