On March 21, PepsiCo reached an agreement on the purchase of a 75.53% stake in the Lebedyansky joint-stock company, Russia's largest juice producer. Thus, within the last three years PepsiCo has caught up with Coca-Cola, which bought a Russian juice asset, Multon, back in 2005. Now three out of the four major players on the Russian juice market (Lebedyansky, Multon and Nidan), which control over 70% of this market, belong to foreign companies.
PepsiCo paid $1.4 billion for 75.53% of Lebedyansky, which makes this the biggest deal in the Russian juice-producing sector. Lebedyansky has been the leader on the domestic juice market for a long time. Its share of the market exceeds 30%, which is nearly 10% more than Multon's, its closest rival.
The Russian juice market has long attracted foreign players: unlike the American market, which is shrinking by nearly 5% a year, it has been growing steadily. Last year it grew by 13-14%, according to various estimates. There are hardly any niches left on this market: the sector has long been divided between the four major players - Lebedyansky, Multon, Nidan and Wimm-Bill-Dann, which together account for over 85% of the domestic market. Under these circumstances, the best way to "win a place under the Russian sun" was to buy a major player on this market.
Foreigners started their hunt for Russian assets three years ago: in 2005, Coca-Cola bought Multon, Russia's second largest juice producer. Meanwhile, PepsiCo was courting Nidan: in 2004, it started packing its Tropicana brand at Nidan's facilities. Analysts have long predicted that Nidan's juice division may be placed under PepsiCo's control. Nidan's restructuring, whereby all its juice assets were united into a separate division, Nidan Soki (Nidan Juice), could only facilitate the takeover.
While PepsiCo was pondering the purchase of the Russian asset, Coca-Cola acquired new production facilities. Its new purchase was Aqua Vision juice and soft drinks factory commissioned in April 2007 (it belongs to the Health Tech Corporation, whose main beneficiary is Russian businessman Dmitry Buryak). By the time of its opening, the factory could produce 300 million liters of drinks a year, and the company's managers promised to increase production to 1 billion liters and thus join the three leaders with a market share of about 20%. This "trophy" cost Coca-Cola 191.5 million euros.
Meanwhile, PepsiCo failed to buy Nidan, which was seized by European rivals. At the end of last year, Nidan was placed under control of the British investment fund Lion Capital. Experts involved in the transaction said that the fund paid $530 million for 75% of Nidan. This transaction made it more difficult for PepsiCo to win a better place on the Russian market: it could choose only between Wimm-Bill-Dann and Lebedyansky.
Through the purchase of Lebedyansky, PepsiCo becomes the leader of the market leaving Coca-Cola, its main rival, behind. Experts say, however, that the leadership cost it dearly: Lebedyansky's shares were bought with a big premium to the market price. Moreover, PepsiCo has to undergo the procedure of dividing Lebedyansky's businesses. Apart from juices, Lebedyansky produces mineral water and baby food. The U.S. company is not interested in these assets, which will remain with their present owners, but it will be technically difficult to separate the assets, so the completion of the deal could be expected only in the third quarter of this year.
Wimm-Bill-Dann, the last of the remaining leaders on the juice market, is not going to sell big chunks of its business or part with some of its divisions. However, there are foreigners among its co-owners: the company's second largest shareholder is the French group Danone, with 12.9% of WBD's shares.
The opinions expressed in this article are the author's and do not necessarily represent those of RIA Novosti.
