Pepsi and Bud Makers Team Up on Costs

David Schepp

posted: 42 DAYS 23 HOURS AGO

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Beverage giants PepsiCo (PEP) and Anheuser-Busch struck an unusual alliance this week to establish a procurement system in the U.S., letting them act as one company when purchasing certain materials and services. The pact, the companies said this week, will give the corporations better prices on computers, office supplies, transportation, and other supplies and services.

PepsiCo, based in Purchase, New York, and St. Louis-based Anheuser-Busch, the U.S. subsidiary of the world's largest brewer, say they haven't determined how much money the pact will save them, but that they will invest any savings into other parts of their businesses.

The agreement makes sense, says Gary Hemphill, research director at Beverage Marketing Corp. in Manhattan. "Given present economic conditions, companies are looking to save dollars and be more creative than they have been historically," he says. Because the pact is unique, he says, other large companies will be watching; if Anheuser-Busch and PepsiCo achieve substantial savings, other sharing agreements could become more commonplace.

The arrangement may have greater implications than saving money. Analysts say the pact indicates a tighter relationship between PepsiCo, which specializes in soft drinks and snacks, and Anheuser-Busch's Belgium-based parent, Anheuser-Busch InBev (BUD). Any savings from the alliance would likely be "helpful" rather than "material," Cazenove Securities analyst Matthew Webb told FT.com. The procurement deal, he said, "may lead to further suggestions that the two companies may ultimately merge, or at least develop closer links."

2009-10-15 14:19:29