Last week I wrote a post on Coca-Cola’s efforts to gain a stronger presence in China with its bid for the 17 year-old China Huiyuan Juice Group (CHJG), the country’s largest juice company. Coke is interested in CHJG because while Coke has captured a sizable portion of the carbonated beverage market, its fruit juice line is not as strong. Last Wednesday, Chinese officials rejected Coke’s offer under its anti-monopoly law. In a statement (in Chinese), the Ministry of Commerce cited the need to protect consumers and preserve competition as reasons for rejecting the bid. Some are saying however, the new law allows the government to protect national brands. It has been estimated, but not confirmed, that the two companies together would control around 20 per cent of the juice market.
While the Ministry’s decision did come to some as a shock, the decision could have longer lasting effects on China. The day after the deal’s rejection was announced and reports that Coke might abandon efforts all together, shares of CHJG dropped almost 23 per cent before trading was eventually halted. The shares fell 42.2 per cent in total before regaining some ground, and ended the day at pre-offer, September 2008, levels. Continue reading ‘Coca-Cola’s deal falls flat as Chinese government rejects offer to buy China Huiyuan Juice Group’
With the opening of its $90 million (USD) technology center in Shanghai on March 6, The Coca-Cola Company (Coke) also announced it will invest $2 billion in China over the next three years on bottling plants and distribution infrastructure, sales and marketing, and research and development.
Over the past 30 years, Coke has invested $1.6 billion in the Chinese Market and has good reasons for doing so. China is Coca-Cola’s fastest growth market and its third biggest market (after the US and Mexico) says Muthar Kent, Coca-Cola’s chief executive officer in the article “Coca-Cola to invest more than $2 bln in China over next three years” from SINA English. The article noted globally, Coke posted a five per cent growth in the fourth quarter of 2008 with both sparkling and still beverages, but in China, it posted a 29 per cent gain (19 per cent for the year as a whole). This represents the largest percentage increase in more than five years (21 consecutive quarters). Compared to Coke’s North American market, their annual report showed that sales declined by 1 per cent in 2008.
This $2 billion investment is not the only big move Coke is pursuing in China. Last September, Coke announced its intention to purchase China Huiyuan Juice Group Ltd, China’s leading pure juice maker. China Huiyuan captures about 42 per cent of China’s fruit juice market. The offer is not final, as according to Anti-Monopoly laws, the deal has to be approved by the Ministry of Commerce. While there are some tensions rising due to nationalistic pride, because if this deal goes through, it would be the largest acquisition of a domestic company by a foreign firm, a decision is expected by the end of the month.
Coke is not the only beverage giant to show an interest in China. Continue reading ‘Chinese drinks market a big draw for Coke, Pepsi and other foreign firms’
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