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PepsiCo Opens Plant With Vow to Potato Farmers

10.07.2009 DOMODEDOVO, Moscow Region — Soft drink and snack maker PepsiCo opened its eighth plant in Russia on Wednesday amid promises to invest another $1 billion in the next few years — including to educate potato farmers.
The opening ceremony, attended by PepsiCo chairwoman Indra Nooyi, Economic Development Minister Elvira Nabiullina and U.S. Commerce Secretary Gary Locke, was at a facility PepsiCo expects to become the largest in Europe in three to four years.
The company said the plant will produce “simple pleasures” that Russians can afford, in good times and bad.
“The Domodedovo plant will initially only produce Lipton Ice Tea, which remains popular in Russia despite the crisis,” Mike White, head of PepsiCo International, said in an interview. “Lipton Ice Tea is a priority for us in Russia now.”
PepsiCo also said it would introduce new products in Russia over the next two to three years and planned to buy 65 percent more potatoes by 2013.
Thousands of bottles of Pepsi, 7UP, fruit-flavored Mirinda and all kinds of Lipton Ice Tea were piled several meters high around the improvised stage where the ceremony was held. Conveyor belts were running throughout the opening.
Locke was enthusiastic in his praise for the plant and its products, saying he “grew up on Pepsi” and that he keeps his refrigerator stocked with it.
The endorsement couldn’t be more timely for the company’s Russia operations, which have seen demand falling for PepsiCo soft drinks and juices.
“We saw a drop in sales of premium brands, like Ya juice, in the fourth quarter,” Alexei Mekhonoshin, the head of Pepsi Bottling Group in Russia, said on the sidelines of the ceremony.
The company is PepsiCo’s largest bottler.
“We reacted by increasing production of the cheaper brands, like the Privet juice, and by producing more small bottles,” White said.
“Pepsi offers simple pleasures,” he said. “Some people can’t afford to buy a car now, but we offer something that anyone can buy. … And we’re working out a strategy for the next two to three years to offer some new products each year.”
The $180 million Domodedovo plant, with a planned capacity of 2.1 billion liters per year, will produce Lipton on two production lines this year. It will gradually add another five lines to produce carbonated beverages and its Aqua Minerale water.
Pepsi makes soft drinks at six plants in Russia, including at Domodedovo. It has one facility making snacks, such as Lays potato chips and Cheetos, and it produces juices such as Ya, Privet and Tropicana at the Lebedyanksy plant it bought last year.
The company has said it will invest $1 billion in Russia in the next three years, including to finish construction this year of a second snacks plant. PepsiCo will develop its distribution network in Russia and the CIS and boost its support for Russian farmers, PepsiCo Europe president Zein Abdalla said after the ceremony.
“As Russia’s biggest industrial potato consumer, we will invest 300 million rubles to train Russian farmers on how to grow and store potatoes,” PepsiCo Russia vice president Sergei Glushkov told Nooyi and Nabiullina while showing them around the plant.
“For the past five years we have managed to almost double their productivity, from 13 tons to 24 tons of potato per hectare,” he said.
Abdalla attributed the gains to PepsiCo’s help providing farmers with loans, quality seeds, fertilizer and machinery.
Moving into the brewing hall, Glushkov suggested that Nabiullina try making a batch of Lipton Ice Tea herself. She and Locke cut open a sack of green tea and poured its contents into a big pot with distilled water, cleaned with nano-filters.
“We haven’t realized the great potential of U.S. and Russian trade,” Locke said in an interview after the opening ceremony. “The Russian government wants to develop technology in health care, IT and other sectors, and American businessmen can help. But actually increasing our trade depends on the Russian government’s decision to eliminate trade barriers and increase the transparency.”
Trade between the countries is worth an annual $36 billion, U.S. President Barack Obama said in Moscow on Tuesday.

Moscow Times.

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