Financial Daily from THE HINDU group of publications
Tuesday, Oct 26, 2004
Marketing - Outlook
PepsiCo chief bullish on India
Mr Steve S. Reinemund, Chairman & CEO, PepsiCo, and Mr Rajeev Bakshi, Chairman, PepsiCo Indian Holdings (left), coming out after meeting the Finance Minister, Mr P. Chidambaram, in the Capital on Monday. Kamal Narang
New Delhi , Oct. 25
THE CEO of PepsiCo, Mr Steve S. Reinemund, is bullish on the Indian market potential, specifically in the snack foods and beverage categories.
During a breakfast meeting with editors in the Capital on Monday morning, he said that the company has, over the last 15 years, invested $700 million in the country and hopes to "repeat this history".
He said that India was the fifth largest market for the Atlanta-based soft drink company, while the Indian snack food business is the "fastest growing" across the globe.
Asked why the company resorted to beverage price hikes in India recently, almost two years after it promoted its Rs 5 "affordability strategy" here, Mr Reinemund admitted that there was an affordability challenge all over the world.
"We have learnt this lesson and reverted to higher price points (in India) after having achieved our objective of 150 million consumer footprints. We do not see any depth in our future pricing and therefore, we have changed our strategy."
On whether the company was planning to take up the issue of high taxation faced by soft drink companies during the meeting with the Finance Minister, Mr P. Chidambaram, later in the day, he said that the company was keen to find out what the Government expected of it. However, he said that taxation discussions with the Government would continue.
Along with Coca-Cola, PepsiCo has been urging the Government to lower taxes, specially the special excise duty of eight per cent levied on carbonated soft drinks. "We have a desire to pay our full quota of taxes but we would want a level playing field," Mr Reinemund said.
(Later, after the 30-minute meeting with Mr Chidambaram, Mr Reinemund described the meeting as "very good" but refused to divulge details. He is also believed to have paid a visit to the Deputy Chairman of the Planning Commission, Dr Montek Singh Ahluwalia.)
Mr Reinemund was also all praise for Indian corporate talent and said that PepsiCo India was being run without any expatriates. About 40 officials from the Indian operations had been placed in the company's global businesses.
On whether the company plans to make structural changes in India, he said that of the 37 bottling plants in the country, 17 company owned bottling plants accounted for 55 per cent of total production.
"The balance between company owned and franchisee owned bottling plants may change over time but this is not a specific objective. There are going to be no major structural changes in the near future, but could happen sometime later to gain environmental efficiency."
With reference to the pesticide controversy plaguing the carbonated soft drink companies, Mr Reinemund reiterated that PepsiCo maintains the same product standards across the world and was conforming to the new regulations of the Health Ministry, which came into effect from October 15 this year.
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