PepsiCo South Africa to acquire the rest of Futurelife

PepsiCo South Africa, through its subsidiary Pioneer Foods, will acquire the remaining 50% stake in Futurelife Health products following the initial 50% obtained in 2015.

CEO of PepsiCo South Africa, Riaan Heyl, said, “Futurelife is an innovative brand within the cereals market, and we believe its product basket will complement our current portfolio.

“Upon closing the transaction, we look forward to welcoming the Futurelife employees into PepsiCo.” The proposed transaction is via Pioneer Foods as the acquiring firm and will see the entity purchase Mr Paul Saad’s 50% shareholding in Futurelife.

Paul Saad founded Futurelife in 2007. The original Futurelife Smart Food (the company’s flagship product) was developed as a scientifically formulated, balanced, nutritious convenient food containing Moducare.

Moducare is a daily immune supplement made from a patented blend of plant sterols and sterolins.

Over time, Futurelife developed a broader product range, emphasising nutrition and health based on its uniquely formulated recipes. The product range expanded to other categories, including bran flakes and breakfast bars.

The development of these products and other product innovations were partly enabled by the investment by Pioneer Foods in Futurelife in 2015.

Pioneer Foods acquired its initial 50% of the issued shares in Futurelife in 2015, and the conditions attached to the approval of that transaction were that for five years, the two businesses be administered independently from each other. This condition expired in November 2020.

Since March 2020, Pioneer Foods has been a wholly owned subsidiary of Simba

Proprietary Limited, which, in turn, is wholly owned by PepsiCo.

PepsiCo’s operations in South Africa are organised into five categories: Bakeries, Grains, Snacks (including fruit), Foods and Beverages, and Futurelife will be a wholly owned subsidiary of Pioneer Foods.

The Commission found that the transaction does not raise any competition concerns as Pioneer Foods is already in a position of joint control over Futurelife, and, in any event, Pioneer Foods and Futurelife compete with several prominent players in the market for ready-to-eat cereals.

Question 1

Conduct research on Pepsico SA, specifically Pioneer Foods, and briefly describe its main brands and business activities, and how its business reflects synergies with Futurelife (less than 150 words).(5)

Marks will be awarded for reflecting a sufficient, high-level insight into the structure and business of all entities mentioned and a brief reflection on the main brands, types of products they are active in, and the high-level ‘business-fit’ between the two
entities in the transaction.

Question 2

With reference to the article provided and the research done for Question 1, consider the concepts studied in SCM202B to do a critical evaluation of any possible benefits and risks of the decision of Pepsico SA to buy out the balance of 50% ownership of Futurelife via its subsidiary, Pioneer Foods. Specifically assess the transaction against the likely impacts that will materialise from the transaction under the following headings related to the Supply Chain Operations Reference (SCOR) model: Refer to both impacts on Futurelife and Pioneer in your assessments.

– Plan (3)

– Source (6)

– Make (5)

– Deliver (6).

(20) Marks will be awarded (1 mark for each valid insight/ argument) for the possible benefits or risks of merging Futurelife fully into the Pioneer Foods Group supply chains, discussed under the above four focused headings of the SCOR model. Responses need to reflect specific insights from the article and the companies provided to earn marks.

Answers to Above Questions PepsiCo Case Study

Answer 1: An analysis of the Pepsico South Africa indicates that it has a subsidiary company known as Pioneer foods that operates in the food and beverage sector. The product portfolio of the company includes many well known branch such as Ceres, Weet Bix, Sasko etc. The products and services offerings of the company are designed with the objective of meeting out the nutritous need of its target customers.