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NEW York-based snack and beverage giant PepsiCo yesterday announced it will swap its beverage bottling business in China for a stake in the beverage unit of -Tingyi Holdings.
PepsiCo will transfer the equity interest of its 24 wholly-owned and joint-venture bottling operations to Tingyi’s beverage subsidiary, Tingyi-Asahi Beverages, according to a statement yesterday.
In return, PepsiCo will receive a 5 percent stake in TAB, with an option to raise the stake to 20 percent by 2015.
The transaction is subject to regulatory approval in China and the approval of Tingyi’s shareholders.
A strategic partnership is rare in China’s consumer products sector, but industry analysts agreed the deal will help PepsiCo improve local distribution and allow Tingyi to expand its China business with a broad product portfolio.
Tingyi is one of the leading food and beverage makers in China. Among its products are popular instant noodle brand Master Kong, juices and teas.
Under the new alliance, TAB will partner PepsiCo’s current bottlers to produce, sell and distribute PepsiCo’s carbonated soft drink and Gatorade brands. PepsiCo will retain branding and marketing responsibilities for these products.
TAB will also begin co-branding its juice products under the Tropicana brand through a licensing agreement with PepsiCo. TAB and PepsiCo’s current bottlers will have sole distribution rights for PepsiCo’s beverage products in China. In addition, PepsiCo will provide the alliance with access to its global beverage innovation pipeline.
PepsiCo has been increasing investment in China to narrow the gap with rival Coca-Cola, which had a 16.8 percent share in China’s soft drink market last year. It was ahead of Tingyi’s 14.4 percent, according to Euromonitor. PepsiCo ranked fourth with a 5.5 percent share.
Industry analysts said the assets swap may indicate PepsiCo remains eager to access China’s fast expanding beverage market.
Chen Jing, an analyst at Beijing Orient Agribusiness Consultant, said: “PepsiCo’s diversified business strategy means it is not so successful in individual market segments. Though PepsiCo is giving up the bottling business, which accounts for small part in its overall profits in China, it retains tight control on upstream business such as the cola concentrates, which have a higher profit margin.”
PepsiCo also makes Lay’s potato chips, Quaker Oats and Cheetos. – Shanghai Daily