fizz
David Gow and Dominic Walsh
PEPSICO has decided that it is time to act on the American catchphrase – “food to go”. Last week the company, maker of the world’s second most popular fizzy drink, announced that it planned to dump its poorly performing restaurant business, which includes the KFC and Taco Bell chains, into a separate company. It plans to stick with its Frito-Lay snacks operations.
The new company would rank just behind McDonald’s among United States fast-food chains, with more than $20-billion in combined sales, and would be the biggest in terms
of units, with about 29 000 restaurants.
The restaurants have repeatedly dragged down Pepsi’s earnings while eating up its capital. Shedding them will allow chief executive Roger Enrico, who took over the reins last April, to concentrate on fixing Pepsi’s beverage business and expanding Frito-Lay overseas.
Pepsi, despite its high-profile “blue” relaunch last year, is still losing ground to Coca-Cola in world soft drinks markets. “The company’s growth rate has been depressed by the restaurants,” said Anne McDermott, an analyst at Sovereign Asset Management, a unit of John Hancock Funds that holds 880 000 shares.
Shareholders have clamoured for Pepsi to sell or spin off its restaurants, which have failed to grow as rapidly as Pepsi had hoped.
In September last year, Enrico, who has been with Pepsi for 25 years, said the company planned to keep its three major restaurant chains.
* McDonald’s fourth-quarter earnings rose 12% as its expansion offset declining sales at established outlets. The world’s largest fast-food restaurant chain said net profit rose 12% to $410-million from $366,8- million a year earlier.