PepsiCo sees big surge in snacks sales on full implementation of AEC
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PepsiCo said yesterday it expects a big jump in sales in its snacks business after the Asean Economic Community comes into full effect next year.
In his first interview since taking over as chief executive of Pepsi-Cola (Thai) Trading in March, Parinya Kitijatanapan said the implementation of the “Power of One” business model at the Thai subsidiary, which saw the reintegration of its food and beverage units (F&B) earlier this year, had been going well.
Previously run separately, the units now share offices, strategic planning and some back-office operations but marketing and production operations are still divided.
“Transportation is still separated, though we have begun to share some suppliers, such as in the case of DHL,” Parinya added.
Parinya, a former boss of PepsiCo’s beverage unit in greater China, has been at the helm in Thailand since earlier this year.
“We have been able to discuss and share knowledge more [on F&B],” he said. “The combination provides savings and greater efficiency.
“Since we are selling to the same customers, you may see we have already done some joint advertising and promotions.”
The contribution from food and beverage was roughly equal, he said.
Parinya said PepsiCo expected both businesses to continue to grow.
The snack business, in particular, had the potential to expand exports in the AEC next year. Mookda Pairatchavet, general manager of PepsiCo’s food unit, said the company’s second snack factory began production at the Rojana Industrial Park in Ayutthaya in February.
“At present, production capacity of the second factory is about half of our Lampoon factory, which is more than 50,000 tonnes per year,” she said. “But in the next two to three years, it will be more than double the first factory.”
Parinya said most of the output would primarily serve the Thai market initially, but the company was looking to penetrating the Laos and Myanmar markets within 18 months.
He said the company had invested Bt2.8 billion on the second snack factory, which currently produced only Frito-Lay potato chips but would soon expand to other types of snacks.
Mookda said political and economic instability had affected the snack market in Thailand, with PepsiCo’s snack sales growth falling to a “low single digit” rate this year, compared to the normal growth of 8-10 per cent.
It is estimated that the Thai snack market is worth about Bt30 billion and comprises three major categories –potato chips, extruded snacks and other snacks such as rice crackers, nuts, pop corn, fish and squid snacks.
Parinya said Thailand possessed high potential to become a hub for the potato chips industry in Asean but the supply from domestic potato farms had to be developed further to ensure a more stable supply.
Mookda said Thailand had made more progress with its potato plantations compared to Vietnam, the only other Asean country with potato plantations. She said Myanmar, thanks to its climate and other conditions is suitable for potato farming.
PepsiCo has started a pilot project in Heho, a mountainous town north of Chiang Mai.
Under the AEC, she said potato imports from other Asean countries would be subjected to a tariff of only 5 per cent – compared to more than 27 per cent for tariffs levied on potato imports from outside Asean under a quota allocated by the government.
The company had discussed with the Ministry of Agriculture and Cooperatives its plan to support the expansion of potato farming to the northeastern provinces such as Nan and Phetchabun. At present, potatoes are being grown in only eight northern provinces.
