Comment - Coca-Cola Co Betting on China
Coca-Cola remains increasingly reliant on China for growth
The Coca-Cola Co's pledge to invest another US$4bn in China serves to cement the company's footprint in what is arguably its most important emerging market.
This latest and significant investment follows the Coca-Cola's pattern of big spending in China over the last five years or so. The soft drinks giant has ploughed $3bn into the country over the last three years, through its bottling partners, Swire Beverages and COFCO Coca-Cola Beverage Co.
By now, it might have dug even further into the market. In 2008, Coca-Cola was planning a potential $2.4bn takeover of the country's largest juice firm Huiyuan Juice Group, only to see the deal snuffed out by competition authorities at the last minute. Hugely disappointing no doubt, but, so far, this setback seems to have only served to spur Coca-Cola on to make its own way in China's thriving economy.
Cynics might question what choice Coca-Cola had. With soft drinks sales struggling in North America and China tipped to become the world's largest economy in the first half of the 21st Century, the group could hardly have taken its ball home.
Fresh figures back up this point. In the second quarter of 2011, figures published by China's National Bureau of Statistics show that the country's GDP rose by 9.5%. The US, meanwhile, is teetering on the brink of another recession.
Coca-Cola and other multinational drinks firms are increasingly reliant on China for volume growth, even if this growth has not yet translated into significant profits momentum.
Only last month, the CEO of PepsiCo told China's vice-premier Wang Qishan that the company is keen to increase its investment in China. Last year, PepsiCo pledged an investment of $2.5bn in its food and beverage businesses in the country.
Anheuser-Busch InBev, meanwhile, is also looking to up the presence of its global beer brands in China as it lines up a push for Stella Artois in the country. Earlier this year, the company strengthened its grip on the Henan province by signing a deal to acquire Weixue Beer Group Co. Nestle, meanwhile, recently announced the purchase of a controlling stake in Chinese food and drink maker Yinlu Foods Group.
To date, Coca-Cola operates around 40 plants in China, employing around 48,000 staff. The country accounts for 7% of Coca-Cola's annual volume sales.
Most multinationals will tell you that China remains a golden business opportunity. Coca-Cola's latest spend proves that the soft drinks giant is prepared to put its money where its mouth is.
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