food factories, and their new strategy is to double the Chinese workforce over the next five years in order to match growth potential in that market. Their aggressive marketing tactics in the past decade have included brand building by using celebrity endorsements and sports sponsorships. In a survey by A.C. Neilsen in 2002, Pepsi had a 44 percent market share in major Chinese cities (FDI 2002).
An important strategy that has solidified Pepsi’s global strength is their belief in localization. A PepsiCo spokesperson stated to Beverage Daily: “It is very clear based on our experience that to succeed in the food and beverage market around the world our products, as well as our marketing, must be locally relevant… that means they must reflect the local culture, as well as local taste preferences and ingredients” (Merret 2007). Investment in China alone totals over one billion dollars, and PepsiCo plans to expand its Chinese market by investing an additional $850 million between 2006 and 2009.
In order to penetrate emerging markets, PepsiCo adapts its products to local preferences (Brush 2006). The company has expanded using joint ventures and it has hired local managers who have expertise in the preferences of that market. Frito-Lay in Mexico sell chips with chili flavors, while Frito-Lay in China sells crab- or duck-flavored chips. By utilizing partnerships with local bottlers and local suppliers, PepsiCo also appeals to consumers’ nationalistic sentiments while also impacting local food production systems. Sabritas in Mexico and Yazhou in China are both popular brands sold by PepsiCo with regional-sounding names. To increase understanding of their target market, PepsiCo opened its first research and development site outside the United States in Shanghai in 2006.
PepsiCo was ranked #1 globally in 2005 for sweet and savory snacks, and 80 percent of the company’s net sales is from packaged foods. In 2003, trans fat was removed from all chips as they switched to using corn oil. By 2006, Lay’s and Ruffles chips were made using sunflower oil. PepsiCo also strove to reduce sugar and sodium in their snack foods and expanded their product range to more nuts and healthy snacks. In the snack foods sector, the pressure to shift from focusing on the sweet and high fat snacks market led PepsiCo to explore two potential development paths. The company can pursue the “impulse channel” or move towards acquiring more healthy and organic snack options. The impulse channel refers to moving toward convenient, on-the-go foods which dominate food markets today.