PepsiCo and Anheuser in landmark purchasing pact

PepsiCo and Anheuser in landmark purchasing pact
By Jonathan Birchall in New York
Copyright The Financial Times Limited 2009
Published: October 14 2009 06:34 | Last updated: October 14 2009 06:34
http://www.ft.com/cms/s/0/0eccc71a-b882-11de-809b-00144feab49a.html


PepsiCo, the soft-drinks and snacks company, and Anheuser-Busch, the US subsidiary of the world’s largest brewer, on Tuesday announced a pact to jointly purchase a range of goods and services in the US.

The two companies said the deal – believed to be the first of its kind between two large US corporations – covered information technology hardware, office supplies, travel and transport, as well as repair, maintenance and other services.

The pact reflects the growing competitive threat posed to Coca-Cola, the largest US soft drinks company, by the increasingly close relationship between PepsiCo and Anheuser-Busch InBev, a company created by Inbev’s $52bn takeover of the US brewer last November.

Anheuser-Busch’s Ambev subsidiary handles bottling and distribution of PepsiCo’s soft drinks in most of Latin America, raising the possibility of further co-operation between PepsiCo and the brewer in the US since the merger.

Before the merger, a number of small independent regional drinks distributors in the US also handled both Anheuser Busch beers and Pepsi-Cola soft drinks.

PepsiCo is the largest US customer of Metal Container Corporation, a subsidiary of Anheuser-Busch that makes and recycles aluminium drink cans, while Barry Beracha, a former chairman of MCC, has served on the board of Pepsi Bottling group, PepsiCo’s largest bottler, since 1999. MCC also sells cans to Coca-Cola.

In a joint statement, the two companies said the purchasing pact would “allow both companies to purchase goods and services more efficiently at competitive prices – effectively managing costs that can be reinvested back into areas that will grow their businesses”.

The statement said that the two would form a joint team of procurement experts who would focus on common areas of spending and negotiate purchases on behalf of both companies.

In the US, there are many similar goods and services that each company purchases, making the agreement a good fit for the specific needs of both companies.

The increasingly close relationship between PepsiCo and Anheuser-Busch has led to speculation that Coca-Cola might develop a rival strategic partnership with SABMiller, the UK brewer that is the second-largest global beer company.

SABMiller has recently held talks with Femsa, the Mexican family-owned conglomerate that is Coca-Cola’s largest Latin American distributor, over the possible purchase of its brewery, which shares some distribution systems with its Coca-Cola Femsa unit.