April 16 2008, 08:56

Russia: Pepsi does not hurry to bottle Tropicana at "Lebedyanskiy"

The global giant of the beverages industry PepsiCo company does not hurry to locate the production of its international juice brand Tropicana in the facilities of "Lebedyanskiy" company; the deal of "Lebedyanskiy" plant purchase has not been finished yet. Information was released yesterday that Pepsi Bottling Group extended the juice production in the facilities of "Nidan Juices" company, in particular its Novosibirsk plant LLC "Joint Venture Nidan-Ecofruit". During the recent five years Pepsi has been producing Tropicana on "Nidan" plant in Moscowskaya region. Pepsi may continue the cooperation with the competitor of "Lebedyanskiy" until two businesses are integrated, the experts think. To their opinion, the merger will take place only in the middle of the next year.

PepsiCo produces alcohol-free drinks (Pepsi, Mirinda, 7Up, Aqua Minerale and others), juices, confectionary, grocery products, and snacks. The turnover amounted to $35 billion in 2006. The company is represented by six plants for beverages bottling and one plant - chips producer in Russia. In the end of March Pepsi announced the agreement on the purchase of 75.53% of shares of "Lebedyanskiy" company. In future the company plans to buy in the rest of the shares from the minority shareholders. Opened JSC "Nidan Juices" is the third largest juice producer in Russia with the largest market share in Siberia. Its profit amounted to $ 173.3 mln., the sales volumes reached 220 mln. L in the first half of 2007.

"Nidan" informs, according to the agreement with Pepsi Bottling Group the bottling of Tropicana started on the 25th of March of the current year in Novosibirsk. The parties do not specify the production volumes. Alexey Mekhonoshin, the President of Pepsi Bottling Group Russia informed RBC daily, the volumes bottled in Novosibirsk plant will still be limited comparing to the Moscowskaya region plant "Nidan-Gross". According to the data provided by "Business Analitika", the share of Tropicana amounted to 1.7% in money terms on Russian market in 2007.

"Nidan" company observed that the agreements with Pepsi regarding both enterprises are unlimited. "If the parties are willing to break the contract, they should inform about this step in half a year", Julia Vishnevskaya, the Press Secretary of the company said.

The Pepsi representatives explain the decision to bottle Tropicana on Siberian "Nidan" plant by the desire to satisfy the increasing demand for this brand, and also by the need to reduce the logistic expenses. "We had to deliver Tropicana from Moscow; the sales scale of this brand was rather insignificant in Trans-Ural area", Mr. Mekhonoshin explained. According to the representatives of Pepsi company, the bottling of Tropicana in "Lebedyanskiy" facilities may be discussed only after the purchase is finished. According to the earlier provided information, the deal may be closed not faster than in the third quarter.

"Possibly, Pepsi is not willing to lose Siberian market during the procedure of "Lebedyanskiy" purchase. Siberian market is growing quite dynamically now, approximately 13-15% per year", Sergey Filchenkov, the Analyst of Investment Company "Finam" believes. To the opinion of Tatyana Bobrovskaya, the Analyst of "BrokerCreditService", after the deal of "Lebedyanskiy" is finished, Pepsi will have to spend half a year for a merger process: "The merger may last till the middle of the next year; I think, after that Pepsi will transfer the Tropicana bottling business to "Lebedyanskiy". Pepsi will be able to consolidate the positions of its juice brand in the eastern regions by the time when Novosibirsk plant of "Lebedyanskiy" is launched".

We'd like to remind that Pepsi is not the only producer which bottles its products in "Nidan" facilities on the outsourcing terms. German Eckes-Granini started to bottle its "Uslada" brand in Dmcember 2006 on "Nidan-Gross" plant. In November 2007 English company Ahmad Tea started to bottle cold tea "Ahmad" there.