PepsiCo vs. Coca-Cola for Investment in Chobani

By Alyssa Potenzone,
Money and Investing Writer

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Hamdi Ulukaya, the founder and CEO of Chobani started the company when he moved from Turkey to New York.

When he came to the United States, he was far from impressed with the quality and variety of yogurts available compared to back home.

From there, Hamdi sought to produce delicious, natural, and nutritious Greek yogurt.

In 2005, Hamdi purchased a closed yogurt plant; the beginning of his entrepreneurial business.

The following two years he formed his team hiring dedicated individuals along with a master yogurt maker.
The thick, smooth, Greek yogurt recipe was later perfected.

Only nine years after the company’s inception, it was ranked the number one Greek yogurt brand in the United States.

As the trend for healthier eating and healthier lifestyles continues to grow, it is no wonder a yogurt including all natural, non-GMO, non-preservative ingredients has been so highly demanded.

Despite Chobani’s huge successes, they have experienced setbacks in the past.

At one point the Greek yogurt brand encountered liquidity issues resulting in TPG, a private equity firm, providing a $750 million loan.

As of October 12, Lauren Hirsch and Greg Roumeliotis of Reuters reported about the ongoing talks between PepsiCo Inc. (NYSE: PEP) and Coca-Cola (NYSE: KO) over an investment in Chobani LLC.

With such an investment, Chobani would be valued at nearly $3 billion.

Companies producing soft drinks have been seeing slowed growth as the desire for more health conscious foods has been increasing.

Due to slowed growth in the carbonated beverage sector, soft drink companies are beginning to diversify by investing in companies that promote healthier living.

Chobani is currently willing to sell a small stake to a worthy investor.

Warrants owned by TPG accounting for 10 percent-20 percent of Chobani’s equity will be included in that stake.

Forgoing a small portion of the company to a strategic investor, Chobani aims to “expand its supply chain, distribution, manufacturing base and geographic footprint for its popular yogurts like Flip, which combine yogurt with flavors such as peanut butter and coffee” according to Reuters.

It is important to note however, that this potential deal is subject to change. Companies other than PepsiCo and Coca-Cola are considering an investment too, but because of confidentiality, those corporations were not identified.

This ongoing initiative to invest in healthier companies is not new to PepsiCo and Coca-Cola. In fact, both soft drink companies are already associated with the dairy sector.

“In 2012, PepsiCo started selling yogurt through a joint venture with German dairy company Theo Müller”

Whereas Coca-Cola just this year started nationally allocating FairLife, a milk product “created through a joint venture with Select Milk Producers.”

As far as competition goes between PepsiCo and Coca-Cola, PepsiCo “has a broader snack portfolio than Coke.”

PepsiCo has an entire “better for you” portfolio of snacks. These snacks adhere to global dietary intake recommendations for total fat, saturated fat, sodium, and added sugar.

PepsiCo’s Frito-Lay division including cookies, chips, and Quaker Oats has been a beneficial investment.

Coca-Cola on the other hand has been investing in healthier beverages rather than snacks. Investments in Keurig Green Mountain (NASDAQ: GMCR), Monster Beverage Corp. (NASDAQ: MNST), and the juice Suja Life has helped supplement Coca-Cola’s slowing soft drink market.

Oct. 14, CNBC released additional details about this ongoing talk of investing in Chobani. According to CNBC’s sources, “Coca-Cola is not exploring a stake in Chobani” any longer.

Negotiations will likely continue and it will be interesting to see which company invests in such a well-known yogurt brand.

A version of this article appeared in the Tuesday, October 20th print edition.

Contact Alyssa at
alyssa.potenzone@student.shu.edu

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