Two years ago, PepsiCo paid $4.2 billion for Russian yogurt giant Wimm-Bill-Dann Foods, the company’s biggest-ever foreign acquisition. At the time, Chief Executive Officer Indra Nooyi said she was capitalizing on growing global demand for dairy products—and left it at that.
Turns out that was just Nooyi’s opening move: PepsiCo aims to use the Russian market as a springboard to reach new consumers in former Soviet republics such as Ukraine, Turkmenistan, and Kyrgyzstan. She sees Russia, with its 142 million consumers, as a proving ground where PepsiCo can experiment with drinks and snacks targeted at a growing middle class. The company will then use Wimm-Bill-Dann’s distribution across the region to bring Western-style snacking in all its gluttonous glory to Eastern Europeans. Fritos, Lay’s chips, and Doritos are among the company’s most profitable products, in part because they are light and easy to distribute. And capturing market share early in former Soviet satellites offers the possibility of growth for decades to come. “Russia is just a base,” explains Nooyi. “You’re doing it for the former Soviet Union countries. This is a business that is going to grow substantially. That’s what fires everybody up.”