Pepsi’s New China Shot Ignores Bigger Issues 百事联手康师傅抢占中国市场
After years of playing perennial number-two to Coke (NYSE: KU), PepsiCo (NYSE: PEP) is gearing up for another shot at the China market through a new tie-up with instant noodle juggernaut Tingyi (HKEx: 322). The deal looks interesting on paper, though Pepsi will need to address the much more fundamental issue of its pathetic marketing in China if it really wants to improve its fortunes in what will soon become the world’s top beverage market. Let’s look at the deal first. Under the agreement, Pepsi will hand over its China bottling operations to Tingyi in exchange for a small stake in the company’s drinks joint venture with Japan’s Asahi (Tokyo: 2502). (English article). The deal not only gives over Pepsi’s money-losing bottling operation to a more seasoned operator, whose Masterkong brand is practically synonymous with instant noodles in China, but also gives Pepsi an important new local partner that better understands the market and whose highly developed sales channels will also be a valuable new resource. But rather than celebrate too much, Pepsi needs to address the much more fundamental issue of marketing. Despite its enviable position as sole soft drink supplier to KFC, easily China’s leading fast food operator, Pepsi’s name remains a relative unknown in China to date due to lack of effective marketing. Its main juice drink product, branded under the Tropicana name, is also a relative unknown. By comparison, Coke invented the word “cola” in China, and its Minute Maid Pulpy brand orange juice drink developed just for the market is the company’s first $1 billion brand developed outside its home US market. Pepsi needs to grasp the importance of marketing in China and use campaigns like those used by Coke, KFC and McDonalds (NYSE: MCD) to bring more excitement to its brands in the market. Otherwise, this latest tie-up with Tingyi could end up as hollow as an empty bowl of noodles.
Bottom line: Pepsi’s new tie-up with China’s top noodle maker won’t help its lackluster performance unless it steps up its marketing efforts.
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