With a practical vision, Suntory Pepsico Vietnam CEO Uday Shankar Sinha shared a lot of valuable lessons in the seminar themed Business Cooperation Strategies organised by Ho Chi Minh city Young Business Association (YBA) – Tan Son Nhat branch recently.
Four formulas for the sustainable development of the Suntory - Pepsico strategic alliance
The PepsiCo story in Vietnam started in 1994, when the United States lifted the embargo on Vietnam, as a joint venture. In 2005, Pepsico led the beverage market.
Notably, in 2004, Pepsico invested heavily in Vietnam with the first factory in Can Tho and two new factories in Dong Nai and Bac Ninh by 2012.
Regarding the reason for the biggest collaboration of recent years, Uday Shankar Sinha said: "We see our bright future in Vietnam. First of all, it is the strong growth of the macro economic with a high growth rate at 6-6.5%. Second, it is the large room level of the beverage market. Third, it is the young population, 55% of which is under 30 years old. Fourth, the consumer confidence in Vietnam is still growing...".
So far, PepsiCo has grown tenfold since 2004 and consistently maintained the double-digit growth over the past 12 years. Uday Shankar Sinha explained for this remarkable result, "The formula for the sustainable development is: human resources and values; strong brand; efficient operation model; and continuous innovation. Both Suntory and PepsiCo have contributed to this success."
Ten brands of Suntory Pepsico are working together to reach the retail sales of US$1 billion in 2018. The alliance model encourages innovations and promotes the strengths of each side: Suntory is strong in tea and coffee while Pepsico is famous for carbonated water.
Regarding the competitive edge in circulation and product sales, exploiting the combined strengths of the two production lines has significantly reduced the initial costs.
Suntory Pepsico also makes good use of the shipping partner, DSL, to cut costs. Currently, Suntory – Pepsico has five factories, 450 distribution points, 3000 employees and more than 1.1 million retail outlets.
With such a vast distribution system, there have been 25,000 refrigerators in ten years and 65,000 refrigerators so far. Utilising this system to develop new products is beneficial.
In collaboration, the most important thing is to share a common vision. Uday Shankar Sinha said, "Pepsico and Suntory have shared the same vision, which is just expressed in different languages. This connection is reflected in the community values. Pepsico has "Clean water for primary schools" project, while Suntory has the program named "Mizuiku - I love clean water". Combining the two programs, 30 primary schools in Vietnam have benefited from them."
The five most important principles for successful cooperation
Summing up his experiences, Uday commented, "Five principles need to be taken into account for successful collaboration. First, it is the Win-Win principle in economic cooperation. Second, it is a clear and comprehensive alliance agreement. Third, it is to take advantage of both parent companies. Forth, it is the freedom in operation to grow fast. Fifth, it is the trust, respect and transparency between partners, which helps both sides stay comfortable in cooperation. This is a crucial point in collaboration."
Sharing the experience that he enjoyed the most in this collaboration, Uday said, "Embrace changes to advance. We always focus our resources on innovation. Changes also come from the reconciliation of a multinational culture between the two representatives from the United States and Japan. When the alliance was first formed, many employees are worried about the confrontation between the streams of ideas. However, after four years, we have succeeded in focusing on our similarities and above all, respecting the difference and receiving quintessences from different perspectives."