PepsiCo's Rs 33k cr investment is a vote of confidence for India

In a rare spot of good investment news, PepsiCo Chairman and Chief Executive Indra Nooyi revealed on Monday that PepsiCo could spend about Rs 33,000 crore ($5.5 billion) over six years to expand its Indian operations.

Uttara Choudhury November 12, 2013 07:59:00 IST
PepsiCo's Rs 33k cr investment is a vote of confidence for India

New York: In a rare spot of good investment news, PepsiCo Chairman and Chief Executive Indra Nooyi revealed on Monday that PepsiCo could spend about Rs33,000 crore($5.5 billion) over six years to expand its Indian operations after meeting with Finance Minister P Chidambaram.

The US beverage giant's expansion plan is positive news given the series of high-profile withdrawals of foreign investment in India this year. In July, foreign investors like US retail giant Wal-Mart, and steel companies Posco and Arcelor Mittal all pulled back on large Indian investment plans highlighting growing frustration with the Indian government over weak policy as the economy slows.

PepsiCos Rs 33k cr investment is a vote of confidence for India

The investment is a "vote of confidence in India's future," Indian-born Nooyi said perceptively on a two-day visit to the country. Reuters

The investment is a "vote of confidence in India's future," Indian-born Nooyi said perceptively on a two-day visit to the country.

"We've built a highly successful business in India over the course of many years and we believe we have only scratched the surface of the long-term growth opportunities that exist for PepsiCo and our partners," added Nooyi, who has India high on the agenda for personal and business reasons.

PepsiCo plans to invest aggressively in emerging markets where the company can achieve leadership or parity with rivals such as Coca-Cola whose international business is broader than Pepsi's.

PepsiCo's announcement follows a similar one from rival Coca-Cola, which said last year it would invest $5 billion in India by 2020.

Nooyi's company plans to double its manufacturing capacity in India and improve its distribution network in rural areas. PepsiCo has 45 bottling plants and three food plants in India.

"We are making this investment as we believe India's fundamental story is still sound. The demographic dividend is there, the middle-class is growing. India will remain among very important markets for PepsiCo. Today, it is among the top 10 markets for us; I believe it will keep moving up. So far, we' have only scratched the surface of the long-term growth opportunities," Nooyi told Business Standard.

In addition, Nooyi said the company plans to develop new products tailored to Indian tastes. PepsiCo doesn't offer public breakdowns of its sales and earnings by country. But it said Monday that eight of its big brands in India including Pepsi and Frito-Lay generate sales totaling more than $1.26 billion in annual sales.

Nooyi has pinpointed the company's priorities for growth, including plans to invest heavily in emerging markets such as India and healthier products.

PepsiCo has been pushing deeper into rural India in recent years by selling single-serving, fortified-snack packs that include iron and other nutrients. Globally, PepsiCo expects its nutrition business to reach $30 billion in sales by 2020 from about $10 billion now.

Pepsi's portfolio has changed from what it was even five years ago. On the snacks front, they have been very successful with Aliva, their baked savoury snacks made with wheat and daal.

PepsiCo has also taken steps to respond to criticism that it sucks scarce water from farm lands in India. Their intake of water for producing a liter of beverage dropped in 2010 to one-third of what it used to be six years ago.

The company is also engaged in water harvesting in Neelamangla, Karnataka and Uttaranchal and building check-dams to prevent water run-off.

Investment Hits and Misses

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

Companies including Wal-Mart, and steel companies Posco and Arcelor Mittal, however, have all pulled back on investments plans in India.

ArcelorMittal dropped its plans to build a steel plant, worth $8.4 billion, in Odisha, over extended delays and problems in acquiring land. In August, US insurer Berkshire Hathaway decided to close its business selling online insurance in India. Aviva PLC and New York Life Insurance Co. are also among insurers that are selling or have sold their India franchises.

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