PepsiCo seeks FIPB nod to invest $200 million more

Soft drinks and foods major Pepsico India Holdings Pvt Ltd has applied to the Foreign Investment Promotion Board (FIBP) to invest an additional $200 million (around Rs 950 crore) as equity in its Indian operations.

The Department of Industrial Policy & Promotion (DIPP), in its communication to the board, has said it “has no objection to the proposal” which was slated for discussion at FIPB’s meeting today.

PepsiCo India will invest over $170 million, with its bottling partners investing the rest. This is by far the largest investment by PepsiCo in its beverage business since its entry into India in 1989. These new investments will be spread across manufacturing capacity, market infrastructure, supply chain, fruit processing, agriculture, and research and development (R&D). This is over and above the significant capacity additions made by PepsiCo last year.

Over the next three years, capacities will be augmented in other locations, including the setting up of new greenfield plants, the company says. It has already begun scouting around for suitable locations, and will focus on states that offer the best investment environment. With this move, PepsiCo’s total investment for which it has approvals will increase to $655 million. It has invested around $1 billion in India so far.

India is among the fastest-growing markets for the world's largest soft drink companies — Pepsi and Coca-Cola. Coca-Cola, too, has invested around $1.25 billion to date in bottling plants, products, technology, fleet and chilling equipment.

Both these companies have seen heady growth in the country despite the global slowdown. The soft drink market in India, according to industry estimates, grew 20 per cent by volumes in 2008, and is expected to grow by 25 per cent this year.

Targeted investments in infrastructure, significant improvements in market execution and a prolonged summer contributed to PepsiCo posting an over 50 per cent growth in India in the July-September quarter of calendar 2009 over the same period last year. The trailing quarter (April-June 2009) also saw PepsiCo post a 35 per cent growth.

Continuing its strong overall unit case volume growth performance for the 13th consecutive quarter, beverage major Coca-Cola India too recorded a rise of 37 per cent for the third quarter ended September 30, 2009. The company had recorded an 18 per cent unit case volume growth in the same quarter of the previous year.