PepsiCo Investing Additional $2.5B In China
PepsiCo Inc. said Friday (May 21) that it plans to invest an additional $2.5 billion in China in the next three years on new plants and research facilities as the food and beverage maker builds up its presence in the growing market.
The company made the announcement in a news release Friday from Shanghai, site of the Shanghai Expo, where PepsiCo is a sponsor of the USA Pavilion. That planned spending is in addition to the $1 billion investment it announced in 2008 and plans to complete this year.
The company's overseas business has become a strong factor in its success, with PepsiCo reporting last month that international growth pushed its first-quarter profit up 26 percent, as people in developing countries bought more of its snacks and drinks. The company, based in Purchase, N.Y., posted double-digit gains in sales of snacks and beverages in India and China.
But competition is fierce. PepsiCo, whose brands include Tropicana and Gatorade, has pledged to invest more in its international business as it fights stagnation at home and in Europe. Rival Coca-Cola Co. plans to do the same in these high growth markets.
Money from PepsiCo's additional investment in China will be used to open 10 to 12 new manufacturing plants, create a new research and development center, open five new farms for potatoes and oats and to build its brands.
The new plants will be used to make soft drinks, juices and other drinks and snacks. Additional production lines will also be installed at existing facilities. Plants will be built in the provinces of Fujian, Gansu, Henan and Yunnan in the next two years as part of PepsiCo's plan to expand in interior and western China.
The company will research and develop new products just for the Asian market. It already offers drinks inspired by traditional Chinese medicine and Lay's potato chips in flavors tailored just to the market, including cool cucumber and crispy prawn.
"We are building expertise and infrastructure now so that we can have a strong, sustainable manufacturing and agricultural base to serve the diverse and growing needs of consumers across China," CEO Indra Nooyi said.
The company currently runs 27 beverage and food plants and five farms in China, and has more than 20,000 employees there.
Shares in premarket trading Friday fell 76 cents to $63.10.
