#21 Coca-Cola getting more involved in China
Despite the worldwide economic downturn, Coca-Cola announced in early March that it would invest approximately $2bn in China over the next three years – more than it has invested since its first entry in 1979. Interestingly enough, the news were spread right during the time when Coca-Cola is waiting for government approval for the $2.4bn takeover of Huiyuan Juice Group. Could it be that the announcement was meant to make Chinese officials friendlier towards the take-over? Having grown by an astounding 29 % in q4 of 2008, China is Coca-Cola’s third largest market behind the US and Mexico. Coca-Cola expects the middle class in China to grow by 300m-350m people by 2020 and assumes that they will all drink Coca-Cola products – which is yet to be seen.
November 11, 2010 @ 10:52 pm
Although the worldwide economic downturn, Coca-Cola still keeps increasing investment in Chinese market. To acquire the local company such as Huiyuan Juice Group is an efficient entry mode to enter China market since Coca-Cola could take over Huiyuan’s abundant local knowledge about consumers’ preference and taste, local marketing strategy, well-established distribution channels and benefits from potential high profits. Moreover, the acquisition would let Coca-Cola maintains the control over operations, protect intellectual property and other know and make a long-term commitment to local market although government eventually did not approve the acquisition.
We can process a research about Coca-Cola’s external environment and find out that the Chinese market exactly has great potential opportunities rather than threat in the future. For political environment, there are some governmental restrictions such as the antitrust laws, tax legislation and tariff may be considered as an obstacle for Coca-Cole entering Chinese market. However, the gradually open economic environment and the mass population in China are great opportunities for Coca-Cola to further develop product line and expand market share. The weak dollar makes the price of Coca-Cola more competitive in China. The growing middle class, considerate amount of baby boomers and young generation are Coca-Cola’s target group for soft drinks. To expand and extend the target market, Coca-Cola also focus on product adaptation and invents innovative drinks such as launching the new dairy drink, named Minute Maid Pulpy Super Milky drink, at the first time in China in 2009 due to the increasing demands for dairy beverage and health-diet trend in China market nowadays. Compared with the tea and juice markets, China’s dairy drink market is far from saturated and still growing. Subsequently, Coca-Cola sets up another target group which is adults and the senior for the alternative of new healthy beverage. This development also can be seen as a marketing strategy to separate market segments and further clearly identify its market positioning. The drink is expected to be available in 300 Chinese cities by the end of this year. The fast growing sales basing on the mass population have made China become the third largest market for Coca-Cola, only behind US and Mexico.
The company’s first dairy drink in China further diversified its portfolio in the rapidly growing market and should see the company capitalize on Chinese consumers’ increasing demand for dairy-based products. The American investor Buffett, one of Coca-Cola’s stakeholders, also highly appraises on China’s potential growth in the future and maybe one of the promoters in the Huiyuan acquisition project. Coca-Cola is dedicated to develop various kinds of drinks in order to meet the different needs and build up brand loyalty in China due to the highly profitable prospect and increasing mass population. The investment in Chinese market would become the trend.