PepsiCo CEO commits to keep Sodastream in Israel 15 years

Ramon Laguarta and Daniel Birnbaum Photo: Shlomi Yosef

PepsiCo CEO: We'll keep the production plant in the Negev and build another there.

Ramon Laguarta, who will replace Indra Nooyi as the PepsiCo CEO in October, today announced the acquisition of Israeli company Sodastream International Ltd. (Nasdaq: SODA;TASE: SODA) for $3.2 billion at a press conference in Tel Aviv with Sodastream CEO Daniel Birnbaum. They also announced that PepsiCo had undertaken to stay in Israel for 15 years and would both keep production in a plant in Rahat in the Negev and found a new plant in Israel. They added that Sodastream would be managed as a division of Pepsico under the management of Birnbaum and its current team.

Laguarta was appointed CEO early this month when Nooyi (62) announced her retirement after 12 years in the job and 24 years at the company.

Sodastream's share price is up 10% in Nasdaq trading.

Sodastream currently has 3,500 employees in 46 countries. The possibility of the company being sold to PepsiCo, Coca Cola, or even Starbucks was raised in the past. The acquisition is a strategic one for Pepsico and fits in with the company's plans to cut down on its presence in the sweetened beverages market. The deal is also significant because it should give Pepsico a foothold in people's homes.

At the joint press conference, Birnbaum said, "We are not a perfect country, but today is important not only for me and the employees, who will benefit a lot from this, but also for Israeli industry and the Israeli economy. This is not an exit in which the company is moved to a foreign country; it is an entry by the world's second largest beverages company expressing confidence in the Israeli economy and the pioneers from Rahat and from the Negev. It is a fulfillment of Isaiah's vision: 'For water has burst forth in the desert' that is flowing all over the world. Thanks to this partnership with Pepsico, there will be a memorial for the six million - wonderful products made in Israel. All of the employees are proud and erect - Jews and Arabs working together on an island of peace."

Laguarta said, "This is an important milestone for both companies. I wouldn't miss the chance to visit Israel. I visited the plant and welcomed the employees into the Pepsico family. Sodastream is an engine of talent and innovation. Today's report is evidence of vision and hard work. We built a company with intelligence, but also with heart, and that is important to us. They have courage and compassion, and we are product to be their partners.

"The acquisition is part of our strategy and will contribute to us in every aspect: geographically and entering into mega-trends. Sodastream can grow greatly under Pepsico. We will help Sodastream expand its deployment with the help of our R&D and distribution. This is a story of growth for both companies. Our companies share a vision of a healthier world. It is performance with purpose and can bring about excellent financial results combined with responsibility for the planet.

"In the end, there are many new opportunities with similarity of vision and strategy, but mainly similar values. I'm very impressed by Sodastream's site. There are a great many different employees working together with a smile and a desire for what they are doing. Diversity is a very important value for us. It will be very difficult to imitate the partnership between us.

"We want to leave Sodastream the way it is. We have promised it for 15 years, but I think it will be forever. The infrastructure and knowledge here are excellent. It's a very successful deal."

Question: Aren't you afraid of BDS?

Laguarta: "We work in 200 countries worldwide and appreciate diversity. We feel comfortable with who we are and the power of Sodastream. We've had business in Israel for years in partnership with Strauss."

There were talks before between the parties. Why did it culminate in a transaction this time?

"We spoke with Sodastream's team a number of times. When you make a deal, you want to see that you are buying something safe. We saw acceleration in certain trends. The other thing is that we saw that Sodastream's business model has been proven in the past two years - proven financially, a strong brand, and a strong strategy."

Will Pepsico use Sodastream's technology in its products?</i?

"Every time we make a major acquisition, we learn as much as we give to the acquired company. It's a two-way street. We'll learn from Daniel and team more than just the technology. I see it as a passage of technology and talent. It's not one-dimensional - Pepsico is the big brother helping the little brother. I think we 'll be able to generate innovation around water."

How does Sodastream's strategy, which includes reducing the use of plastic, connect to Pepsico's current activity?

"It's not a strategy of one or the other. We'll make our existing business more sustainable. We'll make our products recyclable. It's a journey we're on and it will take time. At the same time, we're moving in Sodastream's direction in reusing plastic. Plastic is an excellent product with a lot of value. The problem is when it gets thrown away.

"Sodastream is present in many markets, but there are many more opportunities, among other things in the penetration of new markets and expanding existing markets. We're not counting on synergy in cutting costs; we'll generate value for shareholders through growth, not by cutting costs.

"It was recently decided to build another plant close to the existing one, and we have approval for support from the Ministry of Economy and Industry. Pepsico is part of the plan and will continue investing in Israel. We're making peace every day and producing soda on the way.

"The idea is to manage Sodastream as a division of Pepsico managed by Daniel and the current team. What will enhance growth is R&D, and we're very good in it, and distribution, and we can distribute the products in many markets. Israel will continue to be the production base. The goal is to stay here for many years. Daniel is the soul of Sodastream. It's amazing what goes on at the plant. Daniel knows everyone by their first names. It's the future of leadership: people with vision who are close to people and can lead them. This is one of Daniel's strong points."

Birnbaum said, "Pepsico told me that they were acquiring Sodastream because of who we are, meaning that we’re creating a disruptive solution for the beverages industry. I give a lot of credit to Pepsico's management for the courage and wisdom to understand that this is hat the consumer needs. The world is changing. Use of plastic has to be reduced."

Laguarta said the Sodastream share would be delisted from trading and there were no plans to list Pepsico for trading on the Tel Aviv Stock Exchange (TASE).

Published by Globes [online], Israel business news - www.globes-online.com - on August 20, 2018

© Copyright of Globes Publisher Itonut (1983) Ltd. 2018

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Ramon Laguarta and Daniel Birnbaum Photo: Shlomi Yosef
Ramon Laguarta and Daniel Birnbaum Photo: Shlomi Yosef
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