Commerce Dashboard

Go Back

PepsiCo bullish on India, increases investment at snacks plant in UP to Rs 814 crore

IBEF:  October 12, 2020

Despite short-term headwinds due to pandemic disruptions and increased investment at its new greenfield snacks plant in Uttar Pradesh, PepsiCo is "highly positive" about the future of the Indian market despite short-term headwinds due to pandemic-related disruptions and increased investment to Rs 814 crore (US$ 111.48 million) to meet rising demand, according to its President of India, Mr Ahmed ElSheikh.

The company is committed to doubling its snack sector in India and increasing the potential of established food plants in Maharashtra and West Bengal. In addition, the establishment of a greenfield production facility in Assam has been suggested.

"While there have been some short-term headwinds due to COVID-19, we at PepsiCo are highly positive about the future and are committed to delivering the right food and beverage product range for customers," Mr ElSheikh told PTI.

In the 30 years since its establishment in India, PepsiCo India has emerged as one of the country's largest food and beverage companies and is looking to create more, he added.

"Looking ahead, we are committed to double our snacks business in India. In fact, we have increased our investment in our new greenfield snacks plant in Uttar Pradesh from Rs 500 crore (US$ 68.48 million) to nearly Rs 814 crore (US$ 111.48 million), generating 1,500 direct/indirect jobs and enabling a local sourcing ecosystem," Mr ElSheikh said.

India 's consumption history has just begun, and India will be the third-largest consumption market by 2025, he said, according to industry reports.

The company expects an increased demand from categories such as snacks, juices and other carbonated drinks as the festive season starts, powered by the feeling of celebration.

"From an FMCG point of view, the industry is seeing consumption revival, which we expect will only get better with further unlocking and the upcoming festive season," Mr ElSheikh said.

Mr ElSheikh said 'in-home use' is experiencing a substantial uptake, reflecting on market patterns, and customers are finding comfort along with value.

"As people adjust to the 'new normal', in-home consumption is witnessing a significant uptake. There is a growing demand for our larger packs as in-home occasions of togetherness have increased manifold. While the consumers are looking at in-home experiences and seeking convenience, they are also looking at value," Mr ElSheikh said.

He, however, said, "Today, affordability is key."

In its beverage portfolio, PepsiCo has launched 1.25-litre PET packages at a very reasonable price of Rs 50 (US$ 0.68) to target 'in-home consumption' and has launched various combo packs in the food portfolio. Although it has also strategized price points in the smaller packs to satisfy both rural and urban

"With the Indian FMCG industry slowly showing signs of revival in COVID impacted world, we have adapted quickly and re-strategised our price-pack programmes, enhanced consumer engagement initiatives and doubled down attention on both B2C and B2B distribution models to meet consumer demand," he said.

Its profit after tax in FY 2019-20 rose to Rs 329 crore (US$ 45.06 million) from Rs 36 crore (US$ 4.93 million) in FY 2018-19, according to a recent RoC (registrar of companies) filing by PepsiCo India.

While its revenue was down 15.87 percent to Rs 5,264 crore (US$ 720.94 million) compared to Rs 6,257 crore (US$ 856.93 million) in FY 2018-19 due to the refranchising to its bottling partner Varun Beverages Ltd of the remaining bottling operations in south and west India.

"PepsiCo India's transformation journey remains on track -- third successive year of profit in FY 2019-20 which has been all about building 'a faster, stronger, better company' in India," he said.

While its total volume of beverages increased during the 2019-20 fiscal year, its beverage revenue in the last quarter of March 2020 was lower due to refranchising and the effects of COVID-19. Due to strong growth in the Lays, Kurkure portfolio and Doritos, its food revenue rose.

"Focus on the core brands yielded results with growth across the portfolio namely Lay's & Kurkure portfolio, Lay's Maxx and Doritos. Similarly, Core brands drove beverage growth, led by Pepsi, Mountain Dew & Slice," Mr ElSheikh said.

In its global Q3 results last week, PepsiCo announced organic growth in sales in some international markets, including India.

"Within our international markets, developed market organic revenue growth increased 8 per cent and outpaced developing and emerging markets which increased 2 per cent," PepsiCo's chairman and CEO Mr Ramon Laguarta had said on October 1, 2020.

Double-digit organic sales growth in France, Australia and Brazil, high-single-digit growth in India and mid-single-digit growth in the UK, China and Russia are some notable highlights, he said.

Disclaimer: This information has been collected through secondary research and IBEF is not responsible for any errors in the same.