PepsiCo, Inc. (PEP) announced a massive expansion plan in its high-priority fast growing market, India. By 2020, the food and beverage giant plans to spend, along with its partners, around $5.5 billion to strengthen its presence in the country.
The huge investment will be directed toward expanding the range of food/beverage products; ramping up the selling/delivery infrastructure, with a focus on rural areas; doubling the manufacturing capacity by 2020, growing the country’s agricultural programs; and creating more jobs.
Pepsi is increasingly investing in developing and emerging markets which have significant growth potential due to their relatively low per-capita consumption. Another reason is the burgeoning middle-class population with rising income levels which in turn is increasing the demand for convenience food and beverages.
In addition to India, Pepsi is also expanding in other emerging countries like China, Brazil and Africa through tailored distribution models as well as by offering locally relevant innovation and value-added products. Pepsi is also growing its business in developing markets like Russia, Mexico, Canada and the United Kingdom. The company has strengthened its business in Mexico through bottling consolidation deals and in China through a strategic partnership with Tingyi.
In fact, Pepsi has tripled its revenues from the emerging and developing markets in the past five years. Going forward, management expects two-third of its revenues to come from the emerging and developing markets.
Just last week, another beverage giant, The Coca-Cola Company (KO) told Bloomberg about its plans to invest more than $4 billion in China from 2015 to 2017.
Pepsi carries a Zacks Rank #3 (Hold). Other stocks in the beverage sector that are worth mentioning include The WhiteWave Foods Company (WWAV) and Coca-Cola Amatil Limited (CCLAY). While Coca-Cola Amatil carries a Zacks Rank #1 (Strong Buy), WhiteWave Foods has a Zacks Rank #2 (Buy).