Pioneer to exit its Pepsi business
Pioneer will also try to sell its Pepsi bottling plants if they cannot be used elsewhere in the group, said CEO Phil Roux yesderday in announcing the group’s annual results to end September 2014.
Pioneer impaired its Pepsi bottling business by R34m in 2014, after incurring further losses from the unit as a result of insufficient volumes.
Roux said that by mutual agreement, Pioneer’s partnership with Pepsico “will be coming to an end by no later than July — we’ve been taking serious losses for a long time now”.
Pioneer had acquired various assets to support its Pepsi bottling unit, and would either use the manufacturing assets elsewhere in its business or try sell them. “The coolers, from an agreement perspective, do get transferred — at a value of course — to the new bottler,” Roux added.
Pioneer will still maintain a separate relationship with Pepsico through its rights to sell Lipton’s ice tea brands. Lipton, which grew market share in SA in the past year, is a joint venture globally between Unilever and Pepsico. “We see significant upside from a per capita growth perspective in SA for iced tea,” Roux said.
The move leaves the future of Pepsi unclear. A Pioneer statement says the “Pepsi brand portfolio will however remain in South Africa”, but offered no further details.
PepsiCo has been down this road before in South Africa. After the beverage brand returned to SA with the collapse of apartheid, PepsiCo signed a bottling deal with New Age Beverages. That deal ended after just three years, when PepsiCo apparently decided New Age couldn’t compete against Coca-Cola’s distribution system.
The deal with Pioneer, signed back in 2006, was supposed to be Pepsi’s salvation in that nation. Now Pioneer has decided that Pepsi bottling isn’t a business it wants to be in, and will take a write-down worth R34-million to get out.
Other Pioneer businesses
As part of Pioneer’s portfolio adjustment strategy, it had completed a strategic review of its biscuits business, though Roux said the decision was yet to be announced.
“There are a few others (units)…. We’re either shelving them because of poor strategic fit — they don’t meet our portfolio requirements — or we see no way forward to fix or optimise them. Our one strategic pillar is to shape a winning portfolio, where we would seed, weed or feed. This is part of the weeding.”
This excludes poultry business Quantum Foods, which was unbundled and separately listed a week after the financial year ended. Pioneer’s adjusted headline earnings were 38% higher at R1.17bn. It hiked its final dividend 81% to 156c after reviewing its dividend policy, following the completion of a “peak capital investment period”, Roux said.
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