China: PepsiCo sells bottling operations, forms Alliance with Tingyi

In a U-turn in its China strategy, PepsiCo has announced plans to sell its shares in its bottling operations to Tingyi-Asahi Beverages (TAB) in return for a stake in TAB. TAB would become PepsiCo’s franchise bottler in China.

The move comes after PepsiCo’s  bottling operations in China had been loss-making for 2 consecutive years, and PepsiCo’s soft drinks remained on a 4th position in market share with 5,5 percent, compared to Coca-Cola’s 17.

With the new Alliance, Tingyi and PepsiCo combined will have a 20% market share, becoming the largest player in the Chinese soft drinks market. PEspiCo will benefits from Tingyi’s distribution system, whereas Tingyi looks at bottling its juice products under the PepsiCo Tropicana brand name.

PepsiCo’s food business, which consists in a full production process from potato farming to snacks production, remains untouched by the change in the bottling system.

It remains to be clarified what will happen to PepsiCo’s huge investment plans in China, which were announced last year, comprising 2,5 bln USD investment in beverages and snacks, including 10-12 new bottling plants.

Will this make a difference for workers? News that the company is developing a new strategy in the investment bonanza in China if it cannot win in the direct competition with Coke are probably rather good news for workers, as it – possibly – avoids a long and painstaking but ultimately lost battle.

For Chinese workers themselves though, there might be not much difference – with very few organising space and only state-dominated “unions” in place, their chances for rights at work are slim as long as China, does not see democratic movements, and especially a truly independent labour movement arise.