PepsiCo, reporting a 26% jump in its China sales in 2004, said it would maintain double-digit sales growth in 2005 as it battles market-leader Coca-Cola.
Pepsi said China accounted for 4% of its global revenue. But it has some catching up to do: Coke enjoys commanding tummy share, with 57% of China's soda market locked up. Not discouraged, Pepsi China boss Wah-Hui Chu says that China, in terms of per capita consumption, lags far behind Europe, the US – Americans can now tank up on 64oz, or 2-liter, servings at a single go – and even parts of Asia.
And Pepsi has a marketing trick or two up its sleeve: one calls for deploying transparent vending machines in central Shanghai – loaded with live mini-skirted girls inside.
But Coke will get a boost from mainline distributor McDonald's, which announced plans to expand its mainland network from 640 outlets currently to 1,000 by 2008 – most of that expansion through franchising, which will be a departure for the Golden Arches. Currently, all its restaurants except one new one in Tianjin are run as joint ventures.
Restaurants have been doing well generally, with year-on-year sales rising 21.4% in 2004, according to Ministry of Commerce data. Sales added up to US$90.45bn, accounting for 14% of China's total retail sales for the year.
But the very crowded convenience store segment is hurting. In a startling mea culpa, Wang Dawei, chief executive of Mei Ya, owner of the Shanghai-based 21 Convenience Store chain, announced the company was closing 500 of its 800 outlets. "This is the result of blind pursuit of scale," he said. Shanghai has nearly 5,000 corner stores, compared to 1,000 in Beijing and 300 in Guangzhou – one for every 2,600 residents, as against an industry ratio of 1:2,940 in the United States and 1:3,045 in Japan.