China and India Are Hungry … for Your Products

Now, the two most populous countries also are the fastest-growing; their burgeoning middle classes are developing Western cravings.

By Dave Fusaro, Editor in Chief

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Tyson's business strategy has been joint ventures. The first, was Tyson Dalong, formed in 2001 to produce fresh chicken to be sold under the Tyson brand name for the Shanghai retail market. Ditto for Jiangsu Tyson Foods. Shandong Tyson Xinchang Foods is a fully integrated chicken and duck operation.

Three years ago, there were about 400 Tyson team members in China, says a spokesperson. There will be 10,000 by the end of this calendar year.

An interesting side note is China's appetite for chicken feet, or "paws." They're virtually worthless here in the U.S. but are considered a delicacy in China, often commanding a higher price than white chicken meat. They're become a lucrative export product for Tyson U.S.

Tyson's also active Brazil, Mexico and India. "Growth in our joint venture in India is very good," says Teeter. "We have two complexes and will soon upgrade both and build a third. Much like China, consumers and quick service restaurants there are clamoring for high-quality, safe products."

PepsiCo: India, of course
PepsiCo Chairman and CEO Indra Nooyi is a native of India, which may be incidental to that country's growing importance to the largest food company in the U.S. and Canada. But Nooyi's background may have much to do with her company's strategy in that market.

PepsiCo has been much more than an importer of Western food concepts, an investor in the country or an acquirer of Indian companies. It has become a godfather (godmother?) to a country that is at once the second largest in the world (at 1.2 billion people, a scant 120 million behind China) and one of the poorest.

According to a 2005 World Bank estimate, nearly 42 percent of the Indian population falls below the international poverty line of $1.25 a day. According to a new UN Millennium Development Goals Report, as many as 320 million people in India and China are expected to come out of extreme poverty in the next four years, with India's poverty rate projected to drop to 22 percent in 2015.

PepsiCo apparently sees in those numbers both opportunity and a social mission.

PepsiCo has been in India since 1989 and last year saw revenue of $1.5 billion from that market, according to reports. PepsiCo India is the country's largest food and beverage business. Products range from its namesake cola to Lay's, Tropicana, Quaker and Gatorade products to Kurkure (a fried snack) Nimbooz (a soft drink) and Aliva (chatpate crackers with wheat and daal). Headquartered in Gurgaon, Haryana, PepsiCo India directly and indirectly employs about 150,000 people and operates 36 bottling plants (13 company-owned, 23 franchisee-owned) and three food plants.

Nimbooz is an interesting case in point. It was launched in 2009 as India's first nationally available packaged nimbu pani (lemonade-like drink). It capitalizes on the familiarity with and high consumption of unpackaged/home-made nimbu pani. Even though it's churned out in factories, it remains authentic by using the traditional matka (earthen pot) and squeezer in the manufacturing process.

PepsiCo also has a 50-50 joint venture with Tata Global Beverages, a subsidiary of one of India's largest companies, to develop and market beverages in the health and wellness space.

In 2008, Nooyi committed $500 million of investment in its India operations over the succeeding three years to triple revenues over the next five years. The investments were to be spread among manufacturing capacity, market infrastructure, environment sustainability initiatives, R&D, new product development and agriculture. PepsiCo estimated the investment would contribute 50,000 new direct and indirect jobs to the Indian economy.

PepsiCo also created a pilot program in India in support of the United Nations' Millennium Development Goal to eradicate extreme poverty and hunger by 2015.

"Millions of people – here in India and elsewhere – suffer major deficiencies of key micronutrients, like iron, vitamin A and zinc, which lead to serious health problems," said Mehmood Khan, PepsiCo's chief scientific officer. "PepsiCo is working toward developing nutritious fortified products to reduce micronutrient deficiencies in select developing countries, to address the huge challenge of malnutrition among the poor."

This all fits perfectly with PepsiCo's global commitment to sustainable growth, "Performance with Purpose," which works on four planks: replenishing water, partnering with farmers, converting waste to wealth and nurturing healthy kids.

Water has been a key subject, with the company finding ways to reduce its water use, improve its treatment of wastewater and improve water quality for all Indians. From 2003-2008, the company cut its water use by 55 percent. Perhaps more importantly, the PepsiCo Foundation, working with Water.org, established a $1 million grant and loan program for public water and sanitation improvement projects.

In 2009, PepsiCo India achieved a significant milestone, by becoming the first business in the PepsiCo global system to achieve "positive water balance," a fact validated by Deloitte Consulting.

However, it's not all about helping the poor in India. Here, too, is a rising middle class as well as a generation of highly educated young people with disposable incomes and Western tastes. PepsiCo India developed a slim can for Pepsi Cola, "that … embodies the individual spirit that drives today's young adults." Digital and social media built buzz around the new can. The company says the efforts helped increase local Pepsi volume by 5 percent.

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