labels: Soft drinks, Brand Dossier, Marketing
Cola war heats up in China with Coca-Cola's new $2-billion investment plans news
07 March 2009

The new arena for cola wars has shifted to the world's third-largest beverage market with Coca-Cola planning to invest $2 billion over a period of three years in China, where it is trying to extend its lead in the soft-drink market over its arch rival, Pepsi.

Speaking at the inauguration of its new $90 million Global Innovation and Technology Center in Shanghai, President and CEO Muhtar Kent said that the company plans to invest $2 billion in China over a period of three years on new plants and distribution infrastructure, sales and marketing and R&D.

This new investment plan of $2 billion comes after the September announcement of its $2.4 billion acquisition of Beijing-based Chinese juice maker Huiyuan Juice, which is its biggest acquisition in China (See: Coke pulls-off biggest ever acquisition of Chinese firm with $2.4-billion buy of Huiyuan Juice) but the deal is still awaiting approval from the Chinese regulators.

With Coke having a 51-per cent lead in the Chinese soft-drink market share in China with 54 per cent while Pepsi has 31 per cent, the worlds largest soft-drink maker wants to extend its share further as sales in the US has been declining and is relying more on its $1.6 billion investment made in China from 1979, which has since become its third largest market after the US and Mexico.

The company had said in its annual report that its sales by volume increased 19 per cent last year in China and in the fourth quarter of last year the increase was 29 per cent, which was the largest double digit growth in 21 consecutive quarters in the country.

Coca-Cola has more than 33,000 employees in China and approximately 300,000 employed indirectly with its suppliers who serve nearly 1.9 million customers every week and plan to grab more of the 1.3 billion consumers in China.

Coca-Cola has been operating in China since 1979 and sells over a billion bottles of Coke a year besides other products, like Sprite and its Minute Maid orange juice in China.

It is also the leading provider of sparkling beverages, juices and juice drinks and ready-to-drink teas and coffees. Through the world's largest beverage distribution system, consumers in more than 200 countries enjoy the company's beverages at a rate of 1.5 billion servings a day.

Its arch rival led by Indian born Chairman and CEO Indra Nooyi of Pepsi, not wanting to be trailing too far behind, had announced in November that it would invest $1 billion in China over a period of four years to expand its manufacturing capability, research and development and sales force in the country. (See: Pepsi to invest $1 billion in China)

The non-US markets provide more sales to Pepsi Co and its focus of late has been in emerging markets of Brazil, India, Russia and China, as 44 per cent of the company's sales originated outside the US last year with a double-digit growth in China and high single digit growth in India and sales moved to $1 billion in Russia.

Industry experts feel that the new $2 billion investment plan in China announced by Coca-Cola was to smoothen its acquisition of Chinese juice maker Huiyuan Juice, which has come in for a fair bit of criticism from the Chinese media voicing concerns over a foreign company taking over an iconic national brand.

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Cola war heats up in China with Coca-Cola's new $2-billion investment plans