Why Coca-Cola is spending $4 billion in China

The world's most popular beverage maker is facing increasing competition within the Chinese market.

By Benzinga Nov 8, 2013 4:06PM

Credit: © Jacky Naegelen/Reuters
Caption: Cases holding bottles of Coca-Cola are seen on the production line at their bottling plantBy Jayson Derrick


Coca-Cola (KO) is planning to invest $4 billion in China and build new plants, according to Reuters.


The $4 billion will be spent between 2015 and 2017, as the world's most popular beverage maker is facing increasing competition within the Chinese market. The company has already committed to investing $4 billion in the country through 2014.


"The beverage market is quite competitive right now and Coke is going to have to do a lot more acquisitions rather than growing through organic growth," Shaun Rein, a Shanghai director of China Market Research Group, told Reuters.


Coca-Cola maintains a 16 percent market share by total volume in 2012, down from 16.6 percent five years ago. Chinese consumers are beginning to shun international brands like Coca-Cola, while embracing domestic brands such as JDB, whose signature Jia Duo Bao Red Can outsells Coca-Cola in many provinces, despite being twice the price.


Coca-Cola's investments in China should not come as a surprise. According to Market Research, the Chinese carbonated soft drink market is expected to appreciate at a compounded annual growth rate of 3.5 percent throughout 2012 to 2017.


Coca-Cola's competitors are also heavily investing in the Chinese market. PepsiCo (PEP) plans to open 10 to 12 new plants in China over the next few years with a $3.5 billion investment.


Coca-Cola joins the ranks of many American beverage and food companies that are looking at China to fuel future earnings. Starbucks (SBUX) considers China one of its fastest and most important markets with over 3,000 stores. Yum Brands (YUM) is the largest restaurant chain in the Chinese market through its thousands of KFC and Pizza Hut stores across the country.


Shares of Coca-Cola were unaffected Friday, trading up 0.2 percent.


Read more from Benzinga

40Comments
Nov 10, 2013 12:28AM
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How many plants will coke close in the U S to divert the funds into the booming Chinese market?

Will the Chinese competitors steal coke's formula and intellectual properties the same way they do to so many U S products?  Will the Chinese produce poisonous soda to sell to the U S citizens who bought the poisoned dog treats that have killed hundreds of beloved U S pets?  Why are so many U S companies getting in line to kiss china's ****.  Is our economy so doomed that all the forward thinking U S companies want to get the hell out of America and move to China to keep the money rolling in?

Nov 9, 2013 10:19PM
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Coca Cola is wasting their money. I have experienced first hand how the Chinese are 1) racist beyond all belief,  2) quick to knock off your design/product. The company would be better off focusing on sales in the rest of the world.
Nov 10, 2013 5:59AM
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All these companies looking to China to 'fuel future earnings' are just throwing good money after bad, or as usually looking at the short term gain only.

China has proven that they only let you compete in China until they don't need you anymore and domestic supply can sustain demand at roughly the same price.  This generally happens after domestic companies usually through a silent wink and nod from the government steal your product design and formula.  The Chinese consumer will be happy to sell the foreign company and their investors right down the river the first chance they get.  And the government will assist in domestic competition getting that chance, through tariffs, import restrictions, and other regulations.

Nov 9, 2013 10:59PM
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there should be a American Law to tariff American Corporations abroad to help with America's unemployment crisis. after all, they prospered here, then sought a cheaper labor market to resale imported goods here, causing catastrophic unemployment here.........
Nov 10, 2013 9:18AM
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THE RATS ARE LEAVING THE SHIP!!!!!

THE COCKROACHES ARE COMING IN!!!!!!!!

Nov 10, 2013 3:22AM
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Hey, they need something to wash down all that smog!

They get our jobs, along with poison water and Coke.

Poetic?

Nov 10, 2013 10:21AM
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Pure greed is the only reason lets be honest.  Sell out your country for profit is shameful Coca Cola is just one of many glad I do not drink that garbage.
Nov 10, 2013 4:09PM
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WHAT A NATION OF IGNORANT NINNIES THE U.S IS!!!!!

LIKE COKE IS SHOVING THEIR PRODUCT DOWN YOUR THROATS!!!   WHO MADE THEM A GIANT?????       I CAN CLEARLY SEE HOW WE ARE IN SUCH A MESS - AND RIGHTLY SO!!!!

WHY DON'T A BUNCH OF YOU SUE COKE FOR MAKING YOU MAKE BAD DECISIONS???!!!

HELL- WHY DON'T YOU SUE OBAMA FOR MAKING YOU BELIEVE A LIAR???!!!

Nov 8, 2013 6:27PM
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Because their water and food is toxic...yuk yuk
Nov 10, 2013 11:56AM
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How about they make a coke product that is healthy instead of the dose of phosphoric acid and 9 teaspoons of sugar/corn syrup in every can. I wonder how many cases of type 2 diabetes, pancreatic cancer, and false teeth their products have caused.
Nov 10, 2013 3:54AM
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I wonder why Coca Cola doesn't consider another course of action such as making their soft drinks taste better. Nah!  That would be too simple and straight forward.  It is so much more fun to be a little too clever.

I am old enough to remember when Coke was really delicious.  But those days are gone. 

Nov 10, 2013 12:13PM
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One can only hope that Coke is losing profit in the US because more Americans are waking up and realizing that all soda is making us fat and sick!
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So, Chinese consumers are more willing to buy domestic products than foreign, even at twice the price?   Only proves they're nowhere near as stupid as American consumers, who don't understand (or were never taught?) that when you buy imported goods, it's BAD for your country?
Nov 9, 2013 11:44PM
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until they get it and force us out!!
Nov 10, 2013 2:37PM
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It's  called simple arithmetic:  China has 5 times the population of the USA.
Nov 10, 2013 4:00PM
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DUH....factsandlogic....

 

You really aren't too logical about the article or discussion about Coke and China...

 

WTF does all that gibberish bullshidt, you wrote mean...??

Do you invest in, or buy or drink Coca Cola...?

Nov 10, 2013 12:53PM
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I think the company should leave it's product here. We the people should have the jobs here and take care of our own problems. They are suppose to be so far advanced in education,electronics let them deal with their soft drinks. The product it's self doesn't  make you fat, it's how much the person or persons consume. It's called self control and most of the problems could be avoided at a early age!! The yes and no game we are all taught when you are growing up.

Nov 10, 2013 11:02AM
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Give Coke credit. It will be hard to compete in China, but there is profit to be had. I have bought Coke around the world and while I would not drink the water I felt save drinking Coke. China ruins their reputation with contaminated and flawed products both domestically and for export, while Coke maintains their standards around the world. Chinese people are as concerned as people anywhere about drinking, eating or using contaminated and flawed products. In the past the Chinese have suffered in silence when they got sick and died from the contaminated food and drink. The country with the world's largest population will welcome Coke.
Nov 11, 2013 8:02AM
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Coca-Cola has too much sugar. Diet coke has strange taste. I like green tea and black tea with milk.
Nov 10, 2013 3:55PM
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Econ 101.  If you mandate that companies manufacture stuff in the U.S. and pay union wages then a foreign company will make a competing product and export it to the U.S. 

 

AND IF YOU ARE HONEST, if that happened you would scream bloody murder that the U.S. company which was screwing you trying to charge two or three times more than the competing foreign product.  They you "Buy American types" would buy the foreign product because it is cheaper.  YES YOU WOULD!

 

In conclusion, that U.S. company would go out of business and every American worker in the business would be unemployed.  NICE!   At least when competitive pressure necessitate that a company manufacture stuff overseas, they remain in business and people in marketing, distribution, admin, etc. still have those jobs in the U.S.  So sure, scream bloody murder, and drive U.S. companies out of business by requiring in some shape or form business to manufacture in the U.S. and try hopelessly to complete against cheaper imports and loss even more jobs.

 

Stop being angry for the sake of being angry and engage the brain. Please try.  Economics are really pretty straight forward.

 

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