(Reuters) – Activist Investor Nelson Peltz renewed his crusade to convince PepsiCo Inc to spin off its slow-growing beverage business from its flourishing snacks division, less than a week after the company poured cold water on the idea.
In a 37-page letter to PepsiCo’s board made public on Thursday, Peltz urged the company to spin off its beverage business and focus on its billion-dollar snack business to create “two leaner and more entrepreneurial companies.”
PepsiCo’s snack brands include Lays, Cheetos and Doritos.
Peltz said a standalone snacks business would give investors strong growth in sales, margins and free cash flow, while an independent drinks business would generate strong and stable flow of cash that could be returned to shareholders.
Peltz’s investment firm will begin meeting shareholders immediately to gather support for a split, the letter said.
PepsiCo said last week that it had decided not to separate its beverage business in North America after conducting an exhaustive review involving external consultants and bankers.
“Decoupling our beverage and snack businesses in North America would significantly reduce our relevance to our customers,” Chief Executive Indra Nooyi said.
The company, which also sells Gatorade and Tropicana juices, reported a better-than-expected quarterly profit last week and maintained its forecast of 7 percent growth in full-year adjusted earnings.
Peltz’s investment firm, Trian Fund Management, owns about $1.2 billion of Pepsico stock, the letter said.
“Trian does not agree with the outcome of PepsiCo’s strategic review, particularly following another quarter of uninspiring performance and weak 2014 guidance,” Peltz wrote.
Trian held about 0.8 percent of Pepsico as of Dec. 31, according to Thomson Reuters data.
Peltz, who began his campaign to split up Pepsico last July, has also previously pushed the company to create a snack food giant by acquiring Oreo cookie maker Mondelez International , but he dropped that idea after he won a seat on the Mondelez board last month.
PepsiCo, like rival Coca-Cola Co, has been battling declining soda sales in developed markets, especially the United States, as health-conscious consumers switch to non-carbonated beverages such as juices and health drinks.
PepsiCo reiterated that it had no plans to split up.
“PepsiCo’s management and board of directors have spoken clearly on this issue and are fully aligned with our strategy outlined last week,” a PepsiCo spokesman said in an email.
“Our focus is on delivering results for our shareholders, not new, costly distractions that will harm shareholder interests,” he said.
Peltz’s letter to PepsiCo’s board was first reported by the Wall Street Journal on Wednesday.