Beverage maker aims to expand market presence in western, northwestern China

PepsiCo Inc and Tingyi (Cayman Islands) Holding Corp will open a bottling plant in central China, the first joint-investment plant of their strategic alliance.

They will open the plant in Zhengzhou, Henan province, later this summer. Tim Minges, chairman of PepsiCo (Greater China), said on Tuesday the plant will produce bottled water and other nonalcoholic drinks.

At the end of last year, the Chinese instant-noodle maker Tingyi reached an agreement with PepsiCo to make Tingyi's beverage subsidiary the US company's franchise bottler in China.

Under the new alliance, Tingyi-Asahi Beverages Holding Co Ltd will work 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.

"Tingyi enables us to allow PepsiCo brands to quickly penetrate into western and northwestern China, where we don't have plants. We have about 25 bottling plants, but now with the Tingyi system, we have over 70 plants in the country," Minges said in the first PepsiCo official statement after the alliance.

"A great partner like Tingyi can help us with distribution, and focus on making and selling our brands, and we can focus much more on branding and innovation. That's the strategy we are pursuing to continue to get an even greater share of what is going to be the world's largest beverage market," Minges said.

Li Xin, director of the Brand Strategy Research Center of China Food Safety Report, said: "The alliance is a long-term strategy for both PepsiCo and Tingyi, which aims to open up the huge market in the second- and third-tier cities in China."

The maker of Pepsi-Cola and 7UP had said earlier it will expand production into a greater number of Chinese provinces and hopes to penetrate western areas, such as the Xinjiang and Tibet autonomous regions.

In addition, PepsiCo plans to open 10 to 12 Chinese plants to manufacture soft drinks, noncarbonated beverages and snacks, and install additional production lines at existing plants.

As part of the company's plans to expand into central and western China, the New York-listed beverage and food giant opened a new potato chip plant in Wuhan, Hubei province, on Tuesday.

The plant will produce about 15,000 tons of Lay's potato chips annually.

PepsiCo, which entered the Chinese market in 1981, was the fifth-largest seller of savory and sweet snacks in China in 2010.

In the beverage sector, PepsiCo has a 4.4 percent market share, compared with Coca-Cola Co's 15 percent, according to the London-based researcher Euromonitor International Ltd.

liwoke@chinadaily.com.cn