U.S. beverage giant PepsiCo International (PEP) has decided to join hands with German dairy firm Theo Muller to build a $206 million yogurt production facility in the Genesee Valley Agri-Business Park in Batavia, New York.
The collaboration will form a new company called Wave LLC and create 200 jobs. The plant – scheduled to come up by 2014 in Route 5 near the city’s eastern border – will be spread over 360,000-square-foot, which is almost half of the entire business park.
This deal is Pepsi’s first step towards entering the US dairy market. However, the company is already present in dairy business in Russia through its $3.8 million acquisition of the country’s leading branded food and beverage company Wimm-Bill-Dann Foods OJSC in September 2011.
PepsiCo had initiated the collaboration with Theo Muller back in October 2011. Theo Muller is Germany’s largest privately-owned dairy business with operations in many other European countries as well as Israel. The group has strong brands like Muller, Weihenstephan, Sachsenmilch and Käserei Loose in its portfolio. Retail brands and basic dairy products include butter, UHT-milk, lactose powder and whey protein.
The Muller Group also comprises the Optipack GmbH packaging company, the company’s own logistics enterprise Culina, as well as Fahrzeugtechnik Aretsried GmbH and Müller Naturfarm, one of the largest fruit processing companies in Germany.
PepsiCo’s interest in dairy business dates back to 2003 when it had applied for three trademarks, covering "dairy-based beverages" namely "Smooth Moos," which was used in prior Pepsi test for shelf-stable dairy product, "Milk quakes" and "Milk Chillers."
Pepsico had also launched a yoghurt-flavored soft drink in Japan, which failed to become popular.
Pepsi’s bitter rival, Coca Cola Company (KO), had introduced a new drink called ‘Vio’ in US in 2009, which is made from skimmed milk, mixed with sparkling water, flavored with fruit and sweetened with cane sugar. However, it did not generate much sales for the company. In 2010, the company forayed into the dairy segment in India with the successful launch of milk-based beverage "Maaza Milky Delite.’
Currently, we prefer to be Neutral on Pepsi’s stock. Furthermore, Pepsi holds a Zacks #4 Rank, which translates into a short-term Sell rating.
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