PepsiCo meets Chinese needs

13 July 2012

BEIJING: PepsiCo, the food and beverage group, is basing its Chinese strategy on the core principles of developing a "deep and diverse portfolio", offering tailored products and serving broader social goals.

Writing in the Financial Times, Indra Nooyi outlined the major thought processes informing the organisation's approach. "First, for Chinese consumers it's all about choice," she argued.

In demonstration of this, Nooyi reported there are roughly ten snack aisles in Chinese stores, covering everything from potato chips to ducks' tongues and pigs' feet.

"Consumers buy them all, for the same reason meals in China have up to 15 dishes, served family style: they want variety. It creates incredible growth opportunities for companies with deep and diverse food and beverage portfolios," she added.

The second issue identified by Nooyi was serving the specific requirements of shoppers. Quaker, for example, has mixed rice and oats to make its own variant of congee, a type of porridge.

Lay's, the potato chip range, similarly boasts flavours like cucumber, numb and spicy hot pot, and hot and sour fish. "Local tastes are king," Nooyi said. "Global brands do well here, if you can tailor products to local tastes."

Thirdly, Nooyi pointed to "how you do business" as a defining feature of success. She said: "Corporations are expected to build their businesses in a way that also helps China grow, while meeting the needs of China's people."

Such measures include protecting the environment - say, by reducing water and energy use - as well as fostering sustainable agriculture and assisting in regional development.

Euromonitor, the research firm, pegged PepsiCo's share of the market at 4.4%, trailing Coca-Cola's 15%. Earlier this year, however, it formed an alliance with Tingyi, which holds a 14% share, to become the biggest player overall.

"China will be the largest consumer market in the next decade, and PepsiCo aims to be the largest food and beverage company in the market," said Nooyi.

Data from 2010, the most recent Euromonitor had available, showed PepsiCo was in fifth spot in the snacks sector, on a share of around 3%. Nooyi revealed Lay's is the number one potato chip brand in China, having been tried by 40% of shoppers.

"It's a testament to the unlimited growth potential here that 60% of the population - more than 800m people - have yet to experience them," she added. "It's one of the many reasons why China is central to the long-term growth strategy of companies like PepsiCo."

Data sourced from Financial Times, Wall Street Journal; additional content by Warc staff