Pepsico Allowed to Enter Indian Markets
Pepsico Allowed to Enter Indian Markets
Sep. 19, 1988
NEW DELHI, India (AP) _ The government said Monday it had approved a joint venture that will permit the sale of the soft drink Pepsi-Cola in India.
Food Processing Minister Jagdish Tytler said the project, which also envisions production of food products, was cleared after a meeting of the cabinet committee on economic affairs.
Pepsico Inc., which makes Pepsi soft drinks and Frito-Lay snack foods, said from its headquarters in Somers, N.Y. that it first proposed a joint venture to the Indian government more than three years ago.
Its partners in the deal are the Punjab government's Agro-Industries Corp. and the Tata group, one of India's largest industrial companies.
The agreement calls for an initial investment totaling $17 million.
The project involves setting up agro-research facilities, a potato and grain processing plant, a fruit and vegetable processing unit and a plant to manufacture soft-drink concentrate.
In its announcement, Pepsico said the research facilities will be used to develop high-yield crops and disease-resistant seed varieties.
It said the potato and grain processing plant will make snack foods for local consumption, while the fruit and vegetable processing plant will manufacture fruit juice concentrates and tomato paste, mainly for export.
Soft drink manufacture will occur locally through a group of franchised bottlers, which will be supplied by an Indian plant that produces soft drink concentrate, Pepsico said.
Pepsico's share in the project is pegged at 39.9 percent, in compliance with a law that limits foreign involvement in a joint project to 40 percent.
The project is to be based in the northern state of Punjab, a rich farming state which has seen its once-booming economy shattered by six years of guerrilla warfare by Sikh extremists and has been desperate to lure new industry.
Tytler said the project would create 50,000 jobs in India, of which more than half would be in Punjab.
Indians were cut off from foreign-made sodas in 1977 when Coca-Cola Co. pulled out rather than follow a government directive to dilute its ownership and reveal its secret formula.
Last year, Double Cola Co. from Chattanooga, Tenn., was allowed to sell in India under a special program to encourage investment from non-resident Indians. Indian businessmen based in London secured the government's approval and have opened three plants.
Pepsico will have to comply with some exacting conditions of the Indian government.
The soft-drink production will be restricted to 25 percent of the project's sales and exports of food products will have to be five times the value of imports.
The proposal was stalled for over two years by opposition politicians and domestic bottlers.
Chandra Shekhar, leader of the opposition Janata Party, describes the Pepsi plan as ''a diabolical attempt to abandon the chosen path of self-reliance.''
George Fernandes, also of the Janata Party, said in a statement that his party would ''physically prevent the installation of facilities to produce Pepsi in the country.''
Domestic Indian soda-manufacturers had also tried to block Pepsi's entry into India. ''We are a poor country, and we need to develop industry - our own industry - and this is not the way,'' Ramesh Chauhan, owner of India's largest soda-maker, Parle Exports Private Ltd., said in an interview last year.
Parle is estimated to control 60 percent of India's $460 million annual market for soft drinks and will probably be the hardest-hit by the entry of Pepsi into India.
But Pepsi officials say their aim is to stimulate demand to double its present size and carve out a share of the increased market.
There was no indication whether Pepsi would be able to use its brand name while marketing its cola. The monthly India Today magazine said in a recent article that the name Pepsi-Cola would ''give it an obvious advantage over local brands and (be) .. too much a symbol of multinational neo-colonialism.''