PepsiCo To Put $5.5 Billion Where India's Mouths Are

In a classic understatement, PepsiCo CEO Indra Nooyi declared yesterday that “India is a country with huge potential” while revealing that the company would be investing about $5.5 billion in the subcontinent through the end of the decade in increasing its manufacturing and distribution capacities and by expanding the brands it sells.

PepsiCo projects that “the investment will create more than 100,000 jobs, to add to the 200,000 it says it has already helped create since first investing in the country in 1990,” according to a BBC report that points out that besides Tropicana, the company also purveys Walkers Crisps. Walkers What?

PepsiCo only entered the market in 1989 and has “grown into one of the largest and fastest-growing food and beverage businesses in the country,” according to its website. Other brands sold there include Pepsi, Lay’s, Kurkure, Gatorade and Quaker. “The company has 38 bottling plants and three food plants in India,” Reuters’ Aditi Shah reports.



PepsiCo’s investment in the country has been about $2 billion since its entry, K.K. Kailash writes in the Indian Express, pointing out that it is “more than doubling its current level of investments, towards expanding the range of foods and beverage portfolio among other things.”

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

“The government has been trying to encourage foreign direct investment by opening up the country to competition, in the teeth of sometimes fierce public opposition,” according to the BBC. Unilever, for example, is increasing its stake in Hindustan Unilever from 52% to as much as 75%.

Coca-Cola made a similar announcement to Pepsi’s last year, Sean McLain and Mike Esterl point out in the Wall Street Journal, saying it would invest $5 billion through 2020.

“Coca-Cola targets India to be among its top five countries by volume from seventh now, according to [CEO Muhtar] Kent. He cited the country’s “large population of teenagers, increasing urbanization, changing lifestyles and expanding economy,” Bloomberg’s Malavika Sharma reported at the time. 

“India is a wonderfully diverse country,” Kent said. “Dynamic, young and emergent.”

Pepsi is “banking on the Indian middle-class's fetish for colas and chips,” Shubham Mukherjee & John Sarkar write in their lede for the Times of India. But India’s emerging consumer class is not just ripe for chips and soda pop, judging by the other companies that have set their sights on increasing there market share there.

“Separately on Monday, British retailer Marks & Spencer Group, PLC announced plans to more than double the number of its stores in India to 80 by 2016, McLain and Esterl report. “Vodafone PLC, Unilever PLC, as well as Ford Motor Co. have also said they would boost their India investments.” 

But they also point out that WalMart, Posco (steel making) and ArcelorMilltal (steel and mining) have “slowed down or canceled investment plans in India.”

“Nooyi's faith in the Indian market comes at a time when the country has been derided both globally and domestically for being slow on reforms and clearances,” Mukherjee and Sarkar write in the Times of India. “Besides, many investors have been lately talking about first seeing the verdict of the forthcoming general elections and then investing.”

But Nooyi tell them that “PepsiCo's faith in the India growth story remains unscathed. This is a temporary slowdown and it comes after years of double-digit growth.”

In an interview with Economic Times, however, Nooyi “is not all gung-ho about India," Rajesh Pandathil observes in Firstpost.Business.

“She has said that India has fallen from being a ‘must-invest’ country to ‘must-deal-with’ country,” Pandathil writes. “'Must invest’ means it’s a destination and GDP is growing. ‘Must deal with’ means there are infrastructure issues, the taxation policy is not clear or transparent. So people are saying, ‘Do I have to deal with India?’” 

PepsiCo has also “pioneered and established a model of partnership with farmers” — 45% of whom own an acre or less — “and now works with over 24,000 happy farmers across nine states,” the company says on its website. And $5.5 billion in additional investment says that it, for one, will indeed be dealing.

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