With 27 food and beverage plants and 20,000 employees in China, PepsiCo already has a significant stake in the country but sees opportunities for further expansion.
On top of a $1bn invest announced in 2008 that will be completed this year, the soft drinks and snacks giant has promised an additional $2.5bn over the next three years.
This money will be spent on a variety of projects. A total of 10 to 12 new plants are to be built to manufacture soft drinks, non-carbonated beverages, and snacks in China.
Regional strategy
PepsiCo said that its strategy will be to expand into interior and western China. Plants in the provinces of Fujian, Gansu, Henan and Yunnan will be opened over the next two years.
Zenith market development director Gary Roethenbaugh said the big multinationals have so far focused investment on eastern and southern China around big cities like Beijing and Shanghai so it is significant that PepsiCo is now turning its attention to the emerging cities in the centre and west of the country.
PepsiCo said new production lines will also be added at old facilities and research and development activities will be scaled up with the establishment of an R&D centre in the country. This complements the PepsiCo strategy going forward of broadening its portfolio of Chinese-designed and developed products.
Market characteristics
Roethenbaugh said that in the beverage market, carbonated soft drinks and bottled tea and water are the main products in China. Juice and juice drinks also have an important place in the market although there is not the same tradition of juice for breakfast that exists in the Western market.
PepsiCo will be looking at these broad characteristics as well as the often marked differences in taste preferences between regions.
In addition to the investment in new plants, brand building, and R&D, PepsiCo plans to invest in agricultural development, opening five new farms for potatoes and oats.
“We are building expertise and infrastructure now so that we can have a strong, sustainable manufacturing and agricultural base to serve the diverse and growing needs of consumers across China,” said PepsiCo CEO Indra Nooyi.