PepsiCo invests in Indian growth

PepsiCo invests in Indian growth

PepsiCo has said it will invest INR330bn (US$5.5bn) by 2020 to grow its business in India, with a focus on developing infrastructure and local manufacturing.

The company said it will "significantly increase" manufacturing capacity to "more than double" current levels by 2020.

The US-based snacks and beverage major also intends to ramp up its selling and delivery infrastructure throughout the country, with a focus on expanding in rural markets.

The diverse nature of the Indian market, the dominance of traditional independent retailers in the grocery market and the underdeveloped nature of infrastructure in the country mean that pan-Indian distribution is difficult to achieve.

As Tarun Jain, vice president of the food services and agriculture division of New Delhi-based consulting firm Technopak, told just-food last month: "Coke, Pepsi and Hindustan Unilever have been operating in India for decades, but still have not achieved full penetration."

Jain suggested that the biggest challenge for the industry is how to organise distribution in a market where only 3% of food sales happen through organised channels. "In the United States, if you approach Wal-Mart Stores, you can reach a major section of the market; but here, you have to approach it state by state and region by region."

PepsiCo hopes a focus on new distribution technologies and the strengthening of its independent distribution network will help tackle these challenges. "PepsiCo will work with its partners to deploy new technologies designed to enhance service to retail customers and increase efficiency across go-to-market systems," the company said.

PepsiCo revealed that it will increase its investment in innovation in India, expanding the range of food it offers. The group also plans to increase resources allocated to its farming programme in order to strengthen its supply chain in the country.

Commenting on the move, PepsiCo chairman and CEO Indra Nooyi said: "India is a country with huge potential and it remains an attractive, high-priority market for PepsiCo. We've built a highly successful business in India over the course of many years, and we believe we've only scratched the surface of the long-term growth opportunities that exist for PepsiCo and our partners. This investment is PepsiCo's vote of confidence in India's future and it represents our deep commitment to this great country."

While the Indian economy has slowed, with current forecasts from the Reserve Bank of India predicting GDP growth of just 4.8% this year, the country boasts the world's second-largest population at 1.24bn people and a growing middle class.

For a detailed overview of the challenges and opportunities presented by the Indian market, check out last month's just-food management briefing