The Russian government gave its approval today for PepsiCo Inc. to buy a controlling stake in the Wimm-Bill-Dann Dairy & Juice Co., one of Russia’s leading producers of juice and dairy products, for $3.8 billion.
The approval means PepsiCo is now poised to wrest back the lead in Russia’s juice and dairy market from Coca-Cola Co., which bought controlling interest in another company earlier this year.
“Russia is positive about this acquisition,” Dmitry Peskov, a spokesman for Prime Minister Vladimir Putin, said today by telephone. The Pepsi decision was announced by the Russian Interfax news agency after a meeting of a government commission on foreign investment, which Putin heads.
PepsiCo agreed to pay $3.8 billion, its biggest investment yet in the Russian beverage market, for 66 percent of Moscow-based Wimm-Bill-Dann and plans to make an offer for the rest, the companies said this month.
Putin and President Dmitry Medvedev are seeking to develop manufacturing to help wean Russia’s economy off its dependence on exports of raw materials. Putin said today that Russia will receive $40 billion of foreign direct investment this year.
Russia’s economy is forecast to grow 3.8 percent this year, the government estimates. Manufacturing growth jumped in December, accelerating at the fastest pace since March 2008, HSBC Holdings Plc said in a report on Dec. 27. Russia’s dairy market will expand at a “low-double-digit” rate for at least the next three years, the companies forecast.
To gain Putin’s blessing for the deal, PepsiCo Chief Executive Officer Indra Nooyi traveled to Moscow with her predecessor, 89-year-old Don Kendall, who made a name for himself by giving Soviet leader Nikita Khrushchev his first taste of Pepsi. PepsiCo, based in Purchase, New York, entered the Russian market in 1974, 15 years after Khrushchev’s first sip of Pepsi, and has invested $3 billion in the past decade.
In 2008, PepsiCo purchased a majority stake in OAO Lebedyansky, the country’s biggest juice maker.
Wimm-Bill-Dann, whose brands include Chudo dairy products and Agusha baby food, has almost doubled its sales since 2005.
In 2009, PepsiCo and Wimm-Bill-Dann together had 42 percent of Russian juice sales by volume, according to data from Euromonitor Plc. Coca-Cola Hellenic Bottling Co. and Nidan held a 35 percent share. Coca-Cola purchased a controlling stake in Nidan this year.