PepsiCo India sales to hit $1-billion mark soon

New Delhi: PepsiCo will soon join the elite band of companies with $1-billion sales in India. The company currently has sales of $700 million. Since 1989 the $27-billion food and beverages giant has invested $700 million in India and seen a steady double-digit growth in its volumes. The Indian operations are the Atlant-based company's fifth largest outside the US now.

"We are on track to make it the second or third largest," Steve Reinemund, chairman & CEO PepsiCo told the media in New Delhi. Reinemund's visit was preceded by that of E Neville Isdell, chairman of the board and CEO of The Coca Cola Company, who chose to visit India on taking charge of Coke's global operations a few months ago.

Reinemund said PepsiCo's Rs5-per-pack affordability strategy initiated by Coke and Pepsi had worked well in India and helped the company increase its consumer base from 150 million to 250 million. He said with the strategy PepsiCo had attained critical mass. "It is time now to increase the depth of consumption," he says.

However, he admitted that the company was forced to hike its prices recently as there was an affordability challenge all over the world. "We have learnt this lesson and reverted to higher price points (in India) after having achieved our objective of 150 million consumer footprints. We do not see any depth in our future pricing and therefore, we have changed our strategy."

PepsiCo is now making operating profits in India and its exports are worth over $60 million, up from just $3 million in 1991. Reinemund was especially upbeat about the company's snacks business Frito Lay, in India, which he said was the fastest growing segment for five consecutive years. "India is clearly one of our priority markets," he said.

Extolling Indian corporate talent, Reinemund said PepsiCo India was being run without any expatriates and 40 officials from the Indian operations had so far been placed in the company's global businesses. "We are planning a significant increase in our manpower exports from India," he said.

He said PepsiCo employed more than 4,000 people in India directly and over 60,000 indirectly with its concept of contract farming in India. It has relationships with over 2,000 farmers. The company introduced farmers in India to six high-yield potato varieties and helped development of new seeds which helped increase the total annual production of tomatoes from 28,000 tonnes to over 250,000 tonnes in Punjab.

The company had no plans to make any structural changes in India said Reinemund, since of the 37 bottling plants in the country, 17 company-owned bottling plants accounted for 55 per cent of total production.
He dismissed reports that arch rival Coke was closing in on the sales of Pepsi products and said Pepsi's leadership position was because Indians loved its products.

Reinemund met finance minister P Chidambaram and planning commission deputy chairman Montek Singh Ahluwalia later in the day.

Sources said Reinemund was likely to discuss issues of future investments and the high taxation policy of the government towards the soft drinks industry and the overall fiscal environment with Chidambaram and other senior government officials. Coca-Cola and PepsiCo have been urging the government for lowering taxes, specially the special excise duty of eight per cent levied on carbonated soft drinks.

This is Reinemund's first visit to India and signifies the increasing importance of Indian operations for PepsiCo. India is now among the top eight businesses of PepsiCo worldwide in terms of beverage and snack sales and second only to China within Asia.