PepsiCo Plans To Sell Bottling Operation To franchisees In South And East

PepsiCo India is planning to sell its bottling operations to franchisees in the south and east, thereby divesting that part of the business nationally, said two top executives with knowledge of the development. The aerated drinks category has been grappling with single-digit growth for more than two years compared with high double-digit growth in its foods business.

The company sold its bottling operations in the north and east to franchisee Ravi Jaipuria three years ago. It is not yet clear whether PepsiCo will split its bottling assets among multiple partners or consolidate further with Jaipuria. One of the executives said a deal could be valued at close to Rs 3,000 crore. The national-level divestment is likely to be finalised in the first half of next year.

PepsiCo, which makes Pepsi cola, Mountain Dew and 7Up aerated drinks, has about nine company-owned manufacturing facilities in the south and west. Once the plan goes through, PepsiCo will own the brand name, sell concentrate to franchisees and market its carbonated beverages, while bottling, sales and distribution will be owned and run by franchisees.

Jagrut Kotecha, vice-president, snacks said “We have had double-digit value growth in the foods business with Lay’s being the fastest-growing food brand in FMCG (fast-moving consumer goods) in India. Our second master brand in the snacks portfolio, Kurkure, is also growing and the response to our new offerings like Doritos, Lay’s Maxx and Kurkure Triangles has been very positive.”

Unlike rival Coca-Cola, which has multiple bottlers as franchisees besides its own bottling arm Hindustan Coca-Cola Beverages (HCCB), PepsiCo’s bottling business in India is consolidated with just one bottler in the north and east, which is rare. The Jaipuria group company RJ Corp is PepsiCo’s second-biggest bottler globally and operates its bottling business through listed entity Varun Beverages Ltd (VBL).