Coca-Cola to Invest $4 Billion in China Over Three Years
Coca-Cola Co. (KO) and its Chinese bottling partners will invest $4 billion in the world’s fastest growing economy over three years from 2012 amid plans to build more factories and win market share from rival PepsiCo Inc.
The money will help build bottling plants, boost distribution and develop new cold drinks for the maker of Fanta, Nestea and Glaceau Vitaminwater, Coca-Cola spokeswoman Zhao Yanghong said in a phone interview from Beijing today.
The world’s largest soft-drink maker is investing to focus more on “one of our most important growth markets in the world,” Chief Executive Muhtar Kent said in a statement today. China sales for Atlanta-based Coca-Cola topped 1 billion unit cases in the six months through June, double the rate of 2005, when it sold that amount for the whole year, the statement said.
“China is a real important market for them,” Ben Cavender, an analyst at China Market Research, said by telephone from Shanghai. “In order to stay ahead of Pepsi, they need to keep investing as the competitor is investing a lot of money in the market as well.”
Coca-Cola said in June it was in talks with China’s government to sell shares in Shanghai. The company posted worldwide volume growth of 6 percent in the second quarter, and aims to double system revenue by 2020.
New Plants
The company, whose Sprite brand is China’s top-selling soft drink, will open plants in the northern cities of Yingkou and Shijiazhuang, the statement said. Coca-Cola has 40 plants in China employing more than 48,000 people and about 7 percent of sales volume is made in the country, it said.
Coca-Cola gained 1.6 percent to $69.28 in New York trading yesterday and has advanced 5.3 percent this year.
The maker of Minute Maid juice will have invested $7 billion in China between 2009 and 2014 with its two Chinese bottling partners, according to the statement. Kent in November said Coca-Cola was spending the $2 billion earmarked for China from 2009 to 2011 faster than anticipated and it may invest “a little bit more” to meet demand.
China’s volume growth of 21 percent was Coca-Cola’s highest in the Pacific region, Kent said in last month’s earnings teleconference, according to a Bloomberg transcript.
PepsiCo in May last year said it planned to invest $2.5 billion in China over a three-year period. It had in 2008 announced the company would spend $1 billion through 2010 in the world’s most-populous nation.
Market Leader
Coca-Cola is the dominant soda maker in China with 61.5 percent of the market last year, followed by Pepsi in second place at 29 percent, according to London-based researcher Euromonitor International.
For soft drinks, a category that includes fruit and vegetable juice, ready-to-drink tea and bottled water, Coca-Cola is also No. 1 in China with 16.8 percent market share, according to Euromonitor’s data.
Tingyi (Cayman Islands) Holding Corp. an instant noodle and beverage maker, ranked second with 14.4 percent, closely held Hangzhou Wahaha Group Co. was third with 7.2 percent and PepsiCo was at No. 4 with 5.5 percent, the data show.
To contact the editors responsible for this story: Frank Longid at flongid@bloomberg.net
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