Smaller Chinese soft drinks makers are likely to consolidate, a new study says

Smaller Chinese soft drinks makers are likely to consolidate, a new study says

A coming “wave of consolidations” in China's domestic soft drinks industry, sparked by PepsiCo's Tingyi alliance, will allow smaller international firms to gain a foothold in the country, a new study suggests.

PepsiCo signed a US$5bn deal with Tingyi earlier this year, leaving “second-tier” companies struggling to compete, according to the Rabobank study, released last week. Resulting mergers will offer overseas firms their own opportunities to find local partners with valuable know-how of the Chinese market, the study said.

As an example of a successful cross-border JV, the study highlighted Nestle's acquisition last year of 60% of Xiamen Yinlu Food to penetrate bottled water and RTD teas in lower-tier Chinese cities.

The study also said fast-growing markets such as herbal drinks are not covered by the PepsiCo-Tingyi venture, allowing smaller firms to grab a share. 

Last week, PepsiCo opened a US$40m R&D centre in Shanghai to cover the Asia-Pacific region.