Beverage Giants Targeting China
June 1/Atlanta/The Atlanta Journal-Constitution -- In China, there is money to be made in potato chips flavored as cool cucumbers and crispy prawns, as well as in beverages based on traditional medicine. PepsiCo, one of the world's biggest purveyors of snacks and drinks, wants a bigger piece of that action.
PepsiCo's recent announcement that it plans to invest $2.5 billion in China over the next three years -- on top of a $1 billion investment the company announced in 2008 -- signals a new intensity in competition between PepsiCo and Atlanta-based Coca-Cola Co. for Chinese consumers' business.
PepsiCo plans to open up to a dozen plants in China to make snacks, soft drinks and noncarbonated drinks. PepsiCo will also open farms to grow potatoes and oats, upgrade existing plants and build a research and development center to develop products for Asia.
"This investment reflects very clearly our great confidence in China and our long-term commitment to this very important, growing market," PepsiCo CEO Indra Nooyi said in a statement.
Coca-Cola, PepsiCo's main rival in the beverage industry, is similarly focused on China and its 1.33 billion people. Coca-Cola gets about 15% of its net operating revenue from the Pacific region, including China. The company's sales volume has grown by double-digit percentages in China for the past eight years. In 2009, volume grew 16%.
Still, per capita consumption of Coca-Cola products in China is only about one-third of the world average. The company wants to narrow that gap.
Coca-Cola and its bottlers plan to invest $2 billion over the next three years to open new plants, fund innovation and place more coolers throughout China.
The company has a high-profile sponsorship of the World Expo in Shanghai. China's top-selling carbonated soft drink is Sprite. Other Coke products are tailored to China. They include a mix of Sprite and green tea and a dairy drink called Minute Maid Pulpy Super Milky, a blend of fruit juice, milk powder, whey protein and coconut bits.
Earlier this year, Coca-Cola CEO Muhtar Kent said China is Coca-Cola's most important growth market. He added that the company would be "disappointed" if it failed to hit double-digit growth in China on an annual basis. "We are just getting started in China and remain resolute in our commitment," said Kent.
From the June 7, 2010, Prepared Foods E-dition