PepsiCo to Invest More Than $5 Billion in India

PepsiCo Inc. (PEP), the world’s largest snack-food maker, will invest 330 billion rupees ($5.2 billion) with its partners in India by 2020 as it increases manufacturing capacity and adds new products.

The Purchase, New York-based company and its partners will ramp up investment in delivery infrastructure in the world’s second most populous nation with a focus on rural areas, according to a statement yesterday.

“India is a country with huge potential and it remains an attractive, high-priority market for PepsiCo,” Chairman and Chief Executive Officer Indra Nooyi said in the statement. “We’ve only scratched the surface of the long-term growth opportunities that exist for PepsiCo and our partners.”

The company and rival Coca-Cola Co. are vying for a bigger chunk of developing countries’ business as growth rates in Asia, the Middle East and Africa are four to five times those in the U.S. and Europe, according to PepsiCo. It generated about half its $65.5 billion in revenue last year from outside the U.S.

India is one of Pepsico’s biggest markets globally and the investments will also help expand the range of food and drinks it sells in the South Asian nation, according to the statement.

The investment from the international drinks maker is a boost for the country, which battled capital outflows and a plunging currency earlier this year. India’s economy will grow 5 percent in the year through March 2014, the central bank has forecast, matching the previous year’s expansion, which was the slowest since 2003.

Rural Surge

Even as India’s economy has slowed, farm wages adjusted for inflation rose almost 7 percent on average annually in the five years through March 2012, from 1 percent in the previous decade, according to India’s Planning Commission. Rural consumer spending surged 19 percent a year to $69 billion from 2009 through 2012, exceeding the $55 billion in cities and large towns.

PepsiCo, owner of the Frito-Lay, Gatorade and Quaker Oats brands, said it plans to expand the production capacity with its partners in India to more than double current levels by 2020.

The U.S. company, which opened its first operations in India in 1990, added more spicy offerings and recruited Bollywood actors as brand ambassadors to get a greater share of India’s snack market, which researcher Euromonitor Plc projects will be worth 268 billion rupees by 2018.

PepsiCo’s share of the carbonated beverage market in India fell to 36.4 percent last year, from 40.1 percent in 2007, according to data from Euromonitor. Coca-Cola’s share rose to 60.9 percent from 57 percent in the same period. Both companies are counting on growth from a low consumption base of soft drinks in India to drive sales of their products.

PepsiCo shares gained about 25 percent this year, compared with a 24 percent increase for the Standard & Poor’s 500 index and a 10 percent rise for Coca-Cola’s stock.

To contact the reporter on this story: Anjali Cordeiro in Hong Kong at acordeiro2@bloomberg.net

To contact the editor responsible for this story: Stephanie Wong at swong139@bloomberg.net

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