PepsiCo sells majority stake of Vietnam beverage business to Suntory

According to a joint press release, the deal is expected to further build on PepsiCo’s position in Vietnam while enabling Suntory to enter a priority growth market even as it extends Pepsico’s relationship with the Japanese company.

Both companies will hold key roles in the management team of the new joint venture, the release stated. PepsiCo, with 49 per cent of the business will retain marketing and innovation responsibilities for its brands like Pepsi-Cola, 7-Up, Sting Mirinda, Tropicana Twister, Lipton and Aquafina while Suntory will introduce new brands in the country.

The new company will start selling Pepsico products at first and will eventually introduce Suntory products including tea, coffee and carbonated drinks in the future, said Zenpei Tobo, the company's spokesperson in an email response to Campaign Asia-Pacific. 

At stake for both companies is a lucrative market. According to a 2011 report from market research company Nielsen, FMCG in Vietnam registered the fastest growth rate in Asia at 17.7 per cent.  

Since PepsiCo’s entry into Vietnam in 1994, it has spent over US$500 million in the region with as many as five beverage manufacturing units. Pepsico also tripled its business in emerging markets $22 billion between 2006 and 2011.

Still, it hopes to build its existing position in the country. At a recent conference held in Singapore, Beba admiited that PepsiCo was looking to diversify its business in the region.

Much of this has to do with the fact that like in most markets, Pepsi and Coca Cola are engaged in a fierce battle for market share. Then there are home-grown players like Tan Hiep Phat, which also has a sizeable share of the market. At present, PepsiCo having captalised on its first-mover advantage has a slight edge over its rivals.

Brand experts believe that the deal with Suntory will help PepsiCo build on the lead it currently has. “Suntory operates in Japan, one of the most competitive FMCG markets in the world, and they come with a huge understanding of the business and Pepsi obviously values their expertise,” said Sarah Reiter, chief executive of FutureBrand, Southeast Asia.

“We’re focusing on expanding our food and beverage business in Vietnam through continued investment across our portfolio and we believe that Suntory’s experise and capabilities will drive continued success of our Vietnam beverage business,” said Umran Beba, President, PepsiCo Asia-Pacific.

What's more, Suntory and PepsiCo have previously partnered together in other markets including Japan, New Zealand and the United states. 

For Suntory, a deal like this with a brand that has an established and expansive distribution network is a win-win situation. “Vietnam is just emerging from low-income to middle income and as a food company Suntory wants to leverage that,” Reiter added.

“Suntory has been actively expanding its business foundation to consolidate its position in growing South-East Asian markets and this is one of our strategic initiatives to pursue further growth in the region,” said Henry Park, CEO of Suntory Beverage & Food Asia Pte Ltd. 

Hungry for growth in the region, Suntory set up its Southeast Asia business last year in Singapore. Vietnam is the latest market for development with operations already established in Thailand and Indonesia.