PepsiCo Gets More Investor Pressure

PepsiCo executives have been trying to hold critics of the company's performance at bay over the last year or two, and they're just getting started re-energizing marketing behind the flagship Pepsi brand with the global Live for Now campaign. But the high-profile effort, which kicked off with Nicki Minaj and taps into the brand's most famous brand ambassador in Michael Jackson, isn't silencing the increasing calls from impatient investors about splitting up PepsiCo similar to the ongoing investor-inspired divison of Kraft.

For one thing, there's a new investor in town for PepsiCo — activist shareholder Ralph Whitworth, whose Relational Investors LLC last week took a $600-million stake in the beverage giant. His style is to compel company managements to engage him in discussion about how to fundamentally streamline operations, and then he'll leave them alone. Maybe.

Wall Street, never known for its patience, may feel that PepsiCo hasn't done enough to revitalize Pepsi, which a couple of years ago bell behind Coke and Diet Coke as the No. 3 U.S. soft drink. Neither the social-media based Pepsi Refresh marketing effort nor Pepsi's sponsorship of last fall's big new show The X Factor helped lift the brand back into the No. 2 spot.

Investors, activist or not, have grown increasingly critical of the insistence of PepsiCo CEO Indra Nooyi in hanging on to all parts of the PepsiCo empire, including Frito-Lay snacks and other beverage brands such as Tropicana and Gatorade. And they've questioned whether her emphasis on growing better-for-you products and categories has come at the expense of the overall growth that is fundamental to corporate health.

Now, with Whitworth's help, the investment community is likely to turn up the heat. "With his involvement, along with pressure from other major shareholders, PepsiCo is more likely to consider structural moves, such as a spin-off of Americas Beverages (or global snacks), in the near future," wrote Caroline Levy and Michael Lavery, analysts for CLSA, according to Beverage Daily.

Maybe so. But Nooyi has been arguing for her vision, and she's likely to get at least a little more time to attempt to see it through.