by Lynda Kiernan
PepsiCo has agreed to acquire South Africa’s Pioneer Foods for $1.7 billion, representing a 56 percent premium to the 30-day volume weighted average price prior to July 15.
Pioneer Foods is one of the largest producers and distributors of branded foods and beverages in South Africa. With operations in Botswana, Kenya, and Nigeria, and a number of world-class facilities, the company produces some of the region’s best-loved brands including Weet-Bix, Liqui-Fruit, Ceres, Sasko, Safari, Spekko, and White Star, which it exports to more than 80 countries.
“Today’s announcement marks a very exciting milestone for Pioneer Foods and our people, and highlights the strength of what we have created,” said Tertius Carstens, CEO of Pioneer Foods. “As part of PepsiCo, we will have greater scale to expand our leading brands, greater capital to invest in local agriculture and people, greater access to leading global capabilities and a partner committed to taking our company to even greater heights.”
For PepsiCo, the deal gives the company a stage from which to expand into sub-Saharan Africa. As legacy companies see themselves play-out their growth potential in the U.S. and Western markets, the trend has been to turn to emerging economies with burgeoning middle-classes demanding products that have up until recently only been available in the world’s top markets.
In 2013 PepsiCo made its strategy known, setting its sights on Asia’s third largest economy, with a pledge to invest $5.5 billion in India by 2020. The country’s rising disposable incomes, and growing middle class, along with an administration looking to gain foreign confidence placed positioned India as a market with great growth potential.
A year later, PepsiCo made a similar pledge to invest $5 billion in Mexico over the coming five years, calling the country, “…one of the most attractive markets in Latin America with a growing middle class and numerous opportunities for growth.”
PepsiCo is not alone in this strategy. In 2018, rival Coca-Cola’s Africa distributor announced its intentions to invest $100 million in Kenya over the next five years, to meet the country’s middle class’ demand for new brands. And this was in addition to the company’s previous pledge to invest a total of $17 billion in Africa between 2010 and 2020.
Indeed, Food Dive reports that since its spin-off from Kraft Foods in 2012, Mondelez now attributes more than 75 percent of its sales from outside the U.S.
“As we look to accelerate our growth in key markets around the world and achieve our vision to Be the Global Leader in Convenient Foods and Beverages by Winning with Purpose, we are absolutely thrilled to join forces with Pioneer Foods, one of South Africa’s leading food and beverage companies,” said Ramon Laguarta, chairman and CEO, PepsiCo.
“Pioneer Foods represents a differentiated opportunity for PepsiCo and allows us to immediately scale our business in Africa. Pioneer Foods forms an important part of our strategy to not only expand in South Africa, but further into sub-Saharan Africa as well.”
This deal will create a leading food and beverage company led in South Africa, for Africa. It will foster PepsiCo in its goal to become more locally focused, and enable it to expand its Sustainable Farming Program in Africa, and to work with local farmers in Pioneer Foods’ communities including smallholder and women farmers, to boost yields, improve incomes, and to preserve resources.
As part of the transaction, PepsiCo will create PepsiCo SSA – a new operating sector for sub-Saharan Africa (SSA) to be led by Eugene Willemsen, who has been with Pepsico for nearly 25 years, and has most recently served as executive vice president of Global Categories & Franchise Management.
“Our businesses are highly complementary, and we look forward to working with the Pioneer Foods team to successfully build and implement a shared vision in the region,” said Laguarta.
– Lynda Kiernan is Editor with GAI Media and daily contributor to GAI News. If you would like to submit a contribution for consideration, please contact Ms. Kiernan at lkiernan@globalaginvesting.com
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