US: Consumer Services

PepsiCo CEO Talks Bottlers, China Growth and More

PepsiCoChief Executive Indra Nooyi said Thursday she is not concerned about the potential for Moody's to downgrade the company's credit rating if it succeeds in acquiring its two largest bottlers Pepsi Botting Group and PepsiAmericas.

Photo: Mashroms

So far, the bottlers have rebuffed Pepsi's offer as being too low, but Nooyi has said she continues to believe consolidating the companies is the right step for competing effectively in the beverage business.

Even if Moody's were to downgrade Pepsi's rating, the company would remain "a very high-grade investment company," Nooyi said in an interview with CNBC.

"We have to do what's right strategically for the company," Nooyi said.

Nooyi, who was speaking to CNBC from China, has been trying to strengthen the company's business in emerging markets such as China and India, as developed markets like the U.S. see slower sales of soft drinks.

Pepsico Plants Go Green

Pepsi said late last year that it plans to invest more than $1 billion in China over the next four years in order to open new plants and develop products suited to the local market.

Nooyi says the company wants to build five plants in the next year or so, then an additional 10 more plants over the next three years.

"So there's not a question of overextending in China," Nooyi says. "China represents the single biggest opportunity outside the United States for PepsiCo."

(For more on PepsiCo's plans to boost its business in China, watch the video.)

According to Nooyi, many of the towns in China, particularly in its interior regions, are developing "extremely rapidly."

"The people in China in these cities are aspirational," she says. "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 represent an enormous opportunity for all of us."

Nooyi said she sees the global economy east of the Middle East as "still vibrant," except for Japan, which is "about flat."

"In Latin America, Mexico, and South America, the markets are still vibrant," she says. "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."

Nooyi said growth rates are "still fairly all right" for Europe and North America.

"The pattern of growth varies by country, but the growth rates are still there and our businesses are doing well on a global basis," she says.

According to Nooyi, although consumers are cutting back on eating out, that trend favors the company's business, which includes not only its namesake cola and sports drink Gatorade, but also Frito-Lay snacks.