PepsiCo has divested its entire company-owned bottling operations in North India to its franchisee bottling partner Varun Beverages in a move that the US beverages and snacks major hopes will help it step up its fight for market share with Coca-Cola.
"We are expanding our partnership with a strategic partner who understands the local market and has continually demonstrated the ability to drive synergies and deliver strong market execution," said D Shivakumar, chairman and CEO at PepsiCo India.
The deal comprises transfer of four plants and two co-packing units spread across Uttar Pradesh, Haryana, Chandigarh, Uttaranchal, Himachal Pradesh and Punjab with over 900 direct employees.
With this deal, PepsiCo's entire north and east India bottling operations, with the exception of Bihar, come under Ravi Jaipuria's RJ Corp, which owns Varun Beverages, making it one of the US major's top franchisee bottlers globally. "There are huge operational efficiencies, cost savings and supply chain advantages of consolidating operations across the region," Ravi Jaipuria told ET. Neither Jaipuria nor Shivakumar commented on the size of the deal.
Following the deal, PepsiCo's role in north and east regions, which contribute about 40 per cent of its national sales, will be mostly limited to marketing and supplying concentrates to bottling operations.
India is the fifth-largest market for Pepsi-Co globally. But the maker of Pepsi cola, 7-Up lemon drink and Mountain Dew, trails Coca-Cola in the Rs 14,000-crore Indian soft drink industry. PepsiCo reported doubledigit growth in volume sales in the quarter ended September, helped by a prolonged summer season, after about five quarters of single-digit growth in the country.
RJ Corp, PepsiCo's largest bottler in South Asia, will look to accelerate its growth in the country and bridge the gap with Coca-Cola, which makes Coke, Thums Up and Sprite fizzy drinks and holds 56 per cent market share in India, going by estimates of market researcher Nielsen shared by industry insiders.
With the latest acquisition, Varun Beverages will own 13 PepsiCo bottling plants including those in Delhi-NCR which it acquired last year, UP, Rajasthan, the northeast and Goa. Overall, Varun Beverages owns 19 plants including in overseas markets like Sri Lanka, Mozambique, Zambia and Morocco.
PepsiCo runs 10 companyowned manufacturing facilities in the south and west India. Besides, there are three franchisee operations in the west and south. "We have no plans to exit bottling operations in the south and west," Shivakumar said. "This does not impact operations in our foods business," he added.
Last year, PepsiCo announced an investment of Rs 33,000 crore by it and its bottling partners by 2020 to step up its manufacturing and go-to-market infrastructure in India.
RJ Corp has business interests across restaurants, ice-cream, education, hotels and real estate. About half of its current $1.5 billion business is accounted for by Pepsi-Co. Jaipuria also has the franchisee rights for quick service restaurants Pizza Hut and KFC and exclusive franchise rights for UK cafe chain Costa Coffee.
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