India market is recovering after GST, says PepsiCo CEO Indra Nooyi

Chairwoman and chief executive officer (CEO) of PepsiCo, Indra Nooyi, on Tuesday said the consumer market in India was on a recovery path after initial disruptions caused due to the implementation of the goods and services tax (GST).

 

In the past few weeks, top executives from major fast-moving consumer goods (FMCG) firms, including Unilever, Mondelez, and Colgate-Palmolive, were pinning their hopes on recovering from the initial GST hiccups in the country.

 

 “After GST, the India market is coming back”, Nooyi said. “We want to do better top line growth; there are headwinds like retail disruption. Consumers are health conscious, not consuming as much they used to. There are big brands that are not doing well, (on the other hand,) some smaller brands are doing good business,” Nooyi said during an investors call after PepsiCo’s December quarter results.

 

Pepsico’s business in India registered a “mid-single digit (volume) growth” during the quarter, she said.

 

However, the extent of real growth could not be ascertained as sales during the corresponding quarter were hampered due to demonetisation.

 

Last February, Nooyi had said that demonetisation had a “significant impact” on PepsiCo's business in the country and the cola major was still feeling the “lingering effects”.

 

While, PepsiCo has divested more territories to one of its largest bottling partner RJ Corp, Nooyi said the firm would be open to such franchising, provided it found suitable partners. RJ’s bottling arm Varun Beverages holds the bottling and distribution rights for the cola major’s north and eastern regions for years now. Now it has acquired rights for five more states — Madhya Pradesh, Odisha, Jharkhand, Chhattisgarh and Bihar — in the past three months. The company has also bagged the rights to produce non-carbonated drinks under Tropicana, Quaker and Lipton Tea brands from PepsiCo’s portfolio. In 2013 PepsiCo handed over its bottling and distribution rights for north and east India to RJ Corp, which currently holds around 35 per cent in the company's India operations.

 

Incidentally, Ravi Kant Jaipuria, chairman, RJ Corp, expressed interests in taking over more territories from the cola major last week. According to sources, PepsiCo India’s new CEO, Ahmed El Sheikh, has already held meetings with Jaipuria, who now controls over 65 per cent of the bottling rights in the ~220 billion beverage market.