Sunday, December 12, 2010


The cola wars have taken an interesting direction: at the beginning of the month, Pepsi announced that it would buy a controlling stake in Wimm-Bill-Dann, Russia's largest food company. Wimm-Bill-Dann (which is pronounced like "Wimbledon," owing to its founder's fondness for tennis) is a huge producer of fruit juices, dairy and baby food. After the acquisition completes, Russia will become Pepsi's second-largest market next to the US.

Why fruit juice? It's one of those subtle ways in which the cola companies inch into every age in life. While cola and other soft drinks are undoubtedly marketed to kids emphatically, they don't do quite so well with older demographics, and so fruit juices - healthier in perception - become more and more important as populations age. These healthier products form the business of Pepsi's "Global Nutrition Group" (snicker all you want), which currently brings in $10 billion for Pepsi. This will grow to $13 billion with the acquisition of Wimm-Bill-Dann, and part of Pepsi's plan to grow this part of its business to $30 billion in the next ten years.

But why Russia? It's still a relatively emerging market for these 'luxuries,' where cola companies can still hope to grow (Coke also bought a Russian fruit juice producer this year, Nidan). As the Economist puts it:
As Russia’s middle classes have more disposable income, they are trading up from plain milk to newish luxuries such as cottage cheese and yogurt. (When Wimm-Bill-Dann started selling yogurt in Russia in 1993, local newspapers wondered whether it was sweet kefir or warm ice-cream.) The Russian dairy market increased in size by 22% between 2006 and 2010 and is forecast to grow by 12% in the next four years. “Russian demand for consumer goods has increased from an abnormally low level to a normal level,” says Mikhail Krasnoperov at Troika, an investment bank in Moscow.
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