Beverage major PepsiCo has taken a major step towards cracking the growing Vietnam market by signing a strategic agreement with Japanese beverage and wellness player Suntory.
The recently announced agreement will see Suntory acquire a 51% stake in PepsiCo's Vietnam beverage business, with PepsiCo then becoming a 49% shareholder.
However, PepsiCo will continue to independently operate its foods business in Vietnam, where it enjoys a sizeable market share in the snacks category with its Poca brand.
The deal, which is still subject to legal approvals, will also entail the formation of a management team made up of key people from both Suntory and PepsiCo to operate an entity that will serve as the bottler for both companies in Vietnam.
A statement from Suntory said the new partnership is expected to build on PepsiCo's existing position in Vietnam and also create new growth opportunities for PepsiCo and Suntory in the market.
PepsiCo first entered the Vietnamese market in 1994, and has invested more than US$500m since then. It now has five beverage manufacturing plants in Vietnam, a lynchpin in PepsiCo's aggressive emerging market plans from which it has nearly tripled its business from US$8bn in annual revenue in 2006 to US$22bn in 2011.
Under the deal, PepsiCo will also retain its marketing and innovation responsibilities across its portfolio of beverage brands, which include Pepsi-Cola, 7-UP, Sting, Mirinda, Tropicana Twister, Lipton and Aquafina.
Umran Beba, president of PepsiCo Asia-Pacific, said that Vietnam is a highly attractive growth market for the company, and that PepsiCo is focused on expanding the food and beverage business in the country through continued investment.
“Our beverage alliance with Suntory is an important part of our strategy to position PepsiCo for sustainable long-term growth in the market. We believe their expertise and capabilities will drive the continued success of our Vietnam beverage business,” he said.
The right partner
This is not the first time the two companies have worked together. In the past, they have worked together in other beverage markets, including the US, Japan and New Zealand.
PepsiCo said that it hoped to use Suntory’s strong brands and a long history of successfully developing beverages for the Asia market to further increase its markets share in the Southeast Asian country.
“Suntory has been actively expanding its business foundation to consolidate its position in growing South-East Asian markets. This alliance is one of our strategic initiatives to pursue further growth in the region,” Henry Park, CEO of Suntory Beverage & Food Asia, said.
In the recent past, Suntory has public expressed its increased interest in the beverage markets of Southeast Asia and expansion into Vietnam is a key part of Suntory's long-term plans.