Pepsi Counterpunches Coca-Cola In India
By Sam Lewis
Mimicking its biggest rival, Pepsi invests big bucks in the developing Indian market
The world’s largest maker of snack foods, Pepsi, will be investing more than $5 billion in India by 2020. Pepsi’s plan comes after the company’s biggest rival, Coca-Cola, announced last June it would be investing $5 billion to grow its business in the subcontinent by 2020. Pepsi plans on using its India investment to increase manufacturing capacities, along with adding new products to its already enormous line.
Pepsi’s and its enormous line of snack-food products faces stiff competition in India from Coca-Cola, the world’s second-most popular brand and most-popular maker of soft drinks. Both companies are competing for a larger portion of the business in developing countries. Growth in Africa, Asia, and the Middle East is accelerating four to five times faster than in Europe and the U.S., according to Pepsi. Nearly half of Pepsi’s $65.5 billion in revenue came from business outside of the U.S. The move not only benefits Pepsi, but it will also give India’s economy a boost. The economy in India is forecast to grow only 5 percent for the year ending March 2014, matching the previous year’s growth — the slowest since 2003.
The company will continue its focus in India on rural areas. Pepsi has been selling single-serving nutrient fortified snacks in rural India for the past several years. These snacks are designed for low-income and emerging market customers as part of Pepsi’s plan to offer healthy snacks across the globe. “India is a country with huge potential, and it remains an attractive, high-priority market for Pepsi,” says Chairman and CEO of Pepsi Indra Nooyi. Currently, Pepsi has 38 bottling plants and three food plants in India. These operations create more than $159 million in annual sales of Pepsi and Frito-Lay products.
The Purchase, New York-based beverage company has only devoted $2 billion in Indian assets since it began operations there in 1989. The new enormous investment suggests Pepsi wants to take advantage of not only the growth potential in a slowed economy, but also India’s love for snack food and cola. For the quarter ending in September, Pepsi reported 4 percent growth in revenue in developing and emerging markets. Supporting that growth, Pepsi will make improvements to its Indian distribution network. “We’ve built a highly successful business in India over the course of many years, and we believe we've only scratched the surface of the long-term growth opportunities that exist for Pepsi and our partners,” says Nooyi. “This investment is Pepsi's vote of confidence in India's future and it represents our deep commitment to India."
Want to publish your opinion?
Contact us to become part of our Editorial Community.