BEIJING - Chinese instant noodle maker Tingyi (Cayman Islands) Holding Corp reached agreement on Friday with PepsiCo Inc that Tingyi's beverage subsidiary will become the US company's franchise bottler in China. The move is designed to strengthen both parties' ability to capture market share in China's non-carbonated drinks sector.

Under the new alliance, Tingyi-Asahi Beverages Holding Co Ltd (TAB) will partner with PepsiCo's current bottlers to manufacture, sell and distribute the company's carbonated soft drinks and its Gatorade brand. PepsiCo will retain branding and marketing responsibilities for the products, according to a PepsiCo statement on Friday.

Two attendees eat "Master Kong" noodles in front of a Pepsi billboard at the 11th China High-Tech Fair in Shenzhen, Guangdong province in 2009. [Photo/China Daily]

TAB also will begin co-branding its juice products under the "Tropicana" brand under license from PepsiCo. TAB and PepsiCo's current bottlers will hold the rights to distribute PepsiCo's branded beverage products in China.

In addition, PepsiCo will provide the alliance with access to its global beverage innovation pipeline, the announcement said, without revealing the financial details of the agreement.

"Ready to welcome a golden age for the Chinese beverage industry amid intense market competition, Tingyi and PepsiCo will continue building up their capacity to seize market opportunities and satisfy consumers' diversified demands with world-class products," said Wei Ing-Chou, Tingyi's chairman and CEO in the announcement.

"To win globally, we need to have absolutely the best business partners locally," said PepsiCo's Chairman and CEO Indra K. Nooyi.

"Tingyi has a history of successful partnerships with other companies, and we believe this proposed alliance will combine Tingyi's superb distribution reach with PepsiCo's innovative prowess, significantly enhancing our beverage business in China in the near-term while maximizing PepsiCo's future growth potential in the fastest-growing beverage market in the world. This is a positive deal for PepsiCo, Tingyi, our existing Chinese bottling partners and consumers in China."

"The deal will help PepsiCo acquire a greater share of China's ready-to-drink tea market, through the help of TAB's strong production and distribution, as Pepsi has been late entering the Chinese ready-to-drink tea market," said Yu Lin of Xiamen University of Technology.

"On the other hand, the agreement will also help TAB increase its fruit juice business in China through PepsiCo's renowned brand names."

Tingyi, the maker of "Master Kong" noodles, has a market value of $15 billion after a roughly 20-fold increase in its share price in the past 10 years on rising consumer demand in China.

Instant noodles accounted for 39 percent of Tingyi's first-half revenue, against 40.75 percent a year earlier. Beverages represented 58 percent, from 56.06 percent in the first half of 2010.

PepsiCo, the maker of Pepsi Cola and 7Up, entered the Chinese market in 1981 and the company's total investment in the country has exceeded 10 billion yuan ($1.6 billion) over the past 30 years. The beverage giant said it plans to open 10 or 12 new plants in China to manufacture soft drinks, non-carbonated beverages and snacks, and will install additional production lines at existing facilities.