Japan's Suntory Group, one of the world's leading makers of consumer products, will form a joint venture with Pepsi-Cola Thai Trading Co, the trademark owner of Pepsi, Mirinda and 7-Up, with the aim of cashing in on Thailand's 50-billion-baht carbonated soft drink market, says an industry source.
The source voiced confidence that the partnership would help Pepsi restore its market leadership over Coca-Cola in the near future.
Under the deal reportedly in progress, a 45% stake of the joint venture will be held by Suntory Group and 55% will be owned by Pepsi-Cola Thai Trading.
Operations are expected to start next year.
The venture is a continuation of Suntory's policy to expand with more products in the Thai market. The company has been successful in distributing Pepsi-Cola products in Vietnam during the past few years.
But a source at Pepsi in Thailand remained coy about the tie-up yesterday, saying: "We know that there was a recent news report about PepsiCo looking at a business deal in Thailand. However, this report was not based on any announcements or information provided by PepsiCo.
"PepsiCo is always looking at ways to transform our business to remain competitive and deliver sustainable, profitable, long-term growth through stronger investments and better capabilities, but we have no comments to make on rumours and speculation."
Japan's Suntory Group has five major businesses: alcoholic drinks; cross-functional companies; restaurant services and flowers; healthcare supplements and cosmetics; and non-alcoholic drinks and food.
Suntory has found success in marketing Brand's Essence of Chicken in Thailand. The company has begun to build its sales network to distribute Brand's products after several decades under the distribution of DKSH Thailand.
Top executives from DKSH were recruited to join the sales teams for Brand's products. The influx is expected to help prepare for additional new products under the portfolio of Suntory Group in Thailand, including Pepsi-Cola items.
Recent media reports said Suntory Group had decided to buy two carbonated soft drink factories under a subsidiary company of Pepsi-Cola Thai Trading in Saraburi and Rayong.
With Suntory handling the production and marketing, Pepsi-Cola will put more focus on product development, marketing and brand building in the hope of becoming the leader once again in Thailand's carbonated soft drink market.
Thailand is one of the few countries in the world in which Pepsi-Cola had an edge over arch rival Coca-Cola. Pepsi lost its leadership to Coca-Cola in Thailand after terminating its contract with Sermsuk Plc as the local bottler of its soft drink products in Thailand in 2012.
Another industry source said it is not easy to market carbonated soft drinks in Thailand. The competition is fierce and the market is growing at a slower pace than in the past because consumers have more alternatives.
The soft drink market in the first half of the year contracted by 4%. Coca-Cola is the only company whose sales outpaced the industry's, the source said.
Thailand's carbonated soft drink is estimated to be worth 50 billion baht. Coca-Cola is the market leader with more than a 50% market share, followed by Pepsi with over 30% and the rest belonging to others such as Sermsuk's Est and the Big brand.
The source said competition in the drinks sector will grow fiercer next January.
Both Coca-Cola System Thailand via Thai Namtip Co -- the local bottler of Coke, Fanta and Sprite in Thailand -- and Sermsuk, the maker of Est Cola, are planning strategies to guard their market.
Coca-Cola in particular has ordered more returnable bottles to proactively expand its soft drink market via traditional trade. This channel makes a better profit for the company and is a weak point of Pepsi, which has no returnable bottles available in the market.
Est plans to continue to allocate budget to build brand awareness.