Coca-Cola to Expand Investment in China

As the world’s top brand of soft-drink, Coca-Cola is already a formidable presence in China, with sales reportedly making up around seven percent of its global volume. Coca-Cola has experienced significant growth in China over the last five years and the company has made considerable investments with its Chinese bottling partners to keep up with increasing demands for its range of products. Coca-Cola management recently revealed plans for investing an additional $4 billion over the next three years as it expands its interests in this populous region. This commitment, together with the $3 billion invested during the past three years, will bring the company’s investments in China between 2009 and 2014 to a total of $7 billion.

Currently Coca-Cola and its bottling partners employ more than 48,000 people and operate forty-one plants throughout China. Three new plants were built in 2010 in Hohhot, the capital city of the Inner Mongolia Autonomous Region of the People’s Republic of China, as well as in Shanshui in the Guangdong Province, and Luohe in the Henan Province. While many US companies, such as Coca-Cola, Unilever, Starbucks and Procter & Gamble, have had interests in China for decades, the increase in economic activity in domestic markets has led to these companies expanding their businesses in the country. This has been particularly so in the past five years, and huge growth in domestic consumer demand is anticipated in the next three to five year period.

With the global economy under great stress, emerging markets such as China and Africa present export and investment opportunities for developed nations looking to expand. Coca-Cola’s Minute Maid Pulpy is China’s largest juice brand, and marketing strategies, along with increased production facilities, are likely to ensure this remains the case, while at the same time introducing the company’s other products to the Chinese consumer market. It was noted in the company’s financial results for the second quarter of 2011 that it had sold one billion unit cases of product in the six month period, which when compared to five years ago when one billion unit cases were sold for the entire year, it is clear that demand has doubled over this relatively short period.

While there are apparently no plans at this stage to list as a public company on the Shanghai Stock Exchange, when questioned about this the Coca-Cola CEO noted that if the opportunity arose to do so, the company would be interested in following this path, which he sees as a mutually beneficial action to establish the company as a stronger part of the Chinese community.