Pepsi spends millions on Russian juice maker

March 20, 2008 7:33:42 AM PDT
PepsiCo Inc. and its biggest bottler said Thursday that they are paying $1.4 billion to buy a majority stake in Russia's biggest juice company, JSC Lebedyansky.That price tag that makes it PepsiCo's biggest acquisition since it bought The Quaker Oats Co. in 2001, spokesman Dick Detwiler said.

PepsiCo, the second-biggest U.S. soft drink company and maker of Frito-Lay snacks, and bottler Pepsi Bottling Group Inc. will buy a 75.5 percent stake in Lebedyansky that is now held by the company's four biggest individual stockholders. Once the deal closes, the two companies will offer to buy the remaining shares, as required by Russian law. They could end up owning all the shares.

PepsiCo Chief Executive Indra Nooyi has said the company has a "robust" acquisition pipeline that it will use to expand its product portfolio to include more healthier snacks and drinks. It sells brands such as Doritos, Cheetos, Lay's, Mountain Dew, Gatorade and Tropicana. Other recent acquisitions include the Ukraine-based juice maker Sandora, New Zealand-based Bluebird snacks and Izze and Naked Juice in the U.S.

PepsiCo has a decades-old relationship with Russia that dates to when Soviet Premier Nikita Khrushchev tried Pepsi for the first time in 1959, according to a company statement. In 1974, the company opened a Pepsi-Cola bottling plant in Russia, making it the first Western-branded consumer product to be produced in the country. Today, PepsiCo and PBG together employ more than 7,000 workers in Russia.

JSC Lebedyansky had 2007 annual revenue of about $800 million from its juice operations. PepsiCo's purchase price gives the entire juice business a value of roughly $2 billion.

The deal is subject to the spin-off of Lebedyansky's baby food and mineral water business to its shareholders as well as regulatory approvals. It is not expected to close before the third quarter.

On Monday, Purchase-based PepsiCo and Pepsi Bottling said they bought Russian beverage company Sobol-Aqua JSC through a joint venture. Terms were not disclosed.


AP Business Writer Michelle Chapman in New York contributed to this story.