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Case
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Reference no. 608-007-1
Published by: Asia Case Research Centre, The University of Hong Kong
Published in: 2008
Length: 11 pages
Data source: Published sources

Abstract

PepsiCo introduced Lay''s potato chips to China in 1997. As its chips business grew in China, it faced increasing difficulties in securing a reliable supply of quality potatoes. In the North American market, Pepsi relied on external suppliers for its potatoes, but in China, it ran into problems both in sourcing locally and in getting its US supplier to grow potatoes on its behalf. The matter was further complicated by the fact that the Chinese government had banned the import of potatoes. Faced with numerous obstacles in sourcing potatoes in China, how should Pepsi go about securing this critical input? Should it rely on external suppliers given China''s immature agribusiness industry, or should it integrate backwards to grow its own potatoes?
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Abstract

PepsiCo introduced Lay''s potato chips to China in 1997. As its chips business grew in China, it faced increasing difficulties in securing a reliable supply of quality potatoes. In the North American market, Pepsi relied on external suppliers for its potatoes, but in China, it ran into problems both in sourcing locally and in getting its US supplier to grow potatoes on its behalf. The matter was further complicated by the fact that the Chinese government had banned the import of potatoes. Faced with numerous obstacles in sourcing potatoes in China, how should Pepsi go about securing this critical input? Should it rely on external suppliers given China''s immature agribusiness industry, or should it integrate backwards to grow its own potatoes?

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