PepsiCo to branch out into yogurt
They picked a real wrangler should rumours become true that PepsiCo is closing in on a joint venture with Theo Müller Group, a privately-owned German dairy company, which would give PepsiCo a foothold in the fast-growing U.S. yogurt market. The logic behind such a tie-up is that PepsiCo hopes to reach out to health-conscious consumers and is therefore planning to enter the yogurt market with the help of German dairy giant Theo Müller.
A spokesman for the Theo Müller group refused to comment on the rumour.
Observers say that PepsiCo and Mr Müller plan to launch a new yogurt brand in the U.S. Other details of the deal have not yet been announced and the venture is expected to be unveiled in the coming weeks.
Theo Müller is the largest privately-owned dairy company in Germany, best known for its yogurt range, with operations in several European countries and Israel. In 2010 the group employed almost 4700 people and generated sales of about EUR 2.2 billion.
In Great Britain Müller has held the market leading position in the yogurt sector since 1995 with its brand Müller Corner.
PepsiCo, which had sales of USD 57.8 billion in 2010, isn’t a novice to the dairy industry following its acquisition of Russia’s Wimm-Bill-Dann group in 2010. Wimm-Bill-Dann is a leader in both traditional and value-added dairy products, with a solid position in juice. PepsiCo also set a joint venture in 2009 with Saudi Arabia’s Almarai, a leading dairy company in the Middle East.
Hugh Johnston, PepsiCo’s Chief Financial Officer, said at a March 2011 investor conference that the company planned to build its dairy business in developed markets through collaboration and alliances rather than big acquisitions.
But why the beverage and snacks giant PepsiCo chose Mr Müller to set up a joint venture isn’t clear. His company does not rank among Rabobank’s global top 20 dairy companies. Although Mr Müller has managed to transform a Bavarian village dairy into a national German group within 30 years, not least thanks to highly innovative dairy products such as the Müller Corners, Froop or Müllermilch Coffee, Mr Müller also has a reputation for being a querulous kind of guy, never shying away from a spat with media, unions and politicians.
For many German NGOs, Mr Müller is someone they love to hate, especially when in 2003 he announced that for tax reasons he would move to Switzerland. „I am being expropriated“, he then complained in several interviews, pointing out that his nine children would have to pay several hundred millions of euros in inheritance tax had he stayed in Germany. Nevertheless, he also said that he would return to Germany immediately if the law was changed because as he put it: „I love my home country and my English is poor.“
Obviously, Mr Müller knows a thing or two about dairy innovation and branding and he is not active in the U.S. yet. But is a joint venture between him and PepsiCo really the best solution? Joint ventures are complicated things. They have to satisfy more than one master and problems can be caused by the way in which management control is structured and exercised.
But it’s early days still. Let’s wait and see how they will structure their partnership.
