Nooyi’s Drink Tank: Keep Pepsi’s Beverage and Snacks Units United
PepsiCo (NYSE:PEP) CEO Indra Nooyi is standing firm in her conviction to keep the company’s snack and soft drink division together, despite pressure from notable shareholders. In an interview Friday on CNBC’s ”Squawk Box,” Nooyi refuted the claim that the businesses would perform better if they were to be separated, and instead insisted, “These two categories are better together, not just in the United States, but around the world.”
Nooyi has fielded significant pressure from shareholders, especially Nelson Peltz, over a division of the two businesses because consumers have shown a clear pivot in their interest in sugary soft drinks, while Pepsi’s snack unit, the biggest in the world, is performing much better. However, Nooyi believes that it still makes sense for Pepsi to govern the divisions in tandem, posing the question on Squawk Box, “If you eat a bag of Fritos, do you reach for a beverage?”
Like its rival Coca-Cola Company (NYSE:KO), Pepsi’s soft drink business has been underperforming due to consumers showing deflated interest in sugary, calorie-laden drinks, and Peltz argues that Pepsi’s thriving snack unit is being overshadowed by its struggling beverage unit. Peltz is a major Pepsi shareholder, and made his concerns known back in July at the CNBC-Institutional Investor Delivering Alpha Conference. However, it is clear that Nooyi is unwilling to be swayed by even the most activist investors about her strategy moving forward. Despite Peltz’s urgings to have Pepsi buy Mondelez (NASDAQ:MDLZ), a snack food company previously owned by Kraft (NASDAQ:KRFT), Nooyi has showed no signs of moving in that direction, and doesn’t look like she’s ready to give up Pepsi’s soft drink business any time soon.