Why Potatoes Are Key to PepsiCo's Success in China

Pepsi will build 19 new beverage and manufacturing plants and will increase its agricultural presence in the country by adding five more company-owned farms to help meet demand for China’s seemingly insatiable appetite for potato chips.

Pepsi’s focus on the snack segment of its Chinese business began in earnest about 15 years ago, after coming to the realization that Coca-Cola was simply too formidable a competitor on the bevarage front.

In 1994, PepsiCo -- now one of China’s largest potato growers -- planted its first potato in Chinese soil, for use in the manufacture of Lay's potato chips. This was done for two reasons. First, trade restrictions that forbade the importation of US potatoes were, and still are, in place. And secondly, according to a report by USDA research horticulturist Shelley Jansky in the American Journal of Potato Research, “major constraints” regarding the viability of domestic Chinese potato production existed, such as “inadequate germplasm resources for cultivar development, the lack of high quality seed potatoes, and limited access to equipment for mechanized cultivation, planting, fertilizing, spraying, and harvesting.”

Three years later, Lay’s potato chips hit Chinese shelves and were an immediate hit