PepsiCo has partnered with Jiangsu Rilong Food Co Ltd to establish an oat production facility in Jiangsu province in an effort to optimize costs, enhance efficiency and strengthen its presence in China's growing oat market.

The move is seen as a response to the increasing health consciousness among Chinese consumers and rising demand for premium oat products, particularly among seniors.

The new factory, representing an investment of 500 million yuan ($68.6 million), will span nearly 100,000 square meters and produce up to 160,000 metric tons of cereal products annually.

It will manufacture more than 10 oatmeal varieties and offer diverse packaging options. Production is expected to begin by the end of this year, leveraging advanced equipment and refined joint management to optimize end-to-end efficiency, said PepsiCo.

By combining its global expertise with Jiangsu Rilong's production capabilities, the collaboration aims to address the growing demand for cereal nutrition foods among Chinese consumers, said PepsiCo.

The initiative is part of PepsiCo's broader commitment to investing in China. Over the past six years, the company has built or expanded one food factory annually. In 2024, the company broke ground on its first production facility in Northwest China, in Shaanxi province, with a total investment of 1.3 billion yuan. Also last year, its Shandong province food production base began operations, featuring two automated potato chip production lines with an annual capacity of 25,000 tons.

These factories contribute to local economic development, foster upstream and downstream industry clusters, and promote high-quality growth across the sector, according to PepsiCo.

"This initiative aligns with PepsiCo's commitment to the 'Healthy China' strategy, driving innovation in healthy foods and tapping into the 'silver' economy. It reflects our confidence in the Chinese market and our determination to seize new opportunities amid China's high-standard opening-up," said Anne Tse, CEO of Asia-Pacific Foods, PepsiCo.

As demand for healthier products surges in China, PepsiCo has prioritized transforming its product portfolio. In 2022, the company partnered with the Chinese Nutrition Society to establish the "Chinese Nutrition Society — PepsiCo Nutrition Innovation Center".

This initiative focuses on cereal nutrition, gut health, nut-based products and healthy snacks.

China's oat market has shown steady growth, driven by consumer focus on health management. Zhu Danpeng, an independent food and beverage analyst, said that demand for nutrient-rich and versatile foods like oats is propelled by four key aspects — appearance, weight, nutrition and overall health management.

"By establishing the partnership, PepsiCo aims to strengthen its supply chain and capitalize on this growing demand," Zhu said. "As health awareness grows, demand for oat products among the elderly is also rising, positioning oats as a key segment for future growth."

According to Euromonitor International, the retail value of China's hot cereals sector reached 6.95 billion yuan in 2024, up from 6.61 billion yuan the year prior.

Despite its global dominance in the sector, PepsiCo Inc's China market share in terms of retail value in the hot cereals sector ranked second at 26.6 percent in 2024, following No 1 of Guilin Seamild Foods Co Ltd at 34.9 percent.

Research from Soochow Securities in 2024 revealed that the Chinese mainland oat market remains fragmented, with the combined market share of the top three brands at just 51.3 percent, indicating more growth potential.

Meanwhile, research by Mintel Group highlighted that Chinese consumers prioritize natural ingredients when purchasing foods and beverages.

Plant-based protein drinks, including oat beverages, are perceived as more natural than dairy-based options, a key factor in their growing popularity.

"In the oat beverage category, key brands are experiencing stable growth among high-frequency users," said Rika Huang, senior research analyst at Mintel.

In 2024, over 40 percent of surveyed consumers said that oat beverages pair well with tea or coffee, maintaining their leading position among plant-based protein drink segments.

"Naturalness is a unique advantage of plant-based protein beverages over dairy drinks," Huang added, emphasizing the growing appeal of oat beverages as healthier, more natural alternatives.