PepsiCo, Inc. (PEP) and Mondelez International Inc (MDLZ)? Yes Please.

In 2012, Pepsi’s American beverage segment comprised 33% of revenue, along with 28% of profits. That’s down from 2011 when the unit made up 34% and 30% of revenues and profits, respectively. In contrast, the America’s Food unit contribution to the bottom line increased over the last year. In 2012, the segment supplied the bulk of both revenue and profits with 37% and 52%, respectively, up from 35% and 51% in 2011.

Source: PepsiCo.com

The declining sales of the America’s Beverage unit are largely a result of recent changes in consumer diets. These changes have consumers making healthier decisions that leave out sugary soda and juice.

But the changes aren’t overwhelming, nor are they worldwide. Pepsi is still making gains in its beverage unit elsewhere in the world. Divorcing beverages would be like taking a slice of pie that’s simply too big to eat. If the unit continues to shrink, spinning off the America’s Beverage segment could be a possibility, but the current decline isn’t severe enough to warrant such a brash measure.

Bottom line

Snacks are the future of Pepsi. With greater demand, snacks have a larger upside than beverages. Still, drinks are a large chunk of Pepsi’s top-line, so a spinoff at this point wouldn’t be wise. Pepsi should keep an eye on its America’s Beverage unit while capitalizing on global opportunities that exist in soda; mainly in emerging markets.

PepsiCo, Inc. (NYSE:PEP) and Mondelez International Inc (NASDAQ:MDLZ) should merge, but Pepsi shouldn’t spin off its beverages just yet. There’s still money to be made.

The article PepsiCo and Mondelez? Yes Please. originally appeared on Fool.com and is written by Marie Palumbo.

This article was written by Randy Holcombe and edited by Chris Marasco. Chris Marasco is Head Editor of ADifferentAngle. Neither has a position in any stocks mentioned.The Motley Fool recommends Coca-Cola and PepsiCo. The Motley Fool owns shares of PepsiCo. Marie is a member of The Motley Fool Blog Network — entries represent the personal opinion of the blogger and are not formally edited.

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