Why Is Pepsi So Confident About China?
Despite China’s slow economic growth, PepsiCo Inc (NYSE:PEP) remains confident it can continue to thrive in the country’s market for beverages and snacks.
As the company suffers slower gains in developed markets like the U.S. and Europe, Pepsi is counting on China to help it rebound. Indra Nooyi, Pepsi’s chief executive offer told Bloomberg Wednesday that the country’s economic decline has yet to affect Pepsi’s food and beverage industry progress there, and the world’s largest snack food maker continues to post considerable sales increases. She even predicts the country to become the world’s largest beverage and snack market within the next five to 10 years.
And China isn’t the only country on Pepsi’s radar. Myanmar, too, is of considerable interest for the world’s second-largest soft-drink maker. Though, unlike Coca Cola Co (NYSE:KO), Pepsi has yet to open a manufacturing plant in the country, it is working with local distributors to get its foot in the door and sell its products.
It was just this week that Pepsi’s main rival, Coca-Cola jumped the gun and opened a bottling plant in Myanmar, marking a revived interest in the country’s business after at least 60 years. According to Bloomberg, it plans to invest $200 million in Myanmar in the next five years and will soon open an additional plant.
The two companies’ shared interest in Myanmar and China reflects their competition in an Asian market that, along with the Middle East and Africa, is growing four to five times faster than those in the U.S. and Europe. As Pepsi struggles to keep up with Coca Cola, it opened new factories in China last year, and opened its largest research center outside the U.S. in November as a way to help it cater to Asian tastes and develop new products.
China’s gross domestic product posted a 7.7 percent figure in the first quarter — a disappointing expansion that led analysts to trim their forecasts for the next period.
Investing Insights: Will Pepsi Be Salty or Sweet for Investors?