US food maker General Mills pulled out of the 12-year-old joint venture with PepsiCo in order to pay off mounting debts, leaving PepsiCo in total control of Europe's biggest snack food company, with annual sales of more than $1 billion.
All eyes now will be fixed on PepsiCo's ability to consolidate its position in the rapidly growing emerging markets. Growth has been especially strong in central European states such as the Czech Republic, Poland and, to a lesser extent, Hungary, where consumption is set to rise by 50 per cent, 30 per cent and eight per cent respectively up to 2008.
PepsiCo, mainly through its own subsidiary Frito-Lay, already leads the Polish snacks market with a 33 per cent value share and is number two in Hungary. Datamonitor analyst John Band predicted that the dominance of multinational companies in Eastern Europe would only increase as more and more multiple retailers began to open in the region.
Only in the last few weeks, German discount store Lidl has launched in Hungary.
SVE has also just bought Romanian snacks company Star Foods, giving the company an early leading position in a fragmented market which, according to Band, nevertheless has the potential to achieve the current market value of the Czech Republic, around $187 million, over the next decade.
Given the success and clear potential of the Eastern European market, it is hard to see why General Mills has decided to pull out. However, company spokesperson Marybeth Thorsgaard said it was merely because PepsiCo had always wanted control of SVE and General Mills had seen an opportunity to pay off debts.
The US food giant, like many companies in 2004, including Unilever and Coca-Cola, has been squeezed between high raw material prices and an inability to pass prices on to retailers and consumers.
The total European snacks market has risen 10 per cent in the last five years and is now worth more than $60 billion, according to Datamonitor.