PepsiCo eyes China expansion

PepsiCo eyes China expansion

US food and drink giant PepsiCo has said that it plans to begin “rapidly” expanding its footprint in China having received approval to build ten further plants in the country.

Speaking at the firm’s earnings conference today (11 February), CEO and chairman Indra Nooyi said PepsiCo was “pleased” with its progress in food and beverages in the country and is now looking at the business in China long term.

“We’ve got approval for ten more plants, in addition to the four we currently have so as we are looking at our business long term, we are making an investment to tap into opportunities," she said.

"Carbonated soft drinks is a regulated industry in China, so every time you grow you have to get approval. Now, with all of these new plants approved, we can start expanding our footprint extremely rapidly. In addition, with non carbonated beverages we are off to a good start and the time has come for us to significantly accelerate our investments in China and grow much more rapidly than we have in the past.”

Nooyi said PepsiCo is looking at a timeframe of around five years from 2010 to 2015.

“The market is still growing in leaps and bounds but we have to be careful not to do anything irrational. These bottler transactions gives us the breathing space to truly grow there, this is just the beginning,” she said.

The firm this morning reported a 16% increase in full-year profits, driven by healthy gains in its international beverage and worldwide snack businesses.

For the 12-month period to the end of December, the company earned US$5.95bn compared to $5.14bn in the prior year.

Sales were flat however, at $43.23bn compared to revenue of $43.25bn in 2008.

Despite this, Asia, the Middle East and Africa (AMEA) delivered strong growth in 2009, with net revenue up 12% and core operating profit up 23%. Beverage volume grew 8% for the year led by 32% growth in India.

Nooyi told analysts that in North America, the bottler transactions and actions to refresh its brands across the entire beverage category, will enable PepsiCo to “accelerate” top line growth in the region and improve profitability.

She added: “Internationally, there continues to be significant areas of growth, particularly in developing markets and in emerging categories. We have carefully earmarked investment to take full advantage of those opportunities, looking to ensure we are funding long-term growth that is both profitable and sustainable.”