Tingyi Holding and PepsiCo finalize strategic alliance in China

Posted: 31 March 2012 | PepsiCo | No comments yet

Tingyi and PepsiCo, Inc. have completed their transaction to create a strategic beverage alliance in China…


Tingyi (Cayman Islands) Holding Corp. (Tingyi) (0322.HK), one of the leading food and beverage companies in China, and PepsiCo, Inc. (NYSE: PEP), the world’s second-largest food and beverage business, today announced they have completed their transaction to create a strategic beverage alliance in China, which is projected to become the world’s largest beverage market by 2015.

The alliance was approved by the shareholders of Tingyi in February and received regulatory approval on March 29, 2012.

As part of the alliance, Tingyi’s beverage subsidiary – Tingyi-Asahi Beverages Holding Co Ltd (TAB), one of the country’s leading beverage manufacturers – is now PepsiCo’s franchise bottler in China. TAB will partner with PepsiCo’s current bottlers to manufacture, sell and distribute PepsiCo’s carbonated soft drink and Gatorade brands. In addition, PepsiCo and TAB will begin co-branding their respective juice drink brands using the Tropicana brand name under license from PepsiCo. PepsiCo will retain branding and marketing responsibilities for these products.

Under the terms of the alliance, PepsiCo has contributed its indirect equity interests in its company-owned and joint venture bottling operations in China to TAB and received as consideration a five percent indirect equity interest in TAB. PepsiCo has an option to increase its indirect holding in TAB to 20 percent at its sole discretion by 2015. The shareholdings of PepsiCo’s existing Chinese joint venture partners in the joint venture bottling operations will not change as a result of the transaction.

The PepsiCo-Tingyi beverage system now provides Chinese consumers with some of the country’s most popular beverage products, including:

  • Pepsi, China’s top-selling cola
  • Mirinda, China’s top-selling flavored carbonated soft drink
  • Gatorade, one of China’s top-selling sports drinks
  • China’s top-selling tea and water brands, sold under TAB’s Master Kong brand name
  • China’s second-largest juice portfolio

Significant Strategic Advantages to Drive Growth

The alliance is expected to create long-term value for PepsiCo and Tingyi shareholders, employees and local bottling partners while also encouraging the continued growth and development of China’s competitive beverage industry.

Each company, as well as PepsiCo’s existing joint venture partners, expects to gain significant benefits that will enhance business performance in the near-term while maximizing future growth potential. These important benefits include:

  • Bringing innovative new products to market faster and improving choice for Chinese consumers across the country
  • Improving operating efficiency and reducing costs by combining local and global expertise in manufacturing and distribution
  • Providing better service to PepsiCo’s retail and food service customers in China through TAB’s distribution expertise
  • Supporting new opportunities to develop local economies in interior and western China
  • Extending the national distribution of PepsiCo’s carbonated soft drink and non-carbonated beverage brands
  • Increasing the investment made in PepsiCo brands and marketing in China

Tingyi’s Chairman Wei Ing-Chou said, “We wish to thank the Chinese government and all parties concerned for their understanding and support for the strategic alliance between Tingyi and PepsiCo. The approval of this strategic alliance demonstrates that we can work more closely with China’s beverage industry to embrace a new opportunity for further development. We believe that this alliance will not only lay a good foundation for China’s beverage market to lead the world in developing the global beverage industry, but also improve our ability to better serve our consumers, employees, shareholders and partners and importantly, create a better environment for the healthy development of the beverage industry in China.”

“China will soon surpass the United States to become the largest beverage market in the world. As a result of this new alliance with Tingyi, PepsiCo is extremely well positioned for long-term growth in China,” said PepsiCo Chairman and CEO Indra Nooyi. “Tingyi is an outstanding operator with a proven track record of success. By leveraging the complementary strengths of each company, we’ll be able to significantly enhance our beverage business in China, reach millions of new consumers throughout the country, and create value for Tingyi and PepsiCo shareholders.”

This transaction involves the companies’ respective mainland China beverage operations. Both PepsiCo and Tingyi will continue to independently operate their respective food businesses.

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