PepsiCo Inc is pulling the tab of the Chinese smartphone market. But what awaits the Pepsi phone is set to be something bitter than its iconic soda water.
The United States beverage and food giant said on Tuesday it is working with a licensing partner to bring a line of mobile phones and accessories to China in the next few months.
Available in China only, the effort is similar to Pepsi's apparel and accessories licensing campaigns elsewhere.
The maker of potato chips, soft drinks and breakfast cereals quickly made it clear it "has no plans to get into the mobile phone manufacturing business" yet.
"But we are committed to engaging with Chinese consumers at this point of connectivity, and in innovative ways, to grow our brand," it said.
The first ever smartphone bearing the red-white-blue Pepsi logo, likely to be named Pepsi P1, will be a low-end pamphlet, according to model specifications released by tech website mobipicker.com.
Pepsi P1's 5.5-inch screen, 13-megapixel rear camera and 16 GB internal storage place the device in the sizzling 1,000 yuan market where hundreds of models are battling one another.
It is also unclear how the tech-savvy Chinese buyers might respond to Pepsi's latest move in the country.
"I feel a little confused about it, I may not buy the phone unless it has some unique features to show," said Chen Yang, a college student in Beijing who prefers carbonated soft drinks made by Pepsi than The Coca-Cola Co.
Nicole Peng, director of Shanghai-based information technology consultancy Canalys China, said it will be difficult for customers in China to receive the marketing messages from Pepsi.
"I believe international firms should invest in the areas where consumers can relate the products to the value of their brands … For a soft drink brand, releasing a smartphone does not add much value for consumers," she said.
China is the world's largest smartphone market, but shipments have started to shrink as demand is stagnating, according to research firm International Data Corp. Current smartphone sales are boosted by existing smartphone owners who are looking to replace the devices in use while the number of first-time buyers dropped significantly.
Pepsi has been facing strong headwinds in carbonated soft drinks sales long before the smartphone release.
Its carbonated soft drink sales saw a double-digit decline in China last year, the company said in a financial report.
Jason Yu, general manager at research firm Kantar Worldpanel China, said Chinese consumers are increasingly looking for health and functional benefits to their everyday beverage choice.
More price competition in the carbonated soft drink market is foreseeable, and rapid growth of functional drink, juice, premium packaged water and yogurt is also on horizon, Yu said.