Pepsi reportedly considering 4,000 job cuts

The soft drink giant is said to be mulling several moves to boost its earnings.

By Melly Alazraki Jan 5, 2012 2:02PM
PepsiCo (PEP) is considering cutting roughly 4,000 jobs, or about 1.3% of its 300,000 global payroll, in order to boost earnings, according to the New York Post.

The soft drink giant is also mulling ending its 401(k) match, the paper said. The Post's sources said that Pepsi believes it is more generous than its peers because it offers both a pension plan and a 401(k) match. The elimination of the 401(k) match could reportedly save the soft drink and snack food company $75 million.

Pepsi is also examining the possibility of freezing raises for its salaried employees, although according to Bloomberg, the company will not eliminate the 401(k) match across the board, nor will it freeze salaries. It is, however, looking at whether some salaried employees will lose either their 401(k) match or their pension, the Bloomberg source said.

Can these measures really help the company and breathe life into its stock? No doubt shareholders are unhappy about the stagnant share price, which barely moved over the past year. Coca Cola (KO) stock, meanwhile, climbed about 9.5% during the same time period, as it gained market share from its arch rival.

In November, Pepsi said it would take more time to review its business and present its 2012 outlook. In the third quarter, the company ran into some cost problems that compressed margins, despite raising prices. Meanwhile, North American sales volume was unchanged in the third quarter.

There have been calls for Pepsi to split its beverage and snacks businesses, but CEO Indra Nooyi has resisted the move, saying the company's value is maximized with the two divisions together.

Many companies have laid off thousands of workers in recent years, aiming to cut costs amid an economic slowdown, as well as improve operations. Pepsi's reported plans could indeed help its profitability, but investors may not be satisfied with just that. On Thursday, PEP declined by about 0.8% to $66.22.

Melly Alazraki is a freelance financial writer and does not own shares in the companies mentioned.
Tags: KOPEP
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