Serm Suk knocks Pepsi off shelves

THE day after PepsiCo Inc's bottling deal in Thailand expired, its partner of 59 years launched its own soft drink that has knocked Pepsi off store shelves.

Serm Suk pcl, backed by the billionaire owner of Thai Beverage pcl, Charoen Sirivadhanabhakdi, said its new soda called "est" garnered 19 per cent of Thailand's US$1.8 billion (RM5.6 billion) cola market in just two months following its launch on November 2.

Pepsi's break-up with its bottler meant it also lost access to Serm Suk's vast distribution network, which delivers drinks to about 200,000 stores, restaurants and vending machines serving Thailand's market of 67 million people.

The two companies had a non-compete clause that expired when their contract ended on November 1. Pepsi has similar non-compete clauses with bottlers in other markets such as China, but the decision backfired in Thailand.

The following day, est hit the market, costing about the same as Pepsi and sold in the same bottles, with a red, white and blue logo reminiscent of Pepsi's. Pepsi declined to comment on whether it was pursuing any trademark violation claim.

"We did not deliberately set out to push Pepsi off the shelves but we have a very strong distribution network and if we stop distributing for one company, that company's products will disappear from the shelves," said Pragnee Chaipidej, advertising manager at Serm Suk.

Thailand was one of the few countries where Pepsi's cola drink outsold arch-rival Coca-Cola Co's, but Coke caught up in 2011 and built a lead last year, according to data from research firm Euromonitor International.

Euromonitor's figures show Pepsi's share of the cola market dipped by 2.6 percentage points to 36.1 per cent in 2012, compared with Coke's 40.1 per cent.

Est, a name that has no meaning in Thai but was intended as a play on superlatives such as "biggest" or "tastiest", debuted at 2.1 per cent even though it was available for only two months of the year.

"We welcome competition, and short-term fluctuation in market share is not our barometer for success," said Jeff Dahncke, senior communications director at PepsiCo in Purchase, New York.

Pepsi has opened a US$170 million bottling plant in Rayong, 179km southeast of here, which it said can produce enough drinks to serve every consumer in Thailand. It partnered with Deutsche Post AG's DHL for distribution.

Dahncke said the first phase of distribution, which involves getting drinks into chain stores, was in place. The next phase is smaller mum-and-pop shops.

The Thailand trouble stands in contrast to PepsiCo's global performance, which has propelled its shares to their highest level since 2008. The company reported stronger-than-expected fourth-quarter results last week and raised its dividend.

Much of its recent success stems from a turnaround in its North American operations, which account for half of the company's global revenue, and strong growth in sales of food. Reuters