PepsiCo has agreed to acquire all outstanding shares of South African food and beverage producer Pioneer Foods Group in a deal valued at $1.7bn. As per the agreement, PepsiCo will pay ZAR110 ($8.29) for each Pioneer share, which represents a premium of 56% of the share price measured over the last month.
For 25 years PepsiCo has tried and failed to make in rows into the South African market; however, the decision to purchase Pioneer Foods could change its fortunes in the country. Pioneer Foods already has a number of extremely popular well-known scaled brands such as Weet-Bix, Liqui-Fruit, Ceres, Sasko, Safari, Spekko, and White Star, meaning that PepsiCo products will already have a presence on supermarket shelves.
Increased urbanization and a change in consumer lifestyles have caused a change in consumption habits in the country, which has resulted in the increased consumption of both beverages and savory snacks. Moreover, the volume growth of small packaged snacks mostly attributed to overall market growth.
Pioneer Foods sells cereals, juices and other popular snacks under brands such as Weet-Bix, Liqui-Fruit and Ceres, which are exported to 88 countries globally. Pioneer Foods represents a differentiated opportunity for PepsiCo and will allow the company to immediately scale its business not only into South Africa but further into sub-Saharan Africa as well, which it sees as a lucrative opportunity.
The acquisition will also enable PepsiCo to further its Corporate Social Responsibility ambitions and expand the company ‘Sustainable Farming Program’ in Africa. Through the scheme the brand will work alongside local farmers in ‘Pioneer Foods’ communities, including women and rural smallholders, to help boost yields, improve livelihoods, and preserve precious natural resources.