PepsiCo’s Nooyi Bullish on China Even as Growth Slows
PepsiCo Inc. (PEP) Chief Executive Officer Indra Nooyi said China is a “phenomenal market” for beverages and snacks and that the company is making money there even as the country’s economic growth slows.
“We are very bullish on China,” Nooyi said in an interview yesterday with Bloomberg Television’s Haslinda Amin on the sidelines of the World Economic Forum on East Asia in Myanmar’s capital Nay Pyi Taw. “The recent economic slowdown has not impacted food and beverage items at this point.”
PepsiCo, the world’s largest snack food maker, is boosting sales in China at a high single-digit to low double-digit percentage rate as the company wins market share, Nooyi said. China will quickly become the world’s largest beverage market and may become the largest snacks market in five to 10 years, she said.
Emerging markets are critical as PepsiCo and primary beverage competitor Coca-Cola Co. (KO) seek to make up for slower gains in developed markets. Growth rates in Asia, the Middle East and Africa are four to five times those in the U.S. and Europe, Nooyi said.
“We see enormous potential for growth” for packaged-food and beverage companies in those regions, she said.
PepsiCo, the maker of Tropicana juice drinks and Lay’s potato chips, also has said it plans to open a manufacturing plant in Myanmar. Until then, the company is working with local distributors to sell its products and with farmers to create a local supply of potatoes for chips, Nooyi said.
“Once we have the right model for Myanmar, we will come in,” Nooyi said. “We will come in in a way that’s very sensitive to Myanmar.”
Coca-Cola Chief Executive Officer Muhtar Kent marked that company’s return to Myanmar after at least 60 years by opening a bottling plant on June 4. The world’s largest soft-drink maker will invest $200 million in the next five years and a second plant will open in a month’s time, Kent said in a separate interview with Amin in Myanmar.
China’s gross domestic product expanded a less-than-estimated 7.7 percent in the first quarter and analysts last month trimmed forecasts for the April-June period to a median projection of 7.8 percent. The government in March set a goal of 7.5 percent for the year.
PepsiCo, also the world’s second-largest soft-drink maker, opened new factories and sought to expand distribution in China last year to narrow the gap with market leader Coca-Cola. In November, PepsiCo opened its largest research center outside the U.S. to help tailor beverage and snack food brands to Asian tastes and develop new products for the region.
The company announced a bottling tie-up with Tingyi (Cayman Islands) Holding Corp. in November 2011. PepsiCo had seen market share gains from the deal within the first year, Tim Minges, the company’s greater China chairman, said in November, without elaborating.
PepsiCo, based in Purchase, New York, increased 0.6 percent to $81.66 yesterday in New York. Atlanta-based Coca-Cola rose 0.3 percent to $40.79.
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