Coca-Cola looks to China

26 June 2009

ATLANTA: Coca-Cola, the soft drinks giant, is aiming to expand its operations and increase it sales in China, based on the understanding that the country could ultimately become its largest single global market.

According to Millward Brown, Coca-Cola is the third most valuable brand in the world, and it has increasingly been focusing on the idea of "global tribes" as a key driver of its marketing strategy.

China is now the company's third-biggest national market, overtaking Mexico last year after posting a 19% upturn in sales on an annual basis.

Revenues also improved by 10% in the country in the first three months of 2009, compared with a total increase of just 2% year-on-year in this period.

It is estimated that the US giant holds a 50% share of the carbonated drinks market in the world's most populous nation, and Coca-Cola is also looking to increase its presence in the juice sector.

Doug Jackson, president of its Chinese arm, argued the country "has the potential to become our largest market in the world" in the long-term.

One of the main reasons for this is that the number of people living in China's cities could increase by 300 million by 2020, which constitutes a "big opportunity", according to Jackson.

He also argued that the average consumer in the country currently drinks 25 bottles of Coke a year, a total that compares with hundreds of bottles per person in the US.

As previously reported, Coca-Cola intends to invest $2 billion (€1.4bn; £1.2bn) in China to boost its marketing and manufacturing operations there over the next three years, compared with an outlay of just $1.6bn in the previous three decades.

It also had a $2.4bn bid for Huiyuan Juice Company – one of the biggest local operators in the juice category – turned down earlier this year, and is therefore focusing on boosting sales of its Minute Maid juice brand.

Other recent initiatives include opening two new bottling plants in central and western China, in Nanchang and Xinjiang respectively.

Muhtar Kent, its chairman/ceo, argued that these new facilities will allow Coca-Cola to "increase our geographic presence, enhance our competitive edge in China and support local community development."

The company has also increased its marketing activity in the country, such as by sponsoring the Olympic Torch Relay in China, and is also involved with EXPO 2010 in Shanghai.

Data sourced from China Daily/Fox Business; additional content by WARC staff