Comment: Nestle/Coca-Cola: China a rising star
Nestle and Coca-Cola have both announced Chinese expansion plans. With China's WTO entry still hot news, two of the largest consumer multinationals will build their businesses there.
This is good sense. As China develops and integrates with the rest of the world, it presents major expansion opportunities. And Nestle and Coca-Cola seem better placed than most to cope
with the difficulties inherent in doing business in the country.
Food and drinks multinationals Nestle and Coca-Cola are both already well established in China, but feel that the country still holds massive unrealized potential. Nestle had sales of US$570m last year in China, operating 18 plants with a workforce of over 7000. The extent of Nestle's expansion has yet to be confirmed, although it is clearly looking to build on and supplement projects such as its joint venture with Haoji Food, China's second largest chicken bouillon producer.
Coca-Cola's plans for what is already its sixth largest global market are more specific. The soft drinks giant will invest US$150m in China over the next five years, during which time it plans to open six new bottling plants in the country, taking its total to 34.
Annual per head consumption of Coca-Cola products in China currently stands at nine units per year. In Hong Kong the same figure is 142 units. While reaching Hong Kong levels of consumption may be unrealistic, the figure demonstrates that the country holds considerable potential.
Coca-Cola is already seen as one of the more aggressive multinationals in the Chinese
market, but the company is sure that it can expand further.
China is still not an easy place in which to do business. High levels of corruption continue to blight the Chinese business environment, and distribution to outlying provinces remains at best irregular, at worst impossible.
Despite this, both Nestle and Coca-Cola have managed to overcome, or at least cope with these difficulties. They have set out their stall to penetrate the Chinese market more deeply, and are acting very quickly. The two companies are now in an excellent position to benefit from the continuing economic development of the world's most populous nation.
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