PepsiCo Inc (China)'s Chairman Tim Minges said the beverage maker will expand production into a greater number of Chinese provinces in the next three to five years. That's just days after PepsiCo signed a strategic agreement with Tingyi-Asahi Beverages Holding Co Ltd (TAB).
"We still have six, seven provinces that don't have Pepsi production, so our core focus is to continue the plan we have been on all along, to continue to expand the footprint. That will be the focus for the next three to five years, to continue to grow that out, fill in the white space gaps because right now we are not available in many parts of the country, and our key competitors are," said Minges.
The company said it hopes to penetrate western areas, such as the autonomous regions of Xinjiang and Tibet.
PepsiCo, the maker of the Pepsi Cola and 7Up brands, entered the Chinese market in 1981, and over the past 30 years its total investment in China has exceeded 10 billion yuan ($1.57 billion).
The company now plans to open 10 or 12 new Chinese plants to manufacture soft drinks, non-carbonated beverages and snacks, and it will install additional production lines at existing facilities.
"PepsiCo's decision to team up with Tingyi will help PepsiCo broaden its distribution because Tingyi has a much stronger distribution network and better knowledge of the Chinese market. Meanwhile, the deal will also help Tingyi's soft drink market share through PepsiCo's strong experience in intellectual property rights and product innovation," said Ding Liguo, president and founder of topretailing.com.
On Friday, PepsiCo China announced that it had signed a strategic agreement with TAB. Under that agreement, TAB will partner with PepsiCo's current bottlers to manufacture, sell and distribute PepsiCo's carbonated soft drinks and its Gatorade brand. The US company didn't reveal the financial details of the agreement, but said it will retain branding and marketing responsibilities for the named products.
TAB will also begin co-branding its juice products with the Tropicana name, under license from PepsiCo. TAB and PepsiCo's current bottlers will have the sole rights to distribute PepsiCo's branded beverage products in China. In addition, PepsiCo will provide the alliance with access to its global beverage innovation pipeline, the announcement said.
Coca-Cola Co is the dominant soda maker in China and held a 16.8 percent share of the market last year, according to the London-based researcher Euromonitor International. Tingyi ranked second with 14.4 percent, while Hangzhou Wahaha Group Co was third with 7.2 percent, and PepsiCo was at No 4 with 5.5 percent, according to the researcher's data.
"We think this alliance is a 'win-win' for Chinese consumers, for the industry, and for both companies. It will promote healthy development and give consumers a greater choice," said Minges.