PepsiCo set to divest local brands

PepsiCo snack brands include the venerable Smith’s potato chips. Picture: Peter Ristevski

Speculation is mounting that global drinks giant PepsiCo is about to place its Australian snacks division on the market.

Sources say the drinks giant has been looking for advisers around the Australian market to consider options for the business.

The speculation also comes with suggestions that the division of a major US-based food company is coming up for sale.

The understanding is that some prospective suitors may have already been shown details of what could be on offer.

A Pepsi spokeswoman denied plans were afoot for a sale of the local assets.

In Australia, Pepsi owns The Smith’s Snackfood Company with local brands such as Smith’s chips, Red Rock Deli and Nobby’s nuts, as well as others well recognised snacks like Twisties, Cheetos, Burger Rings, Dorito chips and Sakata rice crackers.

It owns New Zealand division Bluebird Foods, with brands such as Bluebird chips, Copper Kettle, Rashuns, Burger Rings, Poppa Jacks Grain Waves and LeSnack.

The chatter in the market comes only two years after the then recently appointed chief executive Ramon Laguarta completed a strategic review of the business and said he had no plans to break up the snacks and drinks giant.

This was only one year after it purchased SodaStream International.

At that time, there were questions about whether Pepsi would keep its food business, which also sells products such as hummus and Quaker Oats, together with its drinks business, which includes Gatorade, Aquafina and Mountain Dew, the Wall Street Journal had reported.

But sources say that a potential sale could be part of a move by Pepsi to retain only global brands within its portfolio and sell off local brands.

Other global food companies are also selling food brands specific to certain countries, as was demonstrated by Campbell Soup Company with its sale of the Australian Tim Tams and Mint Slice maker Arnott’s Biscuits to Kohlberg Kravis Roberts for $3.2bn in 2019.

Quadrant Private Equity also purchased Australian sweet brand Life Savers in 2018 from Nestle, which has also been shedding localised food and drinks labels.

Other examples in recent years are Nestle’s sale of Violet Crumble to FruChocs in 2018 and Vegemite’s sale to Bega Foods by Mondelez in 2017.

Quadrant would be a logical buyer ahead of a planned listing of its food company The RiteBite Group, which owns Australian licorice manufacturer Darrell Lea, while KKR has been on the hunt for bolt-on acquisitions for Arnott’s. Pacific Equity Partners also has strong credentials in food manufacturing, previously owning The Griffin’s Food Company in New Zealand and currently owning Patties Foods.

Strategic buyers could be global snack food companies such as Mondelez, which recently purchased cracker company Gourmet Food from CPE Capital for more than $400m.

Last month, the Wall Street Journal reported that sales of Cheetos, Tostitos, oatmeal and pancakes propelled snacks and beverage giant PepsiCo through the coronavirus pandemic, offsetting soft drink sales that were weakened by the closing of restaurants, movie theatres and sports stadiums. The company’s North America beverage sales volume fell 1.5 per cent in 2020 and was flat in the fourth quarter.