November 5, 2007 / 12:47 PM / 12 years ago

PepsiCo reorganizes into 3 units

NEW YORK (Reuters) - PepsiCo PEP.N announced a restructuring on Monday that will split the food and beverage company into three units — one for food in the United States, one for U.S. drinks and one for food and drinks abroad.

The world’s No. 2 soft drink company behind Coca-Cola Co. (KO.N) currently has two operating segments, one for North America and one for international.

Pepsi appointed Massimo d’Amore, an executive vice president of PepsiCo International, to head the newly separated Americas drinks business, which will include Gatorade and Tropicana. D’Amore will report directly to Chief Executive Indra Nooyi.

“This is a good idea,” said John Sicher, publisher of Beverage Digest. “The beverages business is very different than the food business.”

The company also said Dawn Hudson, chief executive and president of Pepsi-Cola North America, was resigning to pursue other opportunities. She will be replaced by Hugh Johnston, who is currently the company’s executive vice president of operations.

Citigroup analyst Bonnie Herzog said bringing in new leadership to Pepsi-Cola North America could be “the casualty of a tough year for the segment,” which she noted has underperformed other segments.

PepsiCo Americas Foods, which will include Frito-Lay North America, Quaker and the company’s Latin American food and snack businesses, will be run by John Compton, the current chief executive of PepsiCo North America.

Herzog also said that bringing the Latin American food business under the Americas umbrella allows management to share best practices from its international business across the North America organization, allowing for more effective marketing and innovation to lure Hispanic consumers in the United States.

PepsiCo International will include all business in Britain, Europe, Asia, the Middle East and Africa, and will continue to be run by Mike White.

“Given PepsiCo’s robust growth in recent years, we are approaching a size which we can better manage as three units instead of two,” said CEO Nooyi.

The Purchase, New York-based company, which had 2006 revenue of more than $35 billion, has evolved from a maker of soft drinks into a food and beverage giant whose portfolio of brands includes Frito-Lay snacks, Quaker oatmeal, Aunt Jemima syrups and Rice-A-Roni side dishes.

So far this year, PepsiCo Americas Foods has accounted for 45 percent of the company’s revenue, while PepsiCo Americas Beverages made up about 30 percent and PepsiCo International made up about 25 percent, the company said.

The diversification has helped the company as health-conscious consumers in developed markets like the United States seek alternatives to traditional carbonated soft drinks.

PepsiCo shares were up 1 cent at $72.99 on the New York Stock Exchange.

Reporting by Martinne Geller, additional reporting by Ankur Relia in Bangalore

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