Will PepsiCo break up after exit of Nooyi?

Oct 6, 2018

PepsiCo will be getting a new CEO this week and the industry is speculating that the global beverage and snack company may be aiming for a major business overall. Though the company denies it saying that isn’t likely to follow Indra Nooyi’s transition of power to Ramon Laguarta.

Many Wall Street players believe the company could increase its bottom line by selling off Quaker Foods North America, where operating profit in the most recent quarter dropped 1.5%, or by refranchising PepsiCo’s bottling operations as Coca-Coca has recently done.

It’s also possible that sticking with the status quo would be a better idea for the company as it changes its top leadership. PepsiCo’s third-quarter earnings and net sales beat Wall Street expectations, in part because of an uptick in the company’s North American Beverages segment.

Many in the top league are banking on PepsiCo to divest or split off portions of its business, such as its snacks segment or Quaker division. But former CEO Indra Nooyi successfully resisted efforts by activist investor Nelson Peltz to split the snacks and beverage businesses.

Since Nooyi took over as CEO, the company’s net revenue jumped from $35 billion in 2006 to $63.5 billion last year, resulting in a 162% shareholder return. PepsiCo recently reported third-quarter earnings that exceeded expectations thanks to a revival of the beverage segment of their portfolio. If the next chief can keep up these profits, then following her lead might make sense. But with a brand-new CEO in charge, the question is whether he will be more amenable to making big moves to shake up the company.

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