China: New Battleground for PepsiCo and Coca-Cola

China seems to be the new battleground for the rival cola brands – PepsiCo and Coca-Cola. Close on the heels of latter’s foray to open its 42nd bottling plant located in Yingkou, Liaoning, the largest Coca-Cola production facility in China, today, March 31, PepsiCo said it has finalized an alliance with a local company, Tingyi.

[ Also Read: Coca-Cola Opens 42nd Bottling Facility in China ]

Tingyi Holding Corp. is one of the leading food and beverage companies in China. Tingyi and PepsiCo, the world’s second-largest food and beverage business, today announced they have completed their transaction to create a strategic beverage alliance in China, which is projected to become the world’s largest beverage market by 2015.

The alliance was approved by the shareholders of Tingyi in February and received regulatory approval on March 29, 2012.

Earlier this month, PepsiCo announced a new global structure and strengthened management team — important steps in the company’s move to become a fully integrated, global food and beverage company. (Read: PepsiCo Restructuring with New Leadership)

Now as part of the alliance, Tingyi’s beverage subsidiary – Tingyi-Asahi Beverages Holding Co Ltd (TAB), one of the country’s leading beverage manufacturers – is now PepsiCo’s franchise bottler in China.

TAB will partner with PepsiCo’s current bottlers to manufacture, sell and distribute PepsiCo’s carbonated soft drink and Gatorade brands. In addition, PepsiCo and TAB will begin co-branding their respective juice drink brands using the Tropicana brand name under license from PepsiCo. And PepsiCo will retain branding and marketing responsibilities for these products.

[ Also Read: Nokia’s First CDMA Windows Phone in China ]

Under the terms of the alliance, PepsiCo has contributed its indirect equity interests in its company-owned and joint venture bottling operations in China to TAB and received as consideration a five percent indirect equity interest in TAB.

PepsiCo has an option to increase its indirect holding in TAB to 20 percent at its sole discretion by 2015. The shareholdings of PepsiCo’s existing Chinese joint venture partners in the joint venture bottling operations will not change as a result of the transaction.

“We wish to thank the Chinese government and all parties concerned for their understanding and support for the strategic alliance between Tingyi and PepsiCo,” said Tingyi’s chairman Wei Ing-Chou.

[ Also Read: China Opportunity on Display at the Canton Fair ]

The alliance is expected to create long-term value for PepsiCo and Tingyi shareholders, employees and local bottling partners while also encouraging the continued growth and development of China’s competitive beverage industry.

“China will soon surpass the United States to become the largest beverage market in the world. As a result of this new alliance with Tingyi, PepsiCo is extremely well positioned for long-term growth in China,” said PepsiCo chairman and CEO Indra Nooyi (pictured above).

This transaction involves the companies’ respective mainland China beverage operations. Both PepsiCo and Tingyi will continue to independently operate their respective food businesses.

Photo courtesy: PepsiCo

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