PepsiCo Trades Chinese Bottling Operations
PepsiCo Inc announced on Friday it has agreed to trade its Chinese bottling operations for a stake in the beverage business of Tianjin, China-based Tingyi Holding Corp. The move is designed, the company explained, to help narrow the gap between Pepsi and the world's largest sift drink company, Coca-Cola, in China, which is currently the fastest-growing market for beverages in the world.
Under the terms of the agreement, Tingyi-Asahi Beverages will assume control of Pepsi's Chinese bottling operations, and PepsiCo will gain a 5 percent stake in Tingyi-Asahi, with an option to increase the stake to 20 percent by October 2015. The partnership will "significantly increase" Pepsi's business in China in the near term, the company said in a statement, while also maximizing its future growth potential in the region.
The deal is considered a smart move for Pepsi by analysts since bottling plants are considered non-core assets and Tingyi's well-established distribution network will allow the company to penetrate more markets in the Communist country and make its products available in smaller cities which it would otherwise not have been able to reach. Pepsi currently ranks fourth in the Chinese beverage market, but analysts think Friday's move will help it make up ground on the leader Coca-Cola, perhaps moving into second by 2015.
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