PepsiCo adapts in China

08 February 2011

SHANGHAI: PepsiCo, the food and beverage giant, is leveraging digital media and new product development as a means of driving growth in China, where popular preferences are evolving rapidly.

While the US trading climate has proved particularly challenging as a result of the economic downturn, the world's most populous nation continues to flourish.

"It's like the Big Bang, the market is developing so fast," Richard Lee, PepsiCo's cmo for Greater China, told Advertising Age in an interview.

"China is the number one priority for all multinational companies. So you have Chinese competitors, Japanese and Korean companies, Americans, Europeans ... Everyone is here."

Among the major shifts impacting the country are the rapid progress made by areas beyond leading metropolitan hubs such as Shanghai and Beijing.

"The pace of development is not just happening in the top-tier cities, it's happening across all of China. Most visitors only go to Tier 1 cities, but when you go outside you see what's really happening," Lee said.

However, the opportunity extends further than the scale of the Chinese market, as shoppers currently exhibit a positive mindset largely absent within many advanced regions.

"Chinese people are extremely optimistic about the future. They all believe that anything is possible. That has huge implications in everything, including product development," said Lee.

"They constantly want to try new things. There's not much scepticism; they're willing to accept new products. That's why new categories can be developed so easily."

One of PepsiCo's recent launches in China is an extension to Quaker resembling congee, with added ingredients including lotus root and wolfberry.

Chinese consumers had typically described oatmeal as too bland.

Digital media is also occupying an increasingly integral position, and has quickly assumed a central status in the daily life of netizens.

"I think the China digital space is as developed as in the US," argued Lee.

Looking ahead, he predicted online would become more important in China than America, as it occupies a unique role in the former nation.

"People here have a stronger demand for the internet," he stated. "In the US, you have more media to get entertainment, movies, TV. In China, the internet is their portal, not only to China but to the outside world."

Lee has worked for PepsiCo in China twice, spells separated by a stint as its international marketing director for sparkling beverages between 2007 and 2010.

During his first ten years in China, beginning in 1997, the organisation doubled its Chinese market share, primarily through engaging young shoppers.

In a bid to fully exploit the possibilities available, PepsiCo has trebled the size of its marketing division from around 40 staff to 120 dedicated employees in the last three years.

"What's happening is unprecedented, so old marketing models don't apply," he said. "It's a convergence of great forces."

Although PepsiCo's traditional rivals are ramping up their activity in China, Lee suggested domestic operators may pose an even bigger threat.

"Global competitors have a lot of baggage, they have developed a business model based on past learnings, whereas local competitors are starting new and fresh," he said.

"They also have a higher tolerance for risk. Chinese in general like to take risks. They'll do crazy things, and they are faster to get new products on the market."

Data sourced from AdAge; additional content by Warc staff