Pioneer Foods Group is ending its franchise agreement with PepsiCo in South Africa.
Pioneer will try to sell its Pepsi bottling plants if they cannot be used elsewhere in the group, CEO Phil Roux said, after Pioneer announced that it would stop producing Pepsi by the middle of next year.
Pioneer will exit the bottling agreement with New York-based PepsiCo after writing down its investment in the business by 34 million rand, it said. “The Pepsi brand portfolio will however remain in South Africa,” it said.
Mr Roux said on Monday that by mutual agreement, Pioneer’s partnership with Pepsico “will be coming to an end by no later than July — we’ve been taking serious losses for a long time now”.
Pioneer acquired various assets to support its Pepsi bottling unit, and would either use the manufacturing assets elsewhere in its business or try sell them. “The coolers, from an agreement perspective, do get transferred — at a value of course — to the new bottler,” Mr Roux said.
Pioneer will still maintain a separate relationship with Pepsico through its rights to sell Lipton’s ice tea brands. Lipton, which grew market share in South Africa in the past year, is a joint venture globally between Unilever and Pepsico.
“We see significant upside from a per capita growth perspective in South Africa for iced tea,” Mr Roux said. As part of Pioneer’s portfolio adjustment strategy, it had completed a strategic review of its biscuits business, though Mr Roux said the decision was yet to be announced.
“There are a few others (units).… We’re either shelving them because of poor strategic fit — they don’t meet our portfolio requirements — or we see no way forward to fix or optimise them. Our one strategic pillar is to shape a winning portfolio, where we would seed, weed or feed. This is part of the weeding.”
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