Quick Stats

Quick Stats

    You are here

    Pepsi Completes Quaker Purchase

    On the heels of receiving FTC clearance, the beverage company seizes control of Gatorade.

    Just one day after the Federal Trade Commission (FTC) agreed not to challenge Pepsi?s $13.6 billion purchase of Quaker Oats Co., the soft-drink giant closed the deal amid concerns it could hurt consumers.

    The acquisition creates the world?s fifth-largest food and beverage company, when ranked by the $25 billion in anticipated annual revenues of the combined companies, Pepsico said in a statement.

    ?We?ve been making plans to build a truly outstanding company that?s perfectly positioned to build on the many opportunities we see for convenient foods and beverages,? said Steve Reinemund, Pepsi?s chairman and CEO. ?We are now well prepared to make that dream a reality.?

    The prize of the deal is clearly Quaker?s Gatorade, the nation?s dominant sports beverage line with roughly three-quarters market share. In addition, Pepsi acquires snack foods that includes granola bars, rice cakes and fruit bars.

    The FTC was deadlocked on whether to seek a preliminary injunction to stop the deal amid concerns that Pepsi could leverage their brands across the cooler door to impose harsher deals on retailers and force customers to pay more for beverages, which include Pepsi?s strong carbonated line, along with Tropicana juices.

    To alleviate some concerns, Pepsi said in May it would sell its sports drink, All-Sport, to Monarch Co. of Atlanta, a relatively small player in the beverage industry that owns Dad?s Root Beer, Bubble Up and Moxie. However, the two commissioners who voted against the deal said the purchase would still give Pepsico too much power in the beverage industry, labeling it ?unlawful and contrary to the public interest.?

    Pepsi, however, believes ?this merger will promote competition, not reduce it, and therefore be good for both consumers and retailers,? company spokesman Richard Detwiler Jr. told Reuters.

    Reinemund said Quaker?s distribution system would help Pepsi increase sales of its Tropicana fruit drinks, and that Quaker?s line of snacks? would complement Pepsi?s roster of salty snacks produced by its Frito-Lay division.

    The combination is also expected to generate cost savings of ?hundreds of millions of dollars in purchasing, manufacturing and distribution synergies,? Reinemund said.

    Some jobs will be cut from the combined work force of about 137,000 as the two companies integrate their operations, but Detwiler indicated they would be minimal. Quaker Oats? headquarters in Chicago will remain open, and the company will operate as a division of Pepsico, which also sells Aquafina water, Lipton teas, Pepsi and Mountain Dew -- and trails only Coca-Cola in the soft drink business. The Frito-Lay division makes Doritos, Tostitos and Fritos corn chips and Lay?s potato chips.

    • About

    Related Content

    Related Content