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Pepsi’s Tull Act

PepsiCo India is back into the farm innovation game, with oranges and seaweed, if you please.

By Ankur Sabharwal

Coke: Sharing fizz

PepsiCo would surely be the last company to be accused of living in the past. So when it announces a couple of new farm initiatives in India, you can be sure it’s for a reasonably modern purpose.

What’s it up to this time?

Helping orchards grow better oranges in India. And if that doesn’t strike you as extraordinary (after all, oranges are used by Tropicana), try seaweed farming. Yes, the aqualung stuff, my friend.

Pepsi Foods Private Limited is no stranger to Indian farmers. It has worked with them in the past on farm innovations to grow tomatoes, potatoes, chillies, garlic, Basmati and groundnut. Some of the old initiatives were abandoned after the mid-1990s’ bout of Liberalisation freed it of its rigid-grid commitments, but the company has chosen to keep Indian farmers engaged.

That, even at the risk of the occasional “My gosh, isn’t Pepsi supposed to be selling fizz?” from foreign observers. Shrugging off the golden cage isn’t just a matter of top-level thinking. When people are involved, people must be taken along. That’s what a real market-oriented marketer does. Moreover, sometimes it does make good business sense.

Last month, Pepsi Foods inked a deal with Punjab Agri Export Corporation, a Punjab government undertaking, for the cultivation of citrus fruits (mainly oranges) in the state, with the intention of developing a local raw material base for Tropicana, its fruit juice brand (at the moment, its fruit pulp comes from Brazil and Florida).

Under the agreement, Pepsi Foods will deploy a Tropicana agricultural research team to provide the technical knowhow, while the Punjab government provides the land for research. In the first phase, different citrus varieties will be imported and tested in quarantine plots for a year, following which demonstration plots will be developed at eight sites across the state. Commercial cultivation is likely to begin only three years later, at the earliest, if all goes well. The feasibility of cultivating other citrus varieties such as mandarins, lemons and grapefruit, is also under study. If the project hits off successfully, Punjab could emerge as the regional citrus-fruit sourcing base for much of Asia.

Pepsi Foods’ seaweed farming idea is far more bewildering. Well, it’s a serious move. The company has obtained permission from the Tamil Nadu government to ‘cultivate’ a 10-km stretch along the sea front in the Palk Bay area towards Mandapam (Ramanathapuram district). The project, which is being technically supported by the Bhavnagar-based Central Salt and Marine Research Institute, began trials three years ago in the Gulf of Munnar. According to Abhiram Seth, Executive Director (Exports), Pepsi Foods, “Pepsi plans to expand the current 100 acres of cultivated area to 350 acres in the first phase, after submitting an environment impact assessment report for the Gulf of Munnar.”

But why seaweed? Of all things under the…er, water.

It’s like this. Seaweed is a good source of Carrageenan, a food-grade gelling agent that finds wide application in pet food, toothpaste, processed meat and dairy products. In other words, there is money in it -- if it can be cultivated cost-effectively. And the Tamil coastline fits the bill perfectly.

Pepsi Foods has already set up a pilot scale processing facility at Ramanathapuram, which will be converted into a full-scale processing unit once large-scale production begins. The project, which has already taken investment of over Rs 1 crore, as Seth claims, “is the first of its kind in India, and in terms of cost efficiency, clearly has an edge over the Philippines”, which has an 80 per cent share in the world’s seaweed production.

Overall, the objective of the two initiatives is to boost the firm’s agricultural exports from India, which are currently placed at over Rs 200 crore (around a tenth of its domestic revenues). The seaweed project alone could employ some 2,500 Indian villagers, to add to the 12,000-odd farmers that are employed by Pepsi on a contractual basis.

And it’s not just two states of India. The company’s contract farming projects cover about 6,000 acres of land in Punjab, as well as parts of Haryana, Karnataka, Andhra Pradesh, Tamil Nadu and Uttar Pradesh.

So that’s the story. That’s what India’s first new-wave multinational entrant has been doing, apart from flying kites, opening umbrellas, making cricketers vie with film stars and keeping loveboats afloat on Indian television. It’s all about value addition, for PepsiCo, whether it’s Bulandshahr or Budapest.

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