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India fizz to cola war: Pepsi to bring in $5.5b, Coke $5b

Meghna Maiti, KR Sudhaman, Financial Chronicle

Mumbai/New Delhi, November 11, 2013

PepsiCo and Coca-Cola are in a competition of another kind, both saying on Monday they would invest huge amounts in India. If they do come about as promised, investments amounting to a total of $10 billion will come in from the two cola giants by 2020.

Elections or no elections, PepsiCo’s India-born chairperson and CEO, Indra Nooyi, said the firm would invest $5.5 billion (Rs 33,000 crore) in India by 2020 to more than double its capacity here.

“We are not guided by elections. We are guided by the potential of India. We are not waiting for any election results. We are investing in India for its economic story,” Nooyi told reporters after her meeting with finance minister P Chidambaram.

The company has so far invested $2 billion in India since its entry in 1989. It said new investment would be made to strengthen its capability in various strategic areas, including innovation, manufacturing, infrastructure and agriculture. “The Rs 33,000 crore investment we are making is going to cover both food and beverages and we will more than double the capacity of our business over the next seven years,” Nooyi said.

Not to be left behind, Coca-Cola India said it planned $3 billion new investments in India till 2020 to further capture growth opportunities in fast-growing, non-alcoholic, ready-to-drink (NARTD) beverages. This would take Coca-Cola’s India investments between 2012 and 2020 to $5 billion, a company statement said.

“Achieving continued, sustainable and responsible growth in India is core to achieving our 2020 vision of doubling system reven­ues in this decade,” Muhtar Kent, chairman and CEO of Coca-Cola, said.

“Our ongoing investment in India is focused on delivering innovation, partnerships and a portfolio that enhances the consumer experience, ensures product affordability and builds brand loyalty to deliver long-term growth,” he said.

Devangshu Dutta, CEO of Third Eyesight, said, “India is a fairly strategic market for Pepsi since its focus on non-carbonated beverage and packaged food has gone up significantly.”

Alpana Parida, president of DY Works, a brand strategy and design firm, said, “Pepsi could look at launching its own new brands and acquiring outside brands to make a deeper entry in the Indian food market.”

As per Euromonitor, Coca-Cola enjoyed leadership position in carbonates in 2012, accounting for 60 per cent of the total value of sales. It maintained a strong position with two brands — Sprite and ThumsUp.

“Also, stronger distribution in the existing categories and entry in new markets in rural India helped the company retain its strong position,” Euromonitor said.

Pepsi is the only other significant player in carbonates with 36 per cent retail value share in 2012, according to Euromonitor.

Pepsi has 42 plants in India, including franchises. Nooyi said, “India is a country with huge potential and it remains an attractive, high-priority market for Pepsi. We’ve built a highly successful business in India over the course of many years and we believe we’ve only scratched the surface. This investment is PepsiCo’s vote of confidence in India’s future.”

For the company, India is the largest market. Pepsi will continue to expand the range of foods and beverages in its portfolio. In India it has eight brands that generate Rs 1,000 crore or more in annual retail sales — Pepsi, Lay’s, Kurkure, 7UP, Slice, Mirinda, Mountain Dew and Aquafina.

Apart from raising capacity, Pepsi will expand its selling and delivery infrastructure. It will also step up collaborative farming that the company claimed has benefited 24,000 Indian farmers. “Most importantly, our investments will be aligned with India’s interests,” Nooyi said.

Since entering India, Pepsi claims it has created opportunities for more than 200,000 people through direct or indirect employment and agriculture collaborations. It is estimated that the strategic initiative announced on Monday will add more than 100,000 additional employment opportunities.

On the other hand, Coca-Cola said it had already invested more than $2 billion in India since it re-entered the country in 1993. The fresh investments will raise the amount to $7 billion.

Coca-Cola India directly employs over 25,000 people and indirectly more than 1,50,000 people. The carbonates market is projected to grow at 10 per cent annually in terms of retail volume, according to Euromonitor.

Growth will be driven by rural areas, as urban areas are facing a degree of saturation, as well as shifting to healthier options, such as fruit/vegetable juice and bottled water. Companies are targeting rural areas to build share.

Coca-Cola has equ­ipped retail outlets in remote rural areas with solar coolers. Smaller pack sizes are driving sales in rural areas whereas PET bottles are pushing sales in urban areas.

Coca-Cola bought up Parle’s four big soft drink brands — ThumsUp, Limca, Gold Spot and Maaza — which gave the company an instant 60 per cent share of the Indian softdrinks market when Pepsi had less than 30 per cent.

(Sourced from Financial Chronicle .)

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