PepsiCo completes $7.8 billion buyout of 2 bottlers, move to shake up beverage industry

PepsiCo finishes $7.8 billion buyout of 2 bottlers

PURCHASE, N.Y. — PepsiCo closed the deal to buy its two biggest bottlers Friday — a move that’s expected to shake up the beverage industry.

The $7.8 billion buyout of Pepsi Bottling Group and PepsiAmericas will allow the nation’s second-largest drink maker to try out more new products and get them to market more quickly.

That will let the maker of Pepsi soft drinks and Tropicana juices better respond to a changing market and keep up with shoppers who are switching to juices and teas or buying fewer drinks altogether.

The deal, first announced in August, is also a way for PepsiCo to save money because it won’t be using other companies for its distribution. It estimates pretax savings of $400 million by 2012 from the buyouts, though analysts expect higher.

PepsiCo’s rival Coca-Cola Co. also plans to bring U.S. distribution in-house by buying the North American operations of its biggest bottler. It announced that deal Thursday after months of denials that it would follow in PepsiCo’s footsteps.

Coke’s move takes away some of PepsiCo’s competitive advantage from the deal, according to Consumer Edge Research’s Bill Pecoriello. Still, he said both will benefit from the moves.

Pecoriello said there is speculation that both soda companies will continue to buy bottlers because they need to control about 90 percent of the volume of drinks sold in the U.S. to truly change the way drinks are delivered.

“There could be a race between the Coca-Cola and PepsiCo systems to get toward this 90 percent, and Coke can get there with an additional five bottlers while PepsiCo needs an additional 10+,” Pecoriello said in a report Thursday.