PepsiCo’s buys new business in South Africa

US food and beverages giant PepsiCo acquisition of South Africa-based Pioneer Foods has been cleared by competition authorities, said GlobalData.

The final hurdle was overcome when the UK’s Competition and Markets Authority (CMA), which was reviewing the deal because of competition concerns in the country’s cereal market, added its approval to the earlier all-clear given by South Africa’s Competition Tribunal.

Andy Coyne, Food Correspondent at GlobalData, said: “Approval has been a long time coming. It was back in July last year when PepsiCo swooped to buy South Africa-based food and drinks manufacturer Pioneer Foods Group with a bid worth around US$1.7bn.

“Delayed or not, the fundamentals for making this deal are still in place. PepsiCo has long-stated ambitions to further its already substantial international reach and the purchase of Pioneer – a large, branded and commoditised food supplier in South Africa – gives the company additional bulk in a relatively developed home market in the short term and a ‘beachhead’ from which to press on into the emerging markets of sub-Saharan Africa in the medium to long term.

“Pioneer has joint ventures in Namibia, Botswana, Kenya and Nigeria, a part of the world PepsiCo describes as ‘a key market for future growth’.

“While this is a long-term play, in what might be seen as an added bonus, the approval of the CMA gives it further purchase in the UK’s ultra-competitive breakfast cereal market.

“The purchase price raised a few eyebrows last summer but the logic behind what PepsiCo is trying to achieve with this deal is undeniable.”