Date:15/10/2004 URL: http://www.thehindubusinessline.com/2004/10/15/stories/2004101502700600.htm

Back Pepsi chief may discuss investment plans with Chidambaram

Sindhu J. Bhattacharya

New Delhi , Oct. 14

DURING his four-day visit to India beginning October 23, the PepsiCo International Chairman and CEO, Mr Steve Reinemund, is expected to meet senior Government officials including the Finance Minister, Mr P. Chidambaram.

While sources described the scheduled meeting with the Finance Minister as a courtesy call, they said among the issues Mr Reinemund is likely to discuss with Mr Chidambaram and other senior Government officials would be future investments earmarked for India by the soft drink giant, the high taxation plaguing this industry and the overall fiscal environment.

Both, PepsiCo and Coca-Cola have been urging the Government to bring down taxes levied on the carbonated soft drinks industry, particularly the eight per cent Special Excise Duty (SED). Both companies had, earlier this year, warned that unless taxes were reduced, their five-rupee affordability strategy could be jeopardised and end prices could rise. With the Government paying little heed to their pleas, both companies subsequently announced price increases across pack sizes.

Sources say after prices were dropped, both Coca-Cola India and PepsiCo India suffered value declines and the projected volume growth did not happen. Hit hard by declining margins and continued taxation, both companies have begun to hike prices since August this year.

Mr Reinemund's visit comes at a time when results of the first round of price increases have begun to trickle in and PepsiCo India is considering whether to increase prices further. Also, he will be coming in a year when the company has not invested any money in increasing capacities and he is expected to lay the roadmap of future investments in the country.

This is Mr Reinemund's first visit to the country and perhaps signifies the increasing importance of Indian operations for PepsiCo. Sources said India is now among the top eight businesses of PepsiCo worldwide in terms of beverage and snack sales and second only to China within Asia. Mr Reinemund is expected to also take stock of China during this visit.

Apart from Government officials, Mr Reinemund is expected to meet several other stakeholders including managers and bottlers. In the second quarter ended June 2004, PepsiCo International's total beverage volume grew 13 per cent, led by double-digit growth in markets including China and India. For the Indian operations, volume and value growth was identical at 20 per cent between January and August this year.