PepsiCo Bets On Russian Market

DOMODEDOVO, Russia (AP) -- PepsiCo opened an immense new bottling plant outside Moscow on Wednesday as it bets on Russia to become its biggest market outside the United States in five years.

The glimmering blue and white $1 billion plant, which the company says will be the largest bottling plant in Europe, will eventually churn out more than 2 billion liters of soft drinks a year and employ more than 1,000 people.

"Russia is a country of 147 million people ... who have purchasing power and they like the type of products we make," said Indra Nooyi, chairman and CEO of PepsiCo.

The opening followed a U.S.-Russia summit aimed at building a more constructive relationship between the two countries, which have often been at odds over politics and trade, and high-level officials on both sides praised the PepsiCo venture as an example of a successful partnership.

But despite the goodwill at Wednesday's grand opening, many U.S. companies grumble that doing business in Russia is rife with challenges, including bureaucratic red tape and rampant corruption.

U.S. Commerce Secretary Gary Locke, who attended the opening, told reporters earlier Wednesday that this was limiting U.S. investment to just "a fraction of what it could be."

Nooyi refrained from any criticism. "In our many years of operating in here ... Russia has never let us down," she said.

Pepsi became the first American product to be sold in what was then the Soviet Union in 1974. It now owns bottling plants throughout Russia, including in St. Petersburg and Yekaterinburg, and plans to open a new snacks plant in southern Russia this year. The new plant in Domodedovo, just south of Moscow, will produce carbonated drinks and bottled water.

"Russia's growth potential is huge, and I'm convinced that in five years it will become the biggest market outside the U.S.," said John Ioannou, chief financial officer of PepsiCo.

Pepsi was first introduced to Russians during an American trade exhibition in 1959, when then-president of the company Donald Kendall urged Soviet leader Nikita Khrushchev to taste the drink.

Kendall, who attended Wednesday's opening, said he had high hopes for trade relations between U.S. and Russia.

"Russia has a highly educated society and the opportunities here are unbelievable," said Kendall, 88, as he chewed on a Lay's potato chip, another PepsiCo product. "You get involved in a country and things can happen."

Many Russians have fond memories of when they first tried the sugary, caffeinated drink.

Alexander Bezpalov was 9 years old when he had his first Pepsi at a friend's house. He said the appeal was as much about the taste as what it stood for: an enigmatic product from the West at the height of the Cold War.

"I remember liking it because we had nothing like it at the time," said Bezpalov, now 46. "I don't drink it much now. I'm getting older and sticking with mineral water."

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