Coca-Cola aims to drive growth in China

04 May 2010

BEIJING: Coca-Cola, the soft drinks giant, is planning to develop its operations in China, which currently offers the "greatest opportunity" of all the markets in which it has a presence.

The beverage maker has posted double-digit increases in its revenues in China - which is now its third largest outlet behind the US and Mexico - in each of the last five years.

In 2009, Coca-Cola announced it would spend $2bn (€1.5bn; £1.3bn) enhancing its position in the world's most populous nation, matching the resources it has pumped into China in the previous 30 years.

"China offers the greatest opportunity for us in the world," Muhtar Kent, Coke's chief executive, argued.

During the course of last year, the company opened three bottling plants and a $90m research unit in China, and Kent said its funding programme was "fully on target, if not ahead of target."

Having seen its efforts to buy the Huiyuan Juice Group for $2.4bn, the largest firm in its sector in China at the time, blocked by the Communist government in 2009, Coca-Cola has since adapted its approach.

More specifically, it has placed a heightened emphasis on building up its own portfolio, a strategy which Kent argued had delivered significant success.

"We are the number one juice company with or without Huiyuan … we are totally focused on organic growth," he argued.

With regard to marketing, Coca-Cola invested heavily in sponsoring the 2008 Beijing Olympics, and it has adopted similar tactics for the Shanghai Expo, where it is running the "Happiness Factory" pavilion.

"Our brands benefited substantially by being part of Chinese priorities and aspirations," Kent said when describing Coke's tie-up with the Beijing Olympics.

"It was clear from our first meeting with the Expo organisers that this Expo would be very different to the ones in the past. China was going to give it a special recognition and it would become a big global event," he added.

"We thought this would be a wonderful way for us to showcase what we are doing in China."

In terms of assessing the potential payback from this activity, Kent suggested the impact on brand equity would result from a demonstration of the strength of its commitment to China.

"The only way to measure it is long term," he said.

Some businesses expressed caution after Coke's failed takeover of Huiyuan, and again after Google's recent decision to pare back its Chinese arm, but Kent said a knee-jerk response was unlikely to pay off.

"There is some concern," he argued. "We need dialogue - and to understand why things are the way they are."

Data sourced from Wall Street Journal/Forbes; additional content by Warc staff