Activist firm takes $600 million stake in PepsiCo

[May 16, 2012]  NEW YORK (AP) -- Activist investor Ralph Whitworth said Tuesday that his firm has taken a $600 million stake in PepsiCo Inc., a move that could ramp up pressure on the company to make changes.

PepsiCo has faced investor dissatisfaction in recent years over its underperforming stock price and loss of market share to Coca-Cola Co. That's led to speculation in the past that CEO Indra Nooyi will step down and that the company will split up its soda and snacks businesses.

Whitworth, the co-founder of San Diego-based Relational Investors, said that his firm has accumulated a 0.6 percent stake in the food and beverage giant since last fall. The holding is expected to be disclosed this week in a regulatory filing with the Securities and Exchange Commission.

In a statement, PepsiCo said that it has had constructive meetings with Relational.

"Our senior management meets regularly with investors, and Relational is a respected institution," the company said.

Relational's disclosure comes as PepsiCo is looking to refresh its business. Nooyi has said that 2012 will be a "transitional year" as PepsiCo trims costs by slashing jobs and plows more advertising dollars into strengthening its flagship brands, including those in the Frito-Lay unit.

For the year, PepsiCo plans to boost advertising to 5.7 percent of net revenue from 5.2 percent. Already in the first quarter, the Purchase, N.Y.-based company noted that it increased U.S. advertising spending by 25 percent.

And earlier this month, Pepsi said it is partnering with Michael Jackson's estate to put the late pop star's silhouette on 1 billion soda cans. The global push is part of a broader "Live For Now" campaign, which aims to connect consumers with Pepsi through music and pop culture.

Both PepsiCo and Coca-Cola are facing weaker soft drink demand in the U.S. But Pepsi has a more uphill battle. In 2010, the company's namesake cola lost the No. 2 spot in the U.S. to Diet Coke, according to the industry tracker Beverage Digest. Coca-Cola remains in the top spot.

Relational also holds positions in Guaranty Bancorp, Par Pharmaceutical Companies Inc. and Quest Diagnostics Inc.

Shares of PepsiCo slipped 2 cents in after-hours trading after closing up 70 cents at $67.85.

[Associated Press]

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