Pepsi relaunch fails to lift off

PepsiCo this weekend admitted that its $500m (pounds 320m) "Blue" relaunch had been a disappointment - yet to have a significant impact on sales despite the hype.

Executives at Pepsico are still reeling after the company announced last week that it would take a restructuring charge of $525m to pay for losses in its Latin American bottling subsidiary and fund a company-wide strategic reorganisation.

It also warned that the restructuring would lead to job losses among its 2,300 direct employees in Europe and changes in its relationships with bottlers and customers.

The shake-up may also involve a renewed offer for Britvic, owners of Tango and Robinsons, which bottles and distributes Pepsi in the UK. Pepsico has a 10 per cent stake in Britvic, which is controlled by Bass via a complex consortium including Allied Domecq and Whitbread.

Pepsi was on the verge of buying Britvic two years ago for pounds 450m but pulled out of negotiations with the brewers. Rival Coca-Cola is in the process of buying complete control of its UK bottling operation, currently half-owned by Cadbury-Schweppes, although the deal is subject to clearance by the European Union.

Wayne Mailloux, president of Pepsi-Cola Europe, stressed that the restructuring would mainly affect the soft drinks business and dismissed suggestions that the restaurants business, which includes Pizza Hut, Taco Bell and Kentucky Fried Chicken, was for sale.

"We are aiming for a new design of organisation that is more focused and sustainable. To do this, we're going to look at manning levels around the world. As a result, bottlers and customers will see a different kind of Pepsi," he said.

Mr Mailloux also defended Pepsi's "Blue" marketing campaign, which was launched in April. In the second quarter of this year, however, Pepsi raised its share of the cola market to just 21.1 per cent from 20.7 per cent for the same period last year, according to figures compiled by market research firm Canadean. However, in the same period, Coca-Cola also raised its market share from 57.6 per cent to 59.9 per cent, mostly at the expense of own-brand colas.

"Blue was not something we expected to be a silver bullet," Mr Mailloux said. "It's a very long-term strategic initiative - something you build on over years and years."

Analysts on both sides of the Atlantic believe that while Pepsi's restructuring is an encouraging development, the outlook is far from buoyant.

"It's a question of how much time they can afford to spend putting their house in order," said Terry Bivens, drinks analyst at the New York broking firm Donald.

Mr Bivens added: "The international beverage business looks in disarray at the moment, and there's also weakness in the Taco Bell and Pizza Hut restaurant divisions. My worry is that they have been down the restructuring road before and it has clearly not worked."

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