Originally created 01/27/99

Georgia plants involved in Frito-Lay-PepsiCo plans

NEW YORK -- Frito-Lay is closing four of its oldest production plants and is expanding five others while parent PepsiCo Inc. is swapping bottling operations with its biggest independent bottler. One of the plants closing is in Georgia, as is one of those being expanded.

Both moves announced Monday are designed to make the soft drink and snack food conglomerate more competitive by increasing productivity at Frito-Lay and creating bottlers big enough to serve sprawling retail customers.

The four Frito-Lay plants being closed over the next six to eight months employ 850 people, Frito-Lay executives said. They are in Chamblee, Ga., Salisbury, N.C., Jackson, Miss., and Marlborough, Mass.

The maker of Lay's, Doritos and Tostitos chips will expand capacity at five other plants in a move that could add 400 jobs there. Those plants are in Lynchburg, Va., Jonesboro, Ark., Fayetteville, Tenn., Perry, Ga., and Killingly, Conn.

The net impact would be to reduce Frito-Lay's domestic work force of about 40,000 people by about 450 jobs, or a bit more than 1 percent.

The program will result in a charge of about $120 million before taxes over two quarters against PepsiCo earnings.

PepsiCo, the Purchase, N.Y.-based conglomerate that owns the nation's second-largest soft drink company as well as the biggest snack food maker, also announced Monday it is swapping bottling operations with its biggest independent bottler, Whitman Corp.

Whitman will get rights to bottle Pepsi products in several Midwestern states and in Eastern Europe in exchange for a combination of cash, stock and bottling rights in Virginia, West Virginia and Russia.

The bottling deal continued PepsiCo's efforts to consolidate bottling of Pepsi-Cola products at a smaller number of large bottling businesses. The bigger bottlers are expected to serve expanding retail customers better.

PepsiCo plans to sell a majority stake in its company-owned bottling business, which accounts for about 54 percent of the volume of Pepsi-Cola products sold domestically.

That would free PepsiCo to focus on marketing its beverages and selling concentrate to the bottlers. Atlanta-based Coca-Cola Co., the soft drink industry leader, has used that organizational setup for years.

Whitman is its biggest independent bottler, accounting for about 12 percent of Pepsi's domestic sales volume. After the deal announced Monday, it would handle about 17 percent of U.S. Pepsi sales.

Whitman will get PepsiCo bottling territories in Illinois, Indiana, Missouri and Ohio as well as in the Czech Republic, the Slovak Republic, Hungary and Poland. Those businesses generated $720 million in revenue last year.

PepsiCo will get about $300 million in cash, stock representing about a 35 percent stake in Whitman and bottling operations in Marion, Va., Princeton, W. Va., and St. Petersburg, Russia, with combined 1998 revenue of about $77 million.

PepsiCo currently owns 20 percent of Whitman's bottling division.

The conglomerate also announced Monday that it expects to report next week that it earned 24 cents a share in the fourth quarter.

That reflects a gain of 19 cents a share due to its November settlement of a tax case with the Internal Revenue Service involving its soft drink concrentrate operations in Puerto Rico.

That gain will be nearly offset by charges of 17 cents a share in the quarter for the costs that Russia's economic crisis has had on its business there, the first part of the Frito-Lay plant realignments and the costs of separating its soft drink concentrate and bottling operations in North America.


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