Coca-Cola to Invest $2 Billion in China Over 3 Years
March 6 (Bloomberg) — Coca-Cola Co., the world’s largest soft-drink maker, plans to invest $2 billion in China over the next three years as part of its attempt to win more of the nation’s 1.3 billion consumers.
The investment plan includes a $90 million technology center that opened in Shanghai today, the Atlanta-based company said in an e-mailed statement. Coca-Cola’s proposed investment is 25 percent more than the $1.6 billion it had already spent in China since returning in 1979.
Beverage companies including Coca-Cola and PepsiCo Inc. are expanding in China, betting demand will continue to grow as the recession erodes consumer spending in the U.S. Coca-Cola’s planned spending may also aid its $2.4 billion acquisition of China Huiyuan Juice Group Ltd., which was announced in September and is now awaiting government approval.
“Coca-Cola’s investment is a positive for the Huiyuan acquisition,” said Kevin Luo, a consumer goods analyst with Guotai Junan Securities HK Ltd. in Shenzhen, southern China. “This investment will help create jobs, which would obviously be welcomed by the government, so even though it won’t have a direct impact on the acquisition’s approval, it can’t hurt.”
Pepsi said on Nov. 3 it plans to invest $1 billion in China in the next four years. Japan’s Asahi Breweries Ltd. in January paid $667 million for a 19.9 percent stake in Tsingtao Brewery Co., China’s biggest beer company.
Market Leader
Coca-Cola controls 54 percent of the Chinese soda market and Pepsi 31 percent, according to research company Euromonitor International.
Retail spending in China may rise 14 percent this year, the National Development and Reform Commission, the nation’s top economic planning agency, said in a report distributed yesterday to the country’s legislature. China has also cut taxes and increased welfare spending in a bid to boost consumer spending amid the worst financial crisis since the Great Depression.
“It’s wise for international companies to invest in China, especially at a time when China is trying to boost domestic consumption,” said Kenny Tang, executive director of Redford Securities Co. in Hong Kong. “There’s still room for growth.”
Coca-Cola’s sales by volume rose 19 percent last year in China and declined by 1 percent in North America, according to the company’s annual report.
“Our commitment and confidence in China never wavers,” Coca-Cola Chief Executive Officer Muhtar Kent said in today’s statement. The company will invest in new plants, distribution and sales and marketing, Kent said.
Coca-Cola and Huiyuan, which applied for approval from China’s Ministry of Commerce in September, said then that they expected a government decision by March 23.
“We are in very regular contact with the Ministry of Commerce, and we try to be as helpful as possible in answering questions and providing supplementary information,” Kenth Kaerhoeg, a spokesman for Coca-Cola Asia, said by e-mail today.