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PepsiCo strikes innovation alliance with Chinese beverage firm

By Kacey Culliney , 02-Apr-2012

China: Fizzing nicely for PepsiCo
China: Fizzing nicely for PepsiCo

PepsiCo has formed an alliance with local beverage giant, Tingyi-Asahi Beverages, in a bid to extend its reach and increase traction in China.

The alliance was approved by Tingyi shareholders in February and received regulatory approval on Thursday.

Under the agreement, Tingyi-Asahi Beverages (TAB) will become PepsiCo’s franchise bottler in China and will be responsible for manufacturing, selling and distributing the global beverage giant’s flagship carbonated soft drink and Gatorade brands.  TAB will also begin co-branding its juice products under the Tropicana brand name.

Jeff Dahncke, senior director of communications at PepsiCo, said the alliance is a strategic pull of expertise in manufacturing and distribution at a local and global level that will be innovative and lucrative.

“PepsiCo will also provide the alliance access to its global beverage innovation pipeline,” Dahncke told FoodNavigator-Asia.

It is anticipated that this union will lead to innovative NPD (new product development), ensuring these products are bought to market quickly and efficiently, he said.

China sipping quickly

Tan Heng Hong, senior research analyst at Mintel, noted that as many as 96% of Chinese consumers drink carbonated soft drinks and 99% consumer fruit juices and juice drinks.

Dahncke described China as the “world’s fastest growing beverage market” and set to become “the world’s largest LRB (liquid refreshment beverage) market by 2015.”

“We expect that this alliance will significantly enhance our beverage business in China in the near-term while accelerating PepsiCo’s future growth potential,” he added.

“PepsiCo products have been offered in China for 30 years and our commitment to the market is stronger today than it ever has been,” he said.

The communications director said the agreement will extend the national distribution of PepsiCo beverages through a more efficient distribution network enriched with local expertise.

Indra Nooyi, chairman and CEO of PepsiCo, said the “by leveraging the complementary strengths of each company, we’ll be able to significantly enhance our beverage business in China, reach millions of new consumers throughout the country, and create value for Tingyi and PepsiCo shareholders.”

Dahncke noted that the union only involves the companies’ respective China beverage operations and is no indication of a wider food partnership.

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