NEW YORK — PepsiCo plans to hang onto its struggling North American drinks unit, with hopes that the introduction of naturally sweetened, lower-calorie sodas will help revive sales.
The company has been under pressure to spin off the business and focus on its stronger Frito-Lay snack unit, most notably by activist investor Nelson Peltz of Trian Fund Management.
The calls for a split come as PepsiCo’s drinks, which include Mountain Dew, Tropicana and Aquafina, have lost ground to bigger rival Coca-Cola Co. in recent years. U.S. soda consumption in general has also been on the decline, with people worried about the calories in regular soda and the artificial sweeteners in diet sodas.
But PepsiCo said Thursday that it concluded after an “exhaustive” review involving “bankers and consultants” that its current combined snacks and drinks structure would maximize shareholder value.
The strength in snacks and weakness in drinks played out again in the company’s fourth quarter, with Frito-Lay delivering volume growth of 3 percent in North America. Volume for carbonated soft drinks, by contrast, fell in the “mid-single digits” despite stepped-up marketing. Non-carbonated drinks, which include Gatorade and Aquafina, increased in the “low-single digits.”
Still, CEO Indra Nooyi stressed that PepsiCo’s drinks and snacks are complementary to each other. She also downplayed the company’s exposure to colas, noting that they make up less than 25 percent of North American beverages.
Nooyi also noted that PepsiCo plans to test new natural sweeteners in carbonated drinks this year that could help improve results. Dr Pepper Snapple Group Inc. announced similar plans this week. Coca-Cola, which introduced a similar concept in Argentina last year, reports next week.
PepsiCo announced another cost-cutting program that will save $5 billion over the next five years from actions including factory closures and investments in automated manufacturing, with about 40 percent of the savings coming from workforce cuts.