PepsiCo-Ocean Spray Latin American Strategic Alliance May Signal Uptick in Food & Beverage Industry Joint Ventures

PepsiCo and Ocean Spray Cranberries’ newly formed Latin American strategic alliance may be indicative of a resurging trend in joint ventures and co-packaging arrangements in the food industry, says Brian A. Smith, a Food Industry Team lawyer at Freeborn & Peters LLP in Chicago whose specialties include structuring of manufacturing and distribution joint ventures in Latin America.

“This could be further proof that joint ventures and co-packaging arrangements will be trending up again,” says Smith. “In particular, Ocean Spray is very comfortable with and has grown its business through co-packaging and joint ventures. And PepsiCo is the next logical choice to do this because in last 10 years or so PepsiCo has invested a lot in their self manufacturing equipment.”

As part of the alliance, PepsiCo will have exclusive rights to manufacture and distribute a portfolio of cranberry- and blueberry-based beverages through its Latin America Beverages division. The companies will share product-marketing responsibilities and plan to collaborate on product innovation.

Smith pointed out that it often is difficult for manufacturers to enter new markets due to the steep learning curve as well as the vast amount of machinery and investment required.

“With the economy showing some signs of recovery, companies are beginning to expand to new markets and these types of alliances are just the quickest and most economical way to enter,” Smith said. “With the Ocean Spray deal, in addition to PepsiCo’s obvious distribution network, brand recognition, and Latin American market expertise, Ocean Spray was probably attracted to either the excess capacity from PepsiCo’s recent equipment additions or simply PepsiCo’s equipment purchasing leverage in the marketplace,” Smith added.

Smith is available to discuss this matter as well as other food industry joint ventures and co-packaging arrangements. [01/25/2012]