Activist investor, Nelson Peltz, has renewed his campaign to push PepsiCo, Inc. (PEP) to separate its underperforming beverage business from the snacks business which is going strong. As per media reports, Peltz has warned that he will take the case directly to shareholders.
As per media sources, Peltz in a 37-page letter to Pepsi’s board, has urged that the two businesses be separated to enable the company to concentrate on snacks, thereby accelerating its sales and profits. He has argued that a split would “create two leaner and more entrepreneurial companies.” The letter was made public on Thursday after which shares of Pepsi gained around 1.2%.
Peltz’s investment company, Trian Fund Management, holds major stake in Pepsi. Shifting consumer preferences toward health and wellness and “good-for-you” products is lowering the demand for high-calorie soft drinks, especially in North America. Thus, beverage giants like Pepsi and The Coca-Cola Company (KO) are witnessing declining sales of carbonated beverages, especially the colas. Peltz feels Pepsi’s underperforming beverage business is overshadowing its fast growing snack unit.
However, last week, Pepsi chief, Indra Nooyi announced thatthe company intends to retain the American beverage business as it was in the best interests of the company. As per media sources, Peltz was highly disappointed with the decision.
Peltz had earlier pushed Pepsi to buy global snacks company, Mondelez International, Inc. (MDLZ). However, he put off this agenda after joining the former’s board in January this year. Trian Fund Management also holds major stake in Mondelez.
Previously known as Kraft Foods, Inc., Mondelez changed the name following the spin-off of its North American grocery business into a separate independent company, Kraft Foods Group, Inc. (KRFT) in Oct 2012.
Pepsi carries a Zacks Rank #3 (Hold).