Serm Suk, backed by the billionaire owner of Thai Beverage, Charoen Sirivadhanabhakdi, said its new soda called "est" garnered 19 percent of Thailand's $1.8 billion cola market in just two months following its Nov. 2 launch.
Pepsi's breakup with its bottler meant it also lost access to Serm Suk's vast distribution network, which delivers drinks to about 200,000 stores, restaurants and vending machines serving Thailand's market of 67 million people.
The two companies had a non-compete clause that expired when their contract ended on Nov. 1. Pepsi has similar non-compete clauses with bottlers in other markets such as China, but the decision backfired in Thailand.
The following day, est hit the market, costing about the same as Pepsi and sold in the same bottles, with a red, white and blue logo reminiscent of Pepsi's. Pepsi declined to comment on whether it was pursuing any trademark violation claim.
"We did not deliberately set out to push Pepsi off the shelves but we have a very strong distribution network and if we stop distributing for one company, that company's products will disappear from the shelves," Pragnee Chaipidej, advertising manager at Serm Suk, said in an interview.
She declined to comment on similarities of est to Pepsi.
Thailand was one of the few countries where Pepsi's cola drink outsold arch-rival Coca-Cola, but Coke caught up in 2011 and built a lead last year, according to data from research firm Euromonitor International.
Euromonitor's figures show Pepsi's share of the cola market dipped by 2.6 percentage points to 36.1 percent in 2012, compared with Coke's 40.1 percent. Est, a name that has no meaning in Thai but was intended as a play on superlatives such as "biggest" or "tastiest," debuted at 2.1 percent even though it was available for only two months of the year.
"We welcome competition, and short-term fluctuation in market share is not our barometer for success," said Jeff Dahncke, senior communications director at PepsiCo in Purchase, N.Y.
Pepsi has opened a $170 million bottling plant in Rayong, 179 kilometres southeast of Bangkok, which it said can produce enough drinks to serve every consumer in Thailand. It partnered with Deutsche Post AG's DHL for distribution. Dahncke said the first phase of distribution, which involves getting drinks into chain stores, was in place. The next phase is smaller mom-and-pop shops.
The Thailand trouble stands in contrast to PepsiCo's global performance, which has propelled its shares to their highest level since 2008. The company reported stronger-than-expected fourth-quarter results last week and raised its dividend.Much of its recent success stems from a turnaround in its North American operations, which account for half of the company's global revenue, and strong growth in sales of food. The Middle East, Asia and Africa unit contributed only about 10 percent of total revenue in 2012. The company does not break out figures for Thailand.
Pepsi uses its own distribution for snacks in Thailand, so that business is unaffected. But its soft drinks aren't reaching the same market as they were before the Serm Suk partnership ended.
"What we have seen is a major drop in distribution and availability of Pepsi products," said Shakir Moin, Coca-Cola's marketing director for Southeast Asia.
Customers have also noticed Pepsi's absence from restaurant menus and store shelves, and this has become a hot topic of discussion on blog posts and social media.
"It's pretty much impossible to find a bottle of Pepsi these days," said Itiporn Lakarnchua who works for an English-language radio station in Bangkok, adding that est tasted "much sweeter and more peppery" than Pepsi or Coke.
