Moscow news
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20-Jul-2009
Pepsi opens new factory
Amid some fanfare, PepsiCo opened its largest bottling plant in the world last week in Domodedovo, on the southern outskirts of Moscow.
The opening came immediately after US President Barack Obama's visit to Moscow, and a day before the 50th anniversary of Pepsi coming to the Soviet Union. Exactly 50 years earlier, then-CEO Donald Kendall personally helped hand out 3 millions cups of Pepsi to visitors at the American National Exhibition in Moscow, and Nikita Khrushchev was said to have downed several cups of the drink.
An 88-year-old Kendall was present at the July 8 ceremony, which was also attended by US Commerce Secretary Gary Locke and Economic Development Minister Elvira Nabiullina.
Both Locke and Nabiullina commended PepsiCo's investment in Russia as a model for mutually beneficial trade ties. "We welcome foreign investment," she told reporters at the ceremony. "The Russian market is vast and open."
Pepsi was the first Western consumer product to be manufactured and sold in the Soviet Union.
PepsiCo chairwoman Indra Nooyi said that the newly opened plant, in which $180 million was invested, is part of a three-year plan to invest $1 billion in Russia and the CIS. A plant for making snacks in the Rostov region is currently in the works.
This will bring up PepsiCo's total investment in Russia and the CIS to $4 billion, including the $2 billion acquisition last year of Russia's biggest juice producer, Lebedyansky, which holds the brands "Ya" and "Tonus", amongst others.
The 45,000 square-metre plant employs 450 people and has two production lines. That is soon to become three, and eventually, seven lines should be working, producing up to 1 billion litres of beverages a year.
CEO of PepsiCo International, Mike White, is confident about expanding in Russia, and says there is still a lot to bring here. "Doritos for instance," he said, "is something I think we should get to work on."
The main problem, however, lies in the main ingredient, corn. While FritoLay, a division of PepsiCo, works with local potato farmers to improve the quality and quantity of their harvest and are the biggest buyer of potatoes in Russia, there aren't that many corn growers in Russia to begin with. Importing it all is not feasible, White said.
Despite the recession hitting manufacturers on all levels, PepsiCo's snack food may be a niche relatively immune from the recession.
Nooyi said that "nobody likes to see [a] recession" and that people are still eating and drinking, but different things. "We like our business, but we like growth much better. Great consumer confidence, great consumer optimism is the best for all of us," she said.
The Moscow News