The world's No. 2 soft-drink maker, which on Friday closed its $7.8 billion purchase of Pepsi Bottling Group and PepsiAmericas, also said it still expected earnings to grow 11 percent to 13 percent on a constant-currency basis in 2010 from $3.71 per share last year.

Pepsi archrival Coca-Cola Co surprised Wall Street last week with a similar move to buy the North American operations of bottler Coca-Cola Enterprises Inc.

Bringing the bottlers in-house will speed up distribution to major retailers and cut costs. It will also give both Pepsi and Coke more flexibility and allow them to streamline decision-making when it comes to introducing new drinks in an increasingly segmented market.

The old "franchise" model of having U.S. bottlers separate from the main concentrate company is "a relic of the past," PepsiCo Chief Executive Officer Indra Nooyi told the CNBC business channel on Monday. Combining bottlers with the main company will help them compete better in a U.S. beverage market where "the profit pool is not growing enough to feed the companies," Nooyi said.

Coke CEO Muhtar Kent has affirmed his belief in the franchise model "in its broadest sense."

Both Pepsi and Coke still have independent bottlers in other countries.

Former Pepsi Bottling CEO Eric Foss, who will continue to run PepsiCo's bottling operations, told reporters that Coke's move "confirms that this is the right move, the right strategy, the right model for North America."The reality is that we are ready to go," Foss said, while Coke, which expects to close its acquisition in October, is "just getting started."

Nooyi noted that the new model eliminates time-wasting negotiations between the concentrate company and the bottler, which often have competing interests.On a conference call with reporters, Nooyi gave an example of how a few weeks ago "a major retailer" told PepsiCo -- which also makes Frito-Lay snacks and Gatorade sports drink -- that it wanted certain snacks and beverages on its floor in preparation for the Super Bowl surge, and that it wanted them in 24 hours. "Normally, this would have taken us four to six or eight weeks to work out," Nooyi said, but in this case, the company did it in 24 hours.

Nooyi said she was optimistic about Pepsi's prospects following completion of the bottler deals, but added that she was worried about the next 12 to 18 months, considering weak U.S. consumer confidence levels and high jobless rates.

Source: Reuters and flex-food-news.com