PepsiAmericas, Inc. (NYSE: PAS) is the second largest bottler of Pepsi-Cola products, with 90% of its $4.5B in 2007 sales earned from Pepsico (PEP) products [1], and 75% of sales generated within the U.S. [2] It is licensed to produce PepsiCola carbonated and non-carbonated beverages, like Pepsi and Mountain Dew, as well as Cadbury-Schweppes Yoohoo. PepsiAmericas sales made up 20% of PepsiCo's total sales for 2007 [3]. PAS also produces a number of other beverages under its own subsidiaries. PepsiAmericas operates in 15 countries around the world [4] , mainly Central and Eastern Europe and the Carribean, including 19 states throughout the U.S.
Carbonated beverage sales in PepsiAmericas' core North American market have been declining since 2005. PAS is in the midst of expanding its Central and Eastern Europe segment. In 2007, the company's Central and Eastern European revenues grew by 84%[5] due in part to acquisitions. Despite progress in this area, however, the company is still dependent on the U.S. and the Caribbean for a majority - 80% in 2007- of its sales[6]. PAS is also subject to increasing raw materials costs, which are the main factors to its overall business. For example, PAS uses aluminum for its soft-drink cans, as well as plastics for its soft-drink bottles.
[edit] Business Overview
PepsiAmericas Inc. is the second largest producer, seller, and distributor of PepsiCo beverages, behind Pepsi Bottling Group (PBG). It operates in three geographic segments: the U.S. (Midwest), Central and Eastern Europe (CEE), and the Caribbean. Its geographic coverage lets it serve close to 200 million customers[7]. Of its $4.5 B in sales, 76% was made in the U.S. and the rest (24%) from CEE and the Caribbean[8], with CEE sales increasing yearly. PepsiAmerica's U.S. sales make up approximately 19% of PepsiCo's 2007 U.S. sales[9]. PepsiCo has a 44% stake in PepsiAmericas[10].
 PepsiAmerica's distributing efficiency increased its operating margin and net income from 2006 to 2007. It's operating income in 2007 was approximately 3% higher than the industry average [11]. [12]
 Notice that PAS' sales in the CEE region almost tripled from 2005 to 2007, while the U.S. and Caribbean sales fell. This demonstrates PAS' focus on the CEE region. [13]
|
| Annual income data, in millions
| 2003
| 2004
| 2005
| 2006
| 2007
|
| Net Sales[14] | $3,236.8 | $3,344.7 | $3,726.0 | $3,972.4 | $4,479.5
|
| Gross Profit[15] | $1,360.2 | $1,422.5 | $1,562.5 | $1,608.1 | $1,823.3
|
| Operating Income[16] | $316.3 | $339.7 | $393.4 | $356.0 | $436.1
|
| Net Income[17] | $157.6 | $181.9 | $194.7 | $158.3 | $212.1
|
| Employees[18] | 14,500 | 15,100 | 16,000 | 17,100 | 20,700
|
[edit] Products
PepsiAmericas sells a variety of carbonated and non-carbonated beverages. Its main products are carbonated soft-drinks, as its top selling products are Pepsi, Diet Pepsi, and Mountain Dew.
- Eighty percent of PAS' U.S. sales are carbonated drinks[19], but its other products are becoming increasingly popular.
- Its Lipton Iced Teas had a 30% growth in sales over 2007 and PAS now has 50% of the domestic ready-to-drink-tea market[20].
- Its other popular beverage products include: Aquafina water, 7UP, Lipton Iced Teas, Malta Polar, Slice, and Desnoes and Geddes.
It also sells and distributes brands from other beverage companies (such as Cadbury Schweppes (CSG)), as well as some of its own brands (including acquired companies). It also distributes snack foods in parts of the Caribbean and CEE through an agreement with FritoLay, a PepsiCo subsidiary.
[edit] Trends and Forces
[edit] PAS Expands its European Operations
 Carbonated soft-drink sales have been falling since at least 2005. Domestically, those sales decreased almost 2 percentage points from 2006-07. [21]In the U.S., sales volume declined by 2%[22]. More specifically, carbonated drink sales fell 1% and single-serve sodas fell 4%[23]. In addition, overall carbonated soft-drink sales have been falling since at least 2005 (see graph). In an effort to combat declining domestic sales, PAS has decided to expand abroad to emerging European markets and has had success so far[24]. Its CEE branch had a year-over-year sales increase of 84%, and rapid growth is expected to continue[25]. Acquisitions of Sandora and QABCL were the driving factors in the enormous sales increase. The addition of these companies increased its CEE territory by about 8%[26], and the CEE region generates about 20% of sales, or $1B USD.[27]PAS now has 51 distribution facilities in CEE and its presence is growing.[28] Its affiliations and subsidiaries include:
- PepsiAmericas and PepsiCo jointly acquired Sandora, the leading juice company in Ukraine. Under the agreement, PAS owns 60% and PEP owns the remaining 40%.[29]
- PepsiAmericas also acquired Quadrant-Amroq Bottling Company Limited (QABCL), a PepsiCo producer/distributor/seller in Romania.[30]
- PAS owns a 20% interest of Agrima[31], another PepsiCo producer/distributor/seller in Bulgaria.
- Toma, a juice and water company, is popular with younger consumers[32] and operates throughout the CEE region.
[edit] Rising Commodity Costs
 2006 aluminum prices, $/ton [33] 2006 corn prices, $/bushel [34] 2006 PET resin prices, ¢/pound [35]PepsiAmerica's reported a worldwide 3.9% increase (per unit) in cost of goods sold[36]. Cost of goods sold includes raw materials used for packaging and production and affects profit margins and unit costs. PAS has been able to maintain its margins through improvements in productivity and distribution[37]. PepsiAmericas buys its raw materials from a number of dealers, but it uses Pepsico (PEP) as an agent to purchase its materials[38]. The involvement of PepsiCo affects the prices of the raw materials because PepsiCo is a huge company and buys materials in enormous quantities. The following materials have the biggest impact on PAS' costs:
PepsiAmericas uses aluminum to make cans to package its beverages and represents a sizable proportion of its cost of goods sold. In 2006, average aluminum prices were up nearly 40% for the year.
Corn is used for high-fructose corn syrup as a sweetener for the majority of its non-diet drinks. Corn prices are at an all time high and were up almost 80% from 2005-2006.
PAS uses PET resin to make plastic bottles for packaging. In 2006, PET resin prices rose to a high of $0.88 per pound, but began to decline soon after.
[edit] Competition and Market Share
For the most part PAS doesn't compete directly with other bottlers.
 PepsiAmerica has the second highest market share by volume in the U.S. behind Coca-Cola. Much of Pepsi's share is concentrated in the Midwest, where PepsiAmericas is based. [39]Other companies that provide similar products and services are as follows.:
2004 Data 2005 Data 2006 Data 2007 Data 2008 Data Most Recent Data Available [edit] References
- ↑ | Google Finance, PepsiAmericas
- ↑ | PepsiAmericas, Inc 2007 Annual Report, "Business", p.3
- ↑ | Google Finance, PepsiAmericas
- ↑ | PepsiAmericas Investors, "Overview"
- ↑ PepsiAmericas Inc., 04/28/2008 Morningstar Analyst Report, "Mature Markets Crimp Pepsi Bottlers", p. 1
- ↑ | Pepsi Americas Inc. 2007 Annual Report, "Selected Financial Data, p. 22
- ↑ | PepsiAmericas Inc. 2007 Annual Report, "Business", p. 4
- ↑ | PepsiAmericas Inc. 2007 Annual Report, "Business", p. 4
- ↑ | Google Finance: PAS
- ↑ | PepsiAmericas Inc. 2007 Annual Report, "Business", p.4"
- ↑ | Google Finance: PAS
- ↑ | PepsiAmericas, Inc. 2007 Annual Report, "Selected Financial Data", p. 22
- ↑ | PepsiAmericas, Inc. 2007 Annual Report, "Selected Financial Data", p. 22
- ↑ | PepsiAmericas, Inc. 2007 Annual Report, "Selected Financial Data", p. 22
- ↑ | Google Finance: PAS, "Financial Statements"
- ↑ | PepsiAmericas, Inc. 2007 Annual Report, "Selected Financial Data", p. 22
- ↑ | PepsiAmericas, Inc. 2007 Annual Report, "Selected Financial Data", p. 22
- ↑ | PepsiAmericas, Inc. 2007 Annual Report, "Selected Financial Data", p. 22
- ↑ PepsiAmericas Inc., 04/28/2008 Morningstar Analyst Report, "Mature Markets Crimp Pepsi Bottlers", p. 1
- ↑ PepsiAmericas Inc., 04/28/2008 Morningstar Analyst Report, "Mature Markets Crimp Pepsi Bottlers", p. 3
- ↑ PepsiAmericas Inc., 04/28/2008 Morningstar Analyst Report, "Mature Markets Crimp Pepsi Bottlers", p. 1
- ↑ PepsiAmericas Inc., 04/28/2008 Morningstar Analyst Report, "Mature Markets Crimp Pepsi Bottlers", p. 1
- ↑ PepsiAmericas Inc., 04/28/2008 Morningstar Analyst Report, "Mature Markets Crimp Pepsi Bottlers", p. 1
- ↑ | MSN Money: Brush, Michael, "Why Dr Pepper lost its fizz" (6/4/2008)
- ↑ | Blogging Stocks: Halpern, Steven, "CEO invests $10 million at PepsiAmericas (PAS)" (4/14/2008)
- ↑ | PepsiAmericas 2007 Annual Report, "Business", p. 26
- ↑ | PepsiAmericas 2007 Annual Report, "Business", p. 26
- ↑ | PepsiAmericas 2007 Annual Report, "Business", p. 16
- ↑ | Pepsi Americas 2007 Annual Report, "Business", p. 3
- ↑ | Pepsi Americas 2007 Annual Report, "Business", p. 3
- ↑ | Drinks Business Review: "PepsiAmericas invests in Agrima" (9/5/2007)
- ↑ | Elopak, "Press Releases: PEPSI GIVES TOMA JUICE A NEW SHAPE FOR A FRESH NEW LOOK" (6/12/2006)
- ↑ | www.wikinvest.com, Pepsi Bottling Group (PBG), Commodity Cost Inflation
- ↑ | www.wikinvest.com, Pepsi Bottling Group (PBG), Commodity Cost Inflation
- ↑ | www.wikinvest.com, Pepsi Bottling Group (PBG), Commodity Cost Inflation
- ↑ | PepsiAmericas Inc. 2007 Annual Report, "Management’s Discussion and Analysis of Financial Condition and Results of Operations", p. 26
- ↑ | Forbes.com: Thompson Financial News, "PepsiAmericas' ratings affirmed; outlook stable - Fitch" (5/20/08)
- ↑ | PepsiAmericas Inc. 2007 Annual Report, "Business", p.8
- ↑ | www.wikinvest.com, Pepsi Bottling Group (PBG), Competitors
- ↑ | Yahoo Finance: Coca-Cola Co., "Competitors"
- ↑ | Yahoo Finance: Coca-Cola Enterprises, Inc. 2008, "Key Statistics"
- ↑ | AOL Money & Finance: Cadbury Schweppes, "CSG Key Ratios"
- ↑ CCE, 2007 10-K, Item 1, Page 1
- ↑ KOF, 2007 20-F, Item 3, page 17
- ↑ PBG, 2007 10-K, Item 7, Page 16
|
|
Edit Metric
Whitman
Edit
History
Bookmark
