via http://www.bloomberg.com
Coca-Cola, the world’s largest
beverage company, plans to invest more than $4 billion in Chine from 2015 to 2017 as it builds factories and adds new products
to meet demand and counter rising competition.
The Atlanta-based company is also open to acquisitions in
China and may consider deals with complementary businesses, such
as makers of juices or plant-protein drinks like almond milk,
David Brooks, president of Coca-Cola’s Greater China and Korea
business unit, said in an Nov. 6 interview in Shanghai.
“You will see an absolute increase in investment on an
annual basis and on a three-year basis,” Brooks said,
commenting on the company’s future plan for China. Coca-Cola is
investing $4 billion in the country for 2012-2014.
The U.S. soda maker is ramping up its China investment as
the company and its bottlers seek to double global revenues to
$200 billion in the 10 years to 2020. While it is the country’s
largest soft-drink maker, it faces competition from companies
including Pepsi-Co and the local Hangzhou Wahaha Group as it
seeks to expand in the most populous nation.
Competition in China’s beverage industry is intense and the
sector is one with “low growth and weak profitability,”
analyst Jean Chan from Sanford C. Bernstein & Co. wrote in a
Sept. 25 report. Sales are typically driven by promotions, she
said.
Coca-Cola said in July that its second-quarter sales volume
in China was little changed after rising 7 percent a year ago.
Sales in the third quarter have shown improvements, and this will
continue over the next several quarters, Brooks
said.
The Asian nation has pared economic growth projections to
an average of 7 percent this decade, compared with 10.5 percent
in the previous 10 years.
Coca-Cola plans to open as many as two facilities each year
in China over the next decade, Brooks said. In the nearer term,
it will invest about $40 million in a new pulp blending factory
in Shanghai, and likely open a plant in the southwestern Guizhou
province in the next two years, Brooks said.
“The beverage market in China is still very fragmented,”
the executive said. “No company has predominant market share,
and there is a huge amount of untapped opportunity left to
grow.”
The company also plans to expand its offerings of Chinese-style beverages, with traditional Chinese items such as wolf
berries and herbal ingredients all being considered in future
drinks, Brooks said, declining to elaborate further. It will
also roll out more low-calorie and no-calorie drinks as it
caters to an aging population, he said.
“People like new flavors,” Chan, the analyst, said.
“Going forward, product innovations will help you expand your
categories and also drive growth.”
Chinese consumers are buying more juices and ready-to-drink
teas and fewer carbonated drinks as they seek a healthier
lifestyle, Chan said.
China regulators blocked the Coca-Cola’s planned $2.3
billion buyout of China Huiyuan Juice Group Ltd. in 2009.
Coca-Cola, which broke ground on the first of its 43
factories on the mainland in 1980, already sells snow-pear fruit
drinks and sour-plum sparkling beverages there. On its website,
there are suggested recipes including sweet and spicy hoisin
spare ribs with Coca-Cola, encouraging consumers to incorporate
the carbonated beverage into local cooking.
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