After Coke, Pepsi follows with a $5 billion investment in India

To be rolled out by 2020, says Indra Nooyi.

By Deepak Chitnis

WASHINGTON, DC: PepsiCo has announced that they’re making an over $5 billion investment in India, hoping to expand even further into the lucrative Indian market.

PepsiCo chairwoman Indra Nooyi said that the 33,000-crore investment would be rolled out in installments by the year 2020, and would be in an effort to improve the company’s manufacturing, agricultural, and infrastructural interests in India.

Including franchises, PepsiCo currently has 38 bottling plants in India, along with three food plants, It is the manufacturer behind products such as Frito-Lay potato chip snack, Tropicana juices, and Gatorade sports drinks, among several others.

The company generates around 10 billion rupees worth of revenue annually from just its eight main products, and is looking to increase that number after seeing strong growth in other parts of Asia, the Middle East, Europe and China.

PepsiCo’s decision to strengthen its holdings in India comes a year after Coca-Cola announced a similar $5 billion investment in the country. Although both countries left India in the 1970s because they were being forced by the government to divulge their secret soda formula, PepsiCo re-entered in 1989 and Coca-Cola came back in 1993.

Today, Coca-Cola’s Thums Up and Sprite are the most popular carbonated drinks in the country. As of 2012, soda sales in India are estimated to be a 60 billion rupee industry, or $1.05 billion. According to Euromonitor International, Coca-Cola accounted for 60% of retail soda sales in 2011, compared with just 37% for PepsiCo. India is among the fastest-growing markets for Coca-Cola over the past few years, but the Pepsi drink itself, however, leads Coca-Cola in terms of market share.

Competition between the two brands is fierce, with Nooyi taking a swing at her competitor, by saying in interviews that Pepsi is a “timely” brand and Coca-Cola the “timeless” one, meaning that her company was going after the younger, more profitable market while her competitor is content to appeal just to older consumers.

Since its 1989 re-entry, PepsiCo has invested somewhere around $2 billion into India. Nooyi says the new investment plan is not just to maximize her company’s profits, but it will also create 100,000 new jobs in India, in addition to the 200,000 it claims to have already created. Any growth experienced by both PepsiCo and Coca-Cola from their investments is expected to come mostly from rural areas, since cities already experience large degrees of brand saturation.

To contact the author, email to deepakchitnis@americanbazaaronline.com

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