Pepsi's grand dairy ambitions

The company is on a nutritious-foods mission, and wants to start producing yogurt for U.S. supermarkets.

By Kim Peterson Oct 17, 2011 3:18PM
The yogurt section in the supermarket keeps getting bigger, and for good reason. Yogurt is a huge seller -- the U.S. market has doubled in the last decade.

And Pepsi (PEP) wants in.

Pepsi? Maker of all things junk? Yep, the soda and snacks company wants to go nutritious in a big way. And its plans include yogurt.

Pepsi is negotiating with a German dairy company so it can enter the yogurt market, The Wall Street Journal reports. Chief executive Indra Nooyi has made it a personal mission to expand the company into healthy foods, even though soda and potato chips are still the big money makers.

See why CNBC's Jim Cramer picks Pepsi's stock in the following video.

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Pepsi already has a diverse beverages business outside of sodas. It owns the Tropicana juice, Gatorade and Aquafina water brands. It also makes oatmeal and other food products through its Quaker line.

It's all a part of Nooyi's plans to make "good for you" products in addition to the ones that just taste good. Last year, Pepsi spent $5.4 billion to acquire Russian dairy Wimm-Bill-Dann. The Journal says Pepsi is on track to become a dairy powerhouse.

Pepsi shares have faltered compared to those of Coca-Cola (KO). Pepsi shares are down more than 5% year to date, while Coke's shares are up 9%. But it's almost unfair to compare the two companies, because Coca-Cola hasn't branched out beyond its beverage business the way Pepsi has.

Pepsi is more of a snack food company with a beverage business on the side, and some shareholders have called on Nooyi to split the food and drink divisions. Those calls will likely grow louder as Pepsi expands into yogurt and other nutritious foods.

Tags: KOPEP
2Comments
Oct 17, 2011 10:54PM
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Wouldn't it be nice if Pepsi was buying American dairy products instead of German.  What the hell pepsi -- try supporting your local country.
Oct 17, 2011 9:27PM
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No kidding grocery shelves are full. I went into Safeway a month ago to buy sour cream and couldn't find it in the dairy section. I complained to the manager and he said they had to move it to make room for the yogurt. Pepsi would be better off buying existing recognized brands and adding to its dairy business instead of trying to break into the market with a new brand. Vitamin water, what next vitamin yogurt? Can anyone say jump the shark.
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