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N.Y.-based soft drink giant takes steps to lower expenses
December 3, 2003
PepsiCo Inc., the world's second-largest soft drink maker, will fire 750 workers, close a Frito- Lay snacks plant in Kentucky and combine North American juice businesses into one unit to lower costs.
The firings will reduce earnings by 6 cents a share in the fourth quarter, PepsiCo, which has about 142,000 workers, said in a prepared statement. The Purchase, N.Y.-based company will manage its Tropicana and Dole juices and juice-drinks brands as part of a new group, with a Chicago headquarters.
The closing of the 330-worker plant will reduce manufacturing expenses, part of Chief Executive Steven Reinemund's plan to free up money for advertising healthier juices and snacks and selling new products such as Lays potato chips in canisters. Reinemund is trying to increase annual sales, which have risen 3.7 percent for the past five years.
"The name of the game is lean and mean," said Marvin Roffman, president of Roffman Miller Associates, which manages about $200 million including about 60,000 PepsiCo shares. "Restructuring is never ending."
PepsiCo, which also makes Pepsi-Cola and Mountain Dew soda, delayed reviewing whether to boost its dividend until next year, disappointing some investors. Analysts including Goldman Sachs Group Inc.'s Marc Cohen had said PepsiCo might raise its payout as much as 40 percent.
Shares of PepsiCo fell 57 cents to $48.14 Tuesday in New York Stock Exchange trading. The shares had increased 15 percent this year.
"The stock is trading off due to the absence of a dividend increase," said Daniel Peris of Federated Investors Inc., which holds 1 million PepsiCo shares among $201 billion in assets under management.
About 275 jobs will be trimmed at the North American beverage-and-food division, which includes only Quaker foods, mostly at the Tropicana juice unit in Bradenton, Fla.
The Frito-Lay plant, located in Louisville, will close in the first quarter, with production moving to newer factories in Tennessee and Arkansas. Most of the remaining job cuts will be overseas, company officials said.
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