Thu 9 Aug 2012
Filed under: Business / Trade,News
PepsiCo Inc. (PEP) said it reached a deal to distribute its products in Myanmar through a local partner, in the latest sign of rising investor interest in the once-reclusive Southeast Asian nation.
The move by the Purchase, N.Y.-based beverage company followed a June announcement by rival Coca-Cola Co. (KO), which said it would be re-entering Myanmar with initial plans to support charitable programs there. Coca-Cola said it would initially import products from neighboring countries before establishing local operations.
Other U.S. companies have expressed interest in going into Myanmar, too, but most so far have stopped short of signing far-reaching deals with local partners as they conduct more research on the market, which for years was largely off-limits to Western investors because of economic sanctions and Myanmar government restrictions.
Some companies have waited because they want to be sure the local partners they do business with don’t have extensive associations with the country’s previous military junta, which was accused of widespread human-rights violations before it handed power to a reformist government last year.
PepsiCo said it will partner with Diamond Star Co., a unit of the Capital Diamond Star Group, to distribute PepsiCo beverage brands in the country. Diamond Star describes itself as a major conglomerate founded in the 1960s, with more than 4,000 employees and distribution centers across Myanmar. Its headquarters are in Yangon, and the company says it has other interests in businesses such as flour milling, construction and real-estate development.
The deal gives Diamond Star exclusive rights to import, sell and distribute Pepsi-Cola, 7-Up and Mirinda brands in the country. Financial terms weren’t disclosed.
PepsiCo Chief Executive Indra Nooyi called Myanmar “a market with great potential” and said the Diamond Star agreement is an important first step in expanding Pepsi’s presence in the country, which is also known as Burma. PepsiCo said it also plans to explore opportunities to invest in agricultural development projects there.
PepsiCo exited Myanmar in 1997, at a time when many U.S. companies were abandoning the country as Western leaders imposed sanctions on its military regime, which took over in 1962.
The junta handed power to a nominally civilian government last year. Since then, the country’s leaders have embarked on far-reaching economic and social reforms, including releasing political prisoners, loosening restrictions on the Internet and allowing some of the first political demonstrations in years. U.S. and European officials have responded by easing sanctions on investment, opening the door for more Western companies to do business there.
Although the country is currently one of the least-developed nations in Asia, it has a sizable consumer market of 60 million people and its economy is expected to expand rapidly if reforms continue.
PepsiCo said it plans to evaluate other opportunities in the Myanmar market, including the potential for local manufacturing operations.
-Saabira Chaudhuri contributed to this article.
Write to Patrick Barta at email@example.com