After Coke's $2.4-billion acquisition of Beijing-based Chinese juice maker Huiyuan Juice in September (See: Coke pulls-off biggest ever acquisition of Chinese firm with $2.4-billion buy of Huiyuan Juice), the declining US sales has prompted rival PepesoCo invest $1 billion in China over a period of four years to expand its manufacturing capability, research and development and sales force in the country.
With these two Chinese investments, the race for market share in the emerging markets has just got hotter.
PepsiCo, the maker of Pepsi, Frito-Lay snacks, Tropicana juices, Quaker Foods and Gatorade sports drinks said that this would be part of their global strategy to expand its operations in emerging markets.
The company said that the investment would be used to grow its business in interior and western areas of China.
PepsoCo chairman and CEO, Indra Nooyi, said in a statement, ''This is our largest investment in China in the nearly 30 years we have been doing business here, and it is consistent with our broader global strategy of investing in high-growth developing markets.''
Nooyi is on a four-day visit to China this week to meet with government officials and local business executives. She also will tour PepsiCo's operations in China.
''We are enormously confident in the continued prosperity of China,'' Nooyi said. ''We look forward to building an even brighter future here.''
The investments are expected to create thousands of new jobs in China, where Pepsi and its bottling partners already directly employ more than 22,000 people, it said in the statement.
With sales declining at home, Purchase, NY-based PepsiCo had reported revenues of more than $39 billion, cut 3,300 jobs or roughly 1.8 per cent of its 185,000 work force and said it would close six plants, as part of its plan to save more than $1.2 billion over three years, citing ''macro economic turbulence and volatility in the currency markets.'' (See: Pepsi to axe 3,300 jobs, shut six plants)
The non-US markets provide more sales to PepsiCo and its focus of late has been in emerging markets of Brazil, India, Russia and China, as 44 per cent of the company's sales originated outside the US last year with a double-digit growth in China and high single digit growth in India and sales moved to $1 billion in Russia.
In September this year, Pepsi had announced that it would be investing $500 million in India over three years on enhancing manufacturing capabilities, improving market infrastructure, research, product development, and agriculture. (See: Pepsi to outlay $500 million in India: Reports)
In Russia, Pepsi and its bottling group had jointly acquired a 75.53-per cent stake in Russia's leading branded juice company JSC Lebedyansky for about $1.4 billion in August this year. JSC Lebedyansky is the world's sixth-largest juice manufacturer and the largest in Russia, with an estimated market share in Russia of around 30 per cent and annual revenues in 2007 of approximately $800 million. (See: PepsiCo, Pepsi Bottling buy 75 per cent in Russian juice leader JSC Lebedyansky for $1.4 billion)
Pepsi's bigger rival Coke acquiring is not far behind in the race for market share in the emerging markets with coke planning to invest around $250 million (Rs10,000 crore) in Coke's Indian operations over the next three years, terming these investments as necessary for growth. (See: Cola Wars version 2.0: Coke's Rs10,000 crore plans for India)