Sector News

PepsiCo ends U.S. yogurt JV with Müller

December 11, 2015
Food & Drink

PepsiCo Inc. said Thursday it has ended its U.S. yogurt joint-venture with Germany’s Theo Müller Group because of weak sales.

The U.S. snack-and-beverage giant also confirmed the two companies have sold their dairy plant in Batavia, N.Y., to Dairy Farmers of America, a milk marketing co-operative. It didn’t disclose financial terms.

Müller Quaker Dairy LLC began selling products in the U.S. in 2012 and opened a $200 million plant in 2013 to take aim at the fast-growing U.S. yogurt market. The move also fit with PepsiCo’s strategy of expanding into more “good-for-you” products.

But the partners struggled to take market share from established yogurt brands including privately held Chobani, General Mills Inc.’s Yoplait and Dannon, owned by France’s Danone SA.

PepsiCo said in a statement Thursday the two companies agreed to shut down the venture “after determining that the business was not meeting expectations in a competitive and dynamic marketplace.’’

PepsiCo disclosed a $65 million impairment charge in April tied to the joint-venture, saying at the time that sales growth was less than expected.

A PepsiCo spokesman declined to say Thursday if the company would record any more write-downs but added that any gain or loss wouldn’t be material.

Sixty-six employees will lose their jobs with the change of ownership at the Batavia facility.

PepsiCo declined to comment on any plans to re-enter the U.S. yogurt market but said it remains committed to growing its nutrition business, including the dairy category.

In addition to Pepsi-Cola and Lay’s potato chips, the Purchase, N.Y.-based company’s billion-dollar brands include Quaker oatmeal and Tropicana Juice.

PepsiCo has dairy businesses in countries including Russia and Brazil. It recently launched a Quaker-branded dairy drink with oats in China.

By Mike Esterl

Source: Wall Street Journal

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