PepsiCo reignites cola war with proposed $5.5 bn market push

PepsiCo Inc, the maker of Pepsi-Cola, is planning a big expansion of its sales and delivery infrastructure in India, the company's largest market, involving an estimated expenditure of up to $33,000 crore ($5.5 billion), spread over the next seven years.

Pepsi, the maker of a carbonated drinks and snacks, including brands such as Pepsi, 7UP, Slice, Mirinda, Mountain Dew, Aquafina, Lay's and Kurkure, said it would continue to expand the range of foods and beverages in its portfolio.

PepsiCo's announcement follows rival Coca-Cola Co's proposal made in June last year to invest a total of $5 billion by 2020 to expand its business in India.

"India is a country with huge potential and it remains an attractive, high-priority market for PepsiCo," chief executive Indra Nooyi said in a statement.

"We've built a highly successful business in India over the course of many years and we believe we've only scratched the surface of the long-term growth opportunities that exist for PepsiCo and our partners," said India-born Nooyi, who is on a visit to the country.

PepsiCo and its partners plan to expand their product range, double production capacity and improve their sales and distribution network, especially in rural markets, to bolster sales volume.

PepsiCo, which has eight brands in India that generate Rs1,000 crore or more in annual retail sales, including Pepsi and Frito-Lay potato chips, saw volumes in its snack business in Asia, the Middle East and Europe rise 4 per cent in the July-September quarter, led by double-digit growth in China, Pakistan and Turkey. PepsiCo's cola sales rose 7 per cent.

While Coca-Cola continues to be the world's largest drinks maker, PepsiCo's Nooyi said, Pepsi is for the younger generation while Coke is for a much older generation.

PepsiCo is planning to involve customers in its expansion plan through stepped-up collaborative farming, which, according to the company, has benefited 24,000 farers in India.

''Most importantly, our investments will be aligned with India's interests,'' Nooyi said.

PepsiCo and Coca-Cola's investments in India are driven by a growing middle class with higher disposable incomes. Both companies are also not overly worried about the state of the economy or the outcome of the current state assembly elections or the upcoming general elections due next year.

''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.

Coca-Cola India said it planned $3 billion new investments in India till 2020 in order to 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, the company stated in a release.

''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.