PepsiCo takes huge step into Russian drinks market

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PepsiCo agreed to buy one of Russia's top drinks companies Thursday in a deal that would make the US food giant a dominant force in the Russian market and extend its reach deep into former Soviet lands.

A PepsiCo spokesman told AFP that the company would pay 5.4 billion dollars for all of Wimm-Bill-Dann after taking into account the Russian company's debt.

PepsiCo said the deal would make it the largest food-and-beverage business in Russia -- nearly double the size of its nearest competitor -- and expand its presence in both Eastern Europe and Central Asia.

"This moves the company closer to its strategic goal of building a 30-billion-dollar nutrition business by 2020," PepsiCo said in a statement that predicted Russian revenues of five billion dollars next year.

PepsiCo chief executive Indra Nooyi called Russia "a fast-growing, strategically important market offering abundant opportunity."

Another executive said the company would have "the potential to be leveraged across the broader East European and Central Asian region."

Thursday's agreement gave the US company immediate control of a 66-percent stake for 3.8 billion dollars, with the remaining shares to be bought progressively.

News of the agreement sent Wimm-Bill-Dann shares soaring 64 percent by the close.

Wimm-Bill-Dann is Russia's largest dairy and baby food producer and number three juice maker. It has 35 production facilities stretching from Ukraine to Central Asia and employs 18,000 workers.

Its J7 juice is the most popular brand in Russia, thereby giving PepsiCo the access it had sought for years in former Soviet countries.

The acquisition is believed to be the largest in the US company's history and one of the most important ever concluded outside the Russian energy market.

Wimm-Bill-Dann reported revenues of 2.4 billion dollars in the 12 months ending June 2010. The Russian company said its earnings were hurt by a stronger dollar and predicted a better performance in the current year.

"This represents a tremendous vote of confidence in the future of the Russian market," said Wimm-Bill-Dann chairman Sergei Plastinin.

"Integration into PepsiCo also provides our employees with access to a world-class corporate culture and almost unlimited career potential in one of the largest companies in the world."

Wimm-Bill-Dann was founded in 1992 and has managed to double its revenues since 2005, with the Russian dairy market growing 20 percent annually since 2006.

© 2010 AFP

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