Spinoff #4: PepsiCo Spinning Off Snacks
Coca-Cola (KO) has been in the news lately as it announced a partnership with Green Mountain Coffee Roasters (GMCR) to produce in-home soft drink appliances. The move will provide incremental growth to the beverage giant, and is in line with its core business … which, frankly, doesn’t have much headroom considering the saturation of the Coca-Cola brand worldwide.
PepsiCo (PEP) is normally lumped in with Coca-Cola because it faces the same challenge of how to expand amid big penetration already, and as such, many investors are kicking around possibilities of a SodaStream (SODA) acquisition to find growth and compete with Coke.
But what about a different route? After all, Coke just does soft drinks, but Pepsi remains entrenched in tons of consumer foodstuffs — from Doritos chips to Quaker oatmeal. Why not divest that part of the business into a clear soft drink vs. pantry products duo?
After all, PepsiCo is not unfamiliar with this kind of act. Yum Brands (YUM) and its restaurants that include Taco Bell and KFC were actually a PepsiCo business unit before its 1997 spinoff.
That move proved beneficial to both YUM and to Pepsi. It might be time to consider a similar move, particularly after big mergers over the past 10 to 15 years that include the roll-in of Quaker, Gatorade, Tropicana and other businesses.