Summary
There is a food division that PepsiCo needs to cut loose, but it's not Frito-Lay.
When was the last time you wanted Gatorade and oatmeal? PepsiCo should have known this mix wouldn't work.
Sometimes it's okay to follow your competition. Coke spent 10 years making this switch; now it's Pepsi's turn.
PepsiCo (NYSE:PEP) didn't exactly wow investors with its most recent earnings report. After rising as high as $115 a share in the weeks prior, the shares are trading below $108 as of this writing. With a new CEO, Ramon Laguarta, coming on board, many investors may be wondering what plans he has for the company. One recent article quoted CFO Hugh Johnston saying the company isn't looking at a "substantive" overhaul. Given the company's current position, let's hope that Laguarta realizes sooner rather than later that an overhaul is exactly what is needed.
I'm not talking about Frito-Lay
It might surprise some investors, but I'm not suggesting that PepsiCo needs to do anything with Frito-Lay. I know that many have suggested splitting Frito-Lay from PepsiCo to unlock value and compete more effectively with Coca-Cola (NYSE:KO). Though these businesses aren't directly complementary, Frito-Lay represents one of the highest margin and consistent growth drivers for PepsiCo as a whole.
