With Sales Down in U.S., PepsiCo Focuses on China

Food and Beverage Giant to Invest $1B Over the Next Four Years, Partly to Create More Localized Products Like Lychee-flavored Chips

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SHANGHAI ( -- PepsiCo plans to invest $1 billion in China over the next four years to expand its business and broaden its portfolio of beverage and food products in one of the most important emerging markets.
PepsiCo's Indra Nooyi
PepsiCo's Indra Nooyi
The money will be used to increase the U.S. company's manufacturing capacity, particularly in interior and western areas, expand local research and development facilities and build the company's sales force to broaden product distribution.

Pepsi will also fund brand-building initiatives, develop new products tailored to Chinese consumers and promote environmental sustainability.

Pepsi is eager to pump up sales in China, one of its fastest-growing markets, after a disappointing third quarter. Pepsi's third-quarter profit dropped almost 10%.

"This is our largest investment in China in the nearly 30 years we have been doing business here, and it is consistent with our broader global strategy of investing in high-growth developing markets," said PepsiCo's chairman-CEO Indra Nooyi during a visit to the mainland this week.

She met with key government officials and local business executives and visited PepsiCo's local operations.

PepsiCo's focus on new products is a strategy used by several multinational food and beverage companies in China, including Pepsi's chief rival Coca-Cola Co. Chinese were not raised on sugary carbonated soft drinks, so sales growth depends on investing heavily in marketing, consumer education and distribution.

In the meantime, developing beverages more familiar to local consumers, such as teas, waters and juices, has become big business for multinationals and local companies. PepsiCo sells Pepsi soft drinks, Frito-Lay snacks, Tropicana juices, Quaker foods and Gatorade sports drinks in China.
PepsiCo has introduced localized products in China such as lychee-flavored Lay's potato chips
PepsiCo has introduced localized products in China such as lychee-flavored Lay's potato chips

Several PepsiCo product lines have already been given a local twist, such as Lay's potato chips, available in flavors like cucumber, lychee and lime, corn-flavored Quaker oatmeal and Quaker oats that can be added to steamed rice and Tropicana juice infused with jasmine.

In China, Coke leads Pepsi in carbonated beverage sales with a 52% share, way ahead of Pepsi's 33% share, according to market research firm Euromonitor International.

But Pepsi has developed a strong following among young trendsetters in China's top-tier cities through innovative digital media campaigns.

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