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The world’s leading beverage and snacks maker Pepsico Inc. ( PEP - Analyst Report ) has decided to put its footing into the yogurt world, as it inches toward a joint venture with German dairy company Theo Muller Group. By virtue of the deal, Pepsi and Theo Muller will launch a yogurt brand in the U.S., which still awaits christening.
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 complements the portfolio.
Besides the milk processing subsidiaries, 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.
The soda manufacturer has been trying to expand into the dairy business for quite some time now. Back in 2003, the company 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 unfortunately failed to enter into the popularity list. However, very recently, the company closed a $3.8 million takeover deal of Russia’s juice and dairy king Wimm-Bill-Dann. The buyout conferred the snacks and beverage giant a strong, high-growth platform in the dairy category of Russia.
Pepsi’s hard core rival, Coca Cola Company ( KO - Analyst Report ) , had introduced new drink ‘Vio’ in US back in 2009. Vio is made from skimmed milk, mixed with sparkling water, flavored with fruit and sweetened with cane sugar. However, it did not generate much positive response from customers. The company entered the dairy segment in India with the successful launch of ‘Maaza Milky Delite.’
Thisdeal ticked off several attributes that are sought by international consumer goods groups, Pepsico, including exposure to emerging markets and more nutritional products. The retail giant revealed plans to embark on more upcoming collaborative deals and alliances to reach its goal of nearly tripling annual sales of nutritious and functional foods to $30 billion by 2020.
Currently, we prefer to be ‘Neutral’ on the stock. Furthermore, Pepsi holds a Zacks #3 Rank, which translates into a short-term ‘Hold’ rating.
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