Pepsi tipped to corner less than 1 per cent of China's smartphone market after launch of branded handset

Global beverage and snacks giant PepsiCo is expected to corner a small, but potentially important, niche in mainland China's smartphone market after the launch of its first branded Android handset there next week.

"We forecast Pepsi to capture less than 1 per cent of China's smartphone market in 2016," Neil Mawston, executive director for global wireless practice at technology consultancy Strategy Analytics, told the South China Morning Post.

New York-based PepsiCo, which runs about 14 food and beverage brands that each generate over US$1 billion in annual sales, plans to unveil its "Pepsi P1" smartphone in Beijing on Tuesday. The expected retail price is US$205.

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"PepsiCo is exploring new avenues for brand promotion with smartphones ... and reaching out to younger Chinese consumers who are more likely to drink Pepsi Cola," Mawston said.

Technology research firm IDC has forecast a slight growth in total smartphone sales in mainland China this year to about 424 million units, up from 420 million last year, amid a slowdown in the world's largest smartphone market.

Even if the market remains sluggish next year, a less than 1 per cent niche for the Pepsi P1 could potentially amount to sales of about one million units in a highly competitive industry.

"PepsiCo is very good at distributing fast-moving consumer goods," Mawston said. "So we expect to see some innovative use of distribution channels for the P1 smartphone across China, such as supermarkets, convenience stores, vending machines and even music festivals."

"If the Pepsi P1 becomes a major hit, Coca-Cola will be forced to respond with a Coke phone next year," Mawston added.

Technology news site Mobipicker, which was the first to report about the launch, said on Thursday that the "Pepsi Phone" page on popular microblogging site Weibo had been taken down, following "the avalanche of news circulating around the Pepsi P1".

A PepsiCo spokeswoman told Reuters on Monday that the company was working with a licensing partner to sell a line of mobile phones and accessories exclusively in mainland China.

She said the effort was "similar to recent globally licensed Pepsi products, which include apparel and accessories".

According to Mobipicker, the Pepsi P1 will have a 5.5-inch high-definition screen, a 1.7-gigahertz processor, 2-gigabyte random access memory, 13-megapixel rear camera and 5MP front camera and 16GB storage capacity. It will also run the Android 5.1 "Lollipop" operating system.

Shenzhen Zhongtai Chuangxin Science and Technology, a subsidiary of privately held Aok International Group (HK), is widely speculated to be the Chinese licensing partner PepsiCo has not identified.

Founded in 2006, Shenzhen Zhongtai Chuangxin describes itself as one of the "leading professional manufacturers and exporters of a full range of speakers, headphones, other mobile accessories, gift products and more".

The company, which operates a 2,000 square metre factory in Shenzhen, listed Heineken, Pepsi and Hewlett-Packard among its high-profile customers.

Tay Xiaohan, a senior market analyst at IDC, said PepsiCo's branded smartphone will face stiff competition in a saturated market with many low-cost handset brands. These include new market players LeTV, Lenovo Group subsidiary Zuk and Qiku Network Technologies, a joint venture of security software giant Qihoo 360 and Hong Kong-listed smartphone maker Coolpad.

"Unless Pepsi is able to provide some unique services for its phones, there may not be that much opportunity for its branded smartphones to grow in China next year," Tay said.

Fast-growing technology start-up Xiaomi was the top smartphone supplier in mainland China during the quarter ended June 30, with almost a 16 per cent market share, according to separate estimates by research firms Canalys and Counterpoint.

The other leading smartphone suppliers last quarter included Huawei Technologies, Apple, Lenovo, Samsung Electronics and Vivo Electronics.

Kiranjeet Kaur, a research manager at IDC Asia-Pacific in Singapore, said the Pepsi smartphone was a way "to differentiate itself in the China market, where it is a distant second to Coca-Cola".

"It's interesting to see how there are various [business] models existing in the smartphone market," Kaur said. "Xiaomi is disrupting the industry by focusing on online sales; LeTV is selling phones at zero or negative profits because it intends to make money through services; and now fast-moving consumer goods companies using smartphones for their branding activities.

"I wouldn't be surprised if PepsiCo also made a move to the smartphone market in India, where Pepsi is still second to Coke," he said.

Lenovo, Huawei, Xiaomi, Gionee Communications Equipment and Oppo Electronics are among the major Chinese smartphone suppliers aggressively expanding in India this year.

Linda Sui, a director at Strategy Analytics, has predicted that India will overtake the United States as the world's largest smartphone market by 2017 when total sales there reach 174 million units.

Source: Pepsi tipped to corner less than 1 per cent of China's smartphone market after launch of branded handset