Pepsi’s big squeeze– juice maker will make it top player in Russia — dwarfing Coca-Cola

by Barbara Murray, March 26th, 2008, 7:00 am

When PepsiCo’s acquisition of Lebedyansky becomes final (probably in the third quarter of this year), the soda maker will have achieved three things — expanded its global presence, become a player in the lucrative Russian juice market, and re-ignited its rivalry with that other venerable beverage barterer, Coca-Cola.

While 44% of Pepsi’s sales already occur outside of the US, its purchase of Russia’s #1 juice maker will definitely increase that percentage. Lebedyansky controls about one-third of its home country’s juice market. It is the world’s sixth largest juice maker, ringing up sales of some $800 million in 2007. The $1.4 billion purchase, its largest since it forked over $14 billion for Quaker Oats in 2001, is PepsiCo’s biggest foreign acquisition ever. 

Lebedyansky, with both premium and economy-priced juice brands, will put Pepsi ahead of Coca-Cola, which owns the #2 Russian juice maker, Multon Co., acquired in 2005 for some $500 million. At the moment, Pepsi’s Tropicana brand only rings up 2% of sales in the Russian juice market, while Coke’s Multon controls more than a fifth of the sector.

Pepsi and Russia go back quite a way — back to the Cold War days when the country was the USSR. The mercurial premier Nikita Khrushchev (of shoe-banging fame, for those of an age to remember) sampled Pepsi’s flagship cola for the first time at an exhibition of US products in Moscow in 1959. Things went slowly in those spy-versus-spy days. It took Pepsi fifteen more years to open a bottling plant there, when in 1974, it became the first Western company to actually manufacture its products in the USSR.

Coke has a not-too-shabby presence in the country, but it took it until the early 1990s to establish a significant presence there. But as it does everywhere else in the world, Coke wins the cola wars, with a 21% share of Russia’s carbonated soft drink sales volume; Pepsi Cola’s share is a close-but-no-cigar 19%.

The $3.6 billion Russian juice market, which is expected to increase 10% during the next decade, along with the growing disposable incomes of the country’s consumers, has savvy companies salivating. In addition to Pepsi and Coke, the UK’s Lion Capital last year bought up another of Russia’s biggest juice makers, Nidan Soki.

Never a company to relish second place, Coca-Cola is said to be interested in purchasing the juice business of Russian dairy giant, Wimm-Bill-Dann Foods. Moscow’s daily business paper, Kommersant, has reported that Coke is tracking Wimm-Bill’s monthly juice sales. While both Coke and Wimm-Bill deny any interest in each other, Kommersant quotes the general director of Nidan Soki as saying, “Coca-Cola will not be satisfied with the # 2 position in the market.”

We’ll see. But no matter what Atlanta’s Avatar of Avarice does, we raise our juice glasses in congratulations to Pepsi.