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Rural demand very strong, urban not so much: PepsiCo

NEW DELHI: Forecasting out-of-home demand remains tough amid continued pandemic-induced uncertainty even as consumption of soft drinks and snacks within homes has picked up, PepsiCo India president Ahmed El Sheikh has said.

“It’s tough to forecast consumption and demand in general; forecasting manufacturing cycles, raw material management and inventory stocking remains challenging,” Ahmed told ET in an exclusive interview.

He said PepsiCo was seeing higher demand in rural markets with reverse migration of workers and minimal lockdown disruptions, which led the company to double down on distribution models, digitisation and launching lower-priced beverages and snacks for its brands Pepsi, 7Up and Kurkure in rural India.

“We are seeing very strong demand coming from rural markets,” said Ahmed who has been heading PepsiCo for three years. “In urban India, it’s a different game; it is a more challenging market.”

Higher demand across rural India, which is being seen as the only silver lining for economic growth over the next two-three quarters, has led packaged consumer goods companies to accelerate spending on hinterlands. These companies are expected to spend more on distribution outreach, consumer promotions and products in rural India than in urban markets this year.

PepsiCo India’s revenue for 2019-20 stood at Rs 5,264 crore, down 15.9% over the previous financial year, which it attributed to refranchising of its bottling operations in South and West India to Varun Beverages, the company said in a registrar of companies filing on Friday. “With the Indian FMCG industry slowly shows signs of revival, we have adapted and re-strategized our price-pack programmes,” Ahmed said.

He said PepsiCo’s snacks business is now running at full capacity, with new facilities coming in Pune in the next two months.

Ahmed said the company’s investment in India remains unchanged. It had announced an investment of $2.1 billion by 2022 in manufacturing, sourcing and sustainability for India, for a five-year period beginning in 2017.

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