PepsiCo snaps up a South African 'gem' in Pioneer

Reuters

Reuters

According to a company press release, PepsiCo today announced that it has made an offer for one of South Africa's largest producers and distributors of food and beverage products, Pioneer Foods.

USA beverage and food giant PepsiCo has agreed to buy South Africa's Pioneer Foods for about 24.4 billion rand (RM7.4 billion), a company executive said today, in a bold move into the African market.

Pioneer Foods' product portfolio complements PepsiCo's current lineup, with strong positions in cereals, juices, and other African nutritional food staples, including well-known brands like Weet-Bix, Liqui-Fruit, Ceres, Sasko, Safari, Spekko, and White Star.

There is a lot of margin pressure between Pioneer and Tiger Brands because of the aggressive competition in the sector, and because the companies can not recover input costs from the weak consumer.

As rationale for the acquisition, PepsiCo said that it believes Africa is a key market for future growth, and a meaningful portion of its existing portfolio is in developing and emerging markets where further expansion is a high priority.

"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", he added.

The transaction is subject to a Pioneer Foods shareholder vote, certain regulatory approvals, and other customary conditions, and closing is expected by the first quarter of 2020.

PepsiCo Sub-Saharan Africa will be led by Eugene Willemsen, who most recently served as executive vice-president of global categories and franchise management.

According to Treurnicht, PepsiCo has a clear strategy of using Pioneer's infrastructure as a base to launch its brands into South Africa and the rest of Africa, allowing PepsiCo to achieve "massive synergies and be able to invest huge amounts" of money in the country.

Global food giant PepsiCo and South African Pioneer Foods have announced plans for a deal worth around R24 billion - the biggest ever for the U.S. company outside its home country.

The acquisition gives PepsiCo several brands and manufacturing facilities in countries including Nigeria and Kenya as well as South Africa.

PepsiCo plans to create a new operating sector for sub-Saharan Africa to oversee Pioneer.