After being in the Indonesia market for more than 24 years, Pepsi will finally bid farewell to the Indonesian market from 10 October 2019. The affected PepsiCo products are in the non-alcohol ready to drink segment mainly carbonated soft drink affecting brands like Pepsi, 7Up, Mirinda and Mountain Dew.
PepsiCo’s exit follows the discontinuation of a contract with local distributor Anugerah Indofood Barokah Makmur. Unfortunately, the parties involved did not reveal the exact reason for leaving the Indonesia market apart from citing “commercial reasons.”
The beverage division of Indofood CBP Sukses Makmur Tbk, which includes Club water, Pepsi, Fruitamin fruit flavoured drink and Ichi Ocha RTD tea, continues to register losses despite increase in revenue in 2018. This situation persisted during the first half of 2019.
Japan’s Asahi quit the beverage joint venture with Indofood on 31 December 2017.
We feel the failure of Pepsi beverages in Indonesia is most likely due to the lack of innovation. Innovation is becoming important in the highly competitive beverage business. If you look at PepsiCo’s beverage porfolio in Indonesia, there is simply a lack of innovation. There is no milk-based beverages, coffee, flavoured water and juices or even simple thing like flavour innovations in the flagship Pepsi brand in recent years. Without innovation, it is hard for PepsiCo to engage with consumers.
Even AJE Indonesia, traditionally a volume game player, has in recent years introduced new products including RTD tea, juices and energy drink.
The exit of Pepsi serves as a warning shot for beverage players to keep on innovating.