MARIA BARTIROMO, host: And joining us now, coming to us from China is Indra Nooyi, CEO of PepsiCo. Indra, so nice to have you back on the program. Welcome.
Ms. INDRA NOOYI: Nice to be here, Maria. Good to see you.
BARTIROMO: Well, congratulations on this new plant. It sounds incredibly exciting, using 22 percent less water and 23 percent less energy than the average Pepsi plant in China. Tell me about your strategy.
Ms. NOOYI: Well, the Chongqing plant is the first leaf cooled plant in China. It's environmentally very efficient; uses 22 percent less water, 23 percent less energy. And what's more exciting about the Chongqing beverage plant is that it's not just a plant that's green and that's PepsiCo's plant, it's open to schoolchildren so that people around--about 200 miles around the Chongqing plant can actually come there and learn what it takes to be a green plant, what it--and what is environmental efficiency all about. So this is really a learning center for Chongqing and the areas around it. And we're very proud about it, because this is a reference plant and we can build future plants based on this Chongqing plant.
BARTIROMO: Well, you know, it's pretty amazing. I have to say, when I was in China last I felt that the air quality was so poor. I imagine that the surrounding areas can actually learn a thing or two from the way you're operating.
Ms. NOOYI: Ideally. China's a country where the opportunities are huge, but China also has a lot of issues. And it's critically important that companies that come into China work with the Chinese government to make sure they're making a positive impact on society. And our Chongqing green plant is an example of our commitment to environmental sustainability, to make sure that resources like water, which are very scarce in China, and energy, because the needs of the country are so huge, are used very, very efficiently. And that's why this Chongqing plant is something that's generated so much excitement both within PepsiCo and outside PepsiCo.
BARTIROMO: And you're planning on opening five new plants in China. Do you worry about overextending yourself in that part of the world?
Ms. NOOYI: Well, we plan to build five plants in the next year or so, and then we would like to build 10 more plants over the next three years. So there's not a question of overextending in China. China represents the single biggest opportunity outside the United States for PepsiCo. It is a exciting growth market and I think the optimism, the confidence the Chinese people have is just incredible. And I think China is going to be a growth opportunity for PepsiCo for many years to come.
BARTIROMO: I'm sure, with that kind of population, it makes perfect sense. Indra, can you give us a sense of what you're seeing in terms of the economy there? So much talk back in the United States about that massive stimulus package and whether or not it has actually begun to be felt throughout the country. What are you seeing in terms of economic conditions?
Ms. NOOYI: You know, I'm seeing a confidence in China. I'm seeing the stimulus package being applied in a very targeted way. And we're seeing, you know, the emergence of, you know, more activity here in China. I was in Chongqing a couple of days ago to open the green plant, and the excitement in Chongqing--and I was here about 10 years ago, and to see the changes in Chongqing, because Chongqing is a big focus area for the Chinese government. Just to see how Chongqing has developed and how it's become a city that's bustling with activity; it's a green city. They've planted enormous number of trees. They've developed a riverfront. And the government stimulus package in Chongqing is just to stimulate more job creation in Chongqing. And you can see the excitement, whether it's Chongqing or...(unintelligible)...where I was, or whether it's in Beijing or Shanghai, you see the excitement in every part of China. So I'm very, very optimistic about the prospects for China.
And let me add, Maria, China has declared that the GDP growth rate is about 6.5 or 6.8 percent. But the way I look at it is the differential GDP growth rate between China and the Western world is about 9 points, because the Western world's declining about 2 to 3 points. So to have an economy with over a billion people industrializing, growing GDP at a 9-point difference over the Western world is a very, very exciting market. And you can see it in the Chinese people, you can feel it in the environment here. And as you walk the markets, you see this quiet confidence that everybody has in the Chinese government and the Chinese economy.
BARTIROMO: It's really fascinating. And some of the plants that you have on the plans to go forward in terms of production will be in less developed areas. Are you seeing a movement of people moving from the suburbs to the cities and really adding to that vibrancy that you're talking about?
Ms. NOOYI: I mean, I wouldn't quite call it suburbs--I mean, city to the suburbs; it's more the interior part of China. Not just the coastal part, the interior part of China is also developing extremely rapidly. And a lot of that has got to do with the targeted stimulus packages of the government. In the interior parts, the western provinces, the northern provinces are all developing extremely rapidly.
I was looking at a study yesterday which showed a little rural village in the province of Hebei, and some people have been tracking its development over the past three or four years. In three or four years, that little town--the rural towns have developed so well, it went from a small store, a hole-in-the-wall store to three years later, there's a modern convenience store. People in that little town five years ago didn't have too many cell phones or laptops. Now people have cell phones, laptops, in a period of three to five years. So what you're seeing is the development of regions outside the big cities of Beijing and Shanghai and Guangzhou and Shenzhen, the growth in the interior. And all of them are cities with over a million, two million people. Cities like Chongqing have 16, 17 million people. But these cities are developing extremely rapidly, modernizing, and the people in China in these cities are aspirational. They want to own products that are viewed as aspirational, foreign brands being part of that. And they want to do everything in their own unique way. So they present an enormous opportunity for all of us, and I think China as a whole is an incredible canvas on which all of us can write a story working with the Chinese government and the Chinese people.
BARTIROMO: You know, Indra, we've been talking a lot about protectionist issues; certainly in the United States, the whole idea of just buy American. And then China comes out and does the same thing, you know, buy Chinese. Are you feeling that in any way, being an American company, this protectionist issue that so many of us talk about given the global slowdown?
Ms. NOOYI: Well, I tell you, it's unfortunate that there's a lot of protectionist debate going on, because companies--you know, big, multinational companies depend on expanding into global markets to sustain a growth rate. And so it's important that all markets remain open, so that we can grow our business.
Let me speak to China in particular. The investment in common in China is very good. We've submitted an application to, you know, build 10 more plants, and the Chinese government has worked with us very constructively and has looked upon our investment very, very favorably. At the same time, we've had several meetings with government officials here in Beijing, and there is tremendous concern here that protectionist tendencies will sort of take root in many markets which are facing a slowdown. And, Maria, you know well that it takes about a year to put in trade barriers, but it takes seven to 10 years to knock them down. The world has come a long way because, you know, we've really pushed for globalization, we've pushed for global trade. It would be very sad if we went back. Now, I'm not arguing that we export jobs. That's not what I'm arguing for. What I'm suggesting is that we find creative ways to keep job creation in each of the key countries which require the jobs, but we don't set up barriers for global trade. Because global trade modernizes the world. Global trade brings people out of poverty. And it's critically important that we don't go back on that. We've worked too hard to get here.
BARTIROMO: It's a--it's a very, very important point, Indra, and I--and I appreciate you telling us what your insights are from the ground right now in China.
Let me ask you about the global economy and the impact on your business. You've got so many of us talking about, well, maybe we have passed the point of collapse, but we're still sort of bumping along the bottom. What kind of an impact have you seen in the snack business, in the soda business as a result of this slowdown?
Ms. NOOYI: Well, let me walk you around the world, because you talked about the global economy. East of the Middle East, where 72 percent of the world's population sits, the markets are still vibrant. There's still growth. The GDPs are growing in almost all of those markets expect Japan, which is still about flat. But 72 percent of the world's population, the markets are still growing. In Latin America, Mexico and South, the markets are still vibrant. So you've got a large portion of the world where the markets are still growing. And with the growth of those markets, our business is doing exceedingly well. So, you know, the South America, east of the Middle East I feel very, very bullish about.
Let's now talk about Western Europe, Eastern Europe and North America, which is the bloc that's facing the most amount of slowdown. And I think those are the economies we have to watch very carefully to see what's going to trigger GDP growth to come back to a positive territory. But in spite of GDP growth being negative right now, people still have to eat and drink. And more importantly, people are cutting back eating out in restaurants and eating at home more. And so that's helping our businesses. So overall I'd say the growth rates are still fairly all right. The pattern of growth varies by country, but the growth rates are still there and our businesses are doing well on a global basis.
BARTIROMO: And of course in the face of this global slowdown, you've actually been investing; investing in some of those areas that you believe in, whether it be these 10 plants or 15 plants in China, or the stake--the 20 percent deal to acquire 20 percent of Calbee Foods company, Japan's largest snack company. I want to ask you if you're worried about what Moody's said recently, that they said Pepsi's credit rating could weaken because of the bids you have out for two of your bottlers, Pepsi Bottling Group and Pepsi Americas. Are you worried about losing the credit rating or having it cut?
Ms. NOOYI: Not at all. I mean, look, we have to do what's right strategically for the company. Even if Moody's were to do a one-notch downgrade, shouldn't matter, because it's still a very high grade investment company. And, you know, S&P reaffirmed its high rating for PepsiCo. So I'm not worried about the rating. You know, when you make strategically important moves, you've got to do it whether your rating is down one notch in the investment grade or not. I mean, it's just not something that I worry about.
We have to continue to invest, whether it's investing in Japan in the Calbee deal that you talked about, our investment in China, the big investment in--we announced in India, the big announcement we announced in Mexico a year ago or the juice acquisition we made in Russia. All of these are critical strategic acquisitions. And couple that with the strategic reshaping of the North American beverage business that we've made a bet on by, you know, deciding to consolidate our bottlers back into PepsiCo, that is making an offer to consolidate our bottlers back in PepsiCo, these are all big, bold bets PepsiCo's making because we have to think about managing the company for the long term. We cannot manage the company for the next quarter, that would be a big mistake. And all of these investments we're making is towards an eye to the next five, 10, 15 years.
BARTIROMO: You know, while everybody talks about China and India, Japan is sort of off of the headlines, and here you are making this stake in Calbee. How much growth do you see coming out of Japan, Indra?
Ms. NOOYI: You know, it's interesting. I think Japan, which has been sort of in an L-shaped curve for a long time with the GDP growth sort of flat and negative for many, many years, may be slowly coming out of that slump. And we're beginning to see the top of our green shoots. We're beginning to see it in Japan. I think the last three months, Japan's GDP has actually recorded positive numbers. I think in the last month it was over 5 percent. So Japan's actually looking positive. But more importantly, Calbee is an outstanding snack company in Japan. You know, we have been partners with Calbee in terms of they've visited us many times over the last 10 years. We've been talking with them to see whether the two companies could do something for the past decade or so. The time was right, both companies were comfortable. You know, Japanese don't do something overnight. They take a while to build a relationship. I think they reached a point they were comfortable with PepsiCo, we decided to put our businesses together. I think what's exciting about the Calbee deal is it's not just that it's a partnership for Japan. The Japanese industry has got great packaging innovation, product innovation, and the whole idea is to learn from our Japanese partners to enhance and enrich the rest of our businesses globally.
BARTIROMO: Indra, great to have you on the program. Thanks so much for joining us. We appreciate it.
Ms. NOOYI: Pleasure, Maria. Nice to talk to you, too. Take care.
BARTIROMO: And to you as well. All my best. Indra Nooyi, CEO of PepsiCo...
Ms. NOOYI: Thank you. Thank you.
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