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‘Terrific' Russia position boosts PepsiCo beverage business: Indra Nooyi

By Ben Bouckley+

15-Feb-2013
Last updated the 15-Feb-2013 at 12:44 GMT

PepsiCo CEO Indra Nooyi says the firm has a ‘terrific position’ as the top food and beverage business in Russia, where 10% organic revenue growth in 2013 helped offset weaknesses in Western Europe.

Discussing PepsiCo’s performance in major developing markets such as India, Mexico and Russia, Nooyi said: “We have a terrific position in Russia where we are the number one food and beverage business by a factor of two."

She added: “And in the fourth quarter, our organic revenue growth in Russia was 10%, demonstrating our ability to leverage our brand, scale and product spread to drive growth in this important market.”

Nooyi hailed 5% topline growth for the year ending December 29, but PepsiCo’s net revenue (reflecting costs) fell 1.5% to $65.492bn, while net income fell 4% to $6.214bn.

Strong Russian brands, strong management

Strong Russian growth also failed to offset a 1% sales slump across PepsiCo’s wider European business in Q4 and the full year, where net revenue was $13.441bn.

However, operating profit or EBIT for PepsiCo’s European division rose 10% to $1.33bn.

In December 2010, PepsiCo agreed to buy the 66% of Russian (predominantly dairy) firm Wimm-Bill-Dann (WBD) it didn’t own for $3.8bn; the company produces yogurts, milks, flavored milks, fruit juices and other soft drinks.

Discussing progress on integrating Wimm-Bill-Dann in Russia, and where she saw the business today versus what the firm expected at the start of 2012, Indra told analyst Bryan Spillane from Bank of America Merrill Lynch that the integration, “had gone exceedingly well, with the business performing at Cap Ex levels”.

One of the architects of the Russian business, Zein Abdalla, president, PepsiCo, said that when his firm did due diligence on WBD, it realized it was buying a business with strong brands and a strong management team.

“And those two things really do support your ability to integrate. As we’ve merged these businesses, it’s given us the opportunity to strengthen our go-to-market systems across our total businesses.”

Getting into the ‘morning day part’

Since Russia was immensely big and had multiple time zones, Abdalla said that a company’s strength of reach across the country in terms of the operational scale was crucial, and that WBD had really given PepsiCo a step up in those terms.

He added: “I think the final thing we would really call out is the innovation opportunity WBD brings, to really strengthen our snack and beverage approach by getting us into that morning day part, and allowing us to leverage our assets into a whole new day part has really proven out as well.

“So we are just immensely pleased with both the top and the bottom-line performance, the synergies it’s brought into the business, but also the growth potential that it’s opened up for us in Russia.”

Click here to read a related article we published yesterday , on Nooyi's bold pronouncement that new natural sweeteners and flavorings could 'alter the trajectory' of PepsiCo's cola business.

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