PepsiCo setting up Thai soft drink firm with Suntory

In what may be a new round in the local cola wars, global food and beverage conglomerate PepsiCo of the United States is teaming up with Suntory of Japan to launch a soft drink venture in March 2018 in Thailand, where PepsiCo has the second-biggest share of the second-biggest soft drink market in Southeast Asia, the two companies announced last week.

“The soft drink market in Thailand is growing and competitive,’’ Forbes magazine wrote about the deal. “While Coca-Cola holds the top position in the market, PepsiCo already has solid footing in the market, with strong brand equity, manufacturing facilities, and an established sales network. Meanwhile, Suntory will be able to considerably boost its presence in the market.”

To seal the deal, Suntory will acquire a 51 percent stake in PepsiCo-owned International Refreshment, paying $289 million for the privilege. The company will now be known as Suntory PepsiCo Beverage (Thailand). Suntory and PepsiCo have partnered in the past, establishing joint ventures in the United States, Japan, Viet Nam and New Zealand. In 2007, Suntory forged a joint venture with Tipco Foods of Thailand, which is a major player in the fruit juice sector in the Kingdom.

“Suntory’s growth potential is relatively limited in its home market of Japan as a result of a declining population and market maturity. Accordingly, it is focusing on other Asian markets, and its venture with PepsiCo is rooted in this strategy. Furthermore, Thailand is one of the largest beverage markets in Southeast Asia and is likely to see continued growth going forward as well, backed by its population and GDP growth,” Forbes magazine wrote about the deal.

Pepsi was the top-selling cola in Thailand for decades – one of the only countries in East Asia where it was number one – but a 2013 dispute with its Thai partner, Serm Suk Plc., led to a corporate divorce and Pepsi lost its leadership position to Coca Cola. Its market share fell from 51 percent in 2013 to 30 percent the following year and 35 percent last year. The company has set a goal of recapturing the top slot over the next three to five years.

“Thailand is a critical and strategic market for PepsiCo in the Asia Pacific region. We have a long history in the country, going back to when Thai consumers got their first taste of Pepsi in 1952,” said Adel Garas, President, PepsiCo Asia Pacific Region.

“To remain competitive and position ourselves to continue to deliver sustainable, profitable, long-term growth, we must always ensure we have the right business model to meet the needs in a given market. We believe the joint venture with Suntory provides us with a strong partner and platform for continued growth in Thailand,” Garas added.

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