The Coca-Cola Company (KO) announced plans to invest over $4 billion in China along with establishing new plants between 2015 and 2017 to gain a stronger foothold in approximately 421 billion yuan ($69.12 billion) soft drinks market of China, according to Reuters.
Soft drink makers Asia-based spokeswoman Sharolyn Choy told that the company has added on this amount to the previously announced investment of $4 billion to be invested from 2012-2014.
Focus on healthier drinks
Choy added that the company is also exploring deals with local firms. Analysts believe that this will start a new trend in China of more local-style herbal teas and healthier drinks.
The Company has plans to offer more of traditional Chinese items such as wolf berries and herbal ingredients, according to David Brooks, president of The Coca-Cola Company’s Greater China and Korea business unit. Also, many low calorie and no calorie drinks will constitute the offerings for the aging population, said Brooks. Brooks said that, over a span of three years investment will be increased annually.
The sales of the fast food chains such as McDonald’s Corp and KFC parent Yum Brands Inc has declined in China as consumers are looking more for healthier eatables and drinks.
Intense competition ahead
Shaun Rein, Shanghai-based managing director of China Market Research Group told Reuters, “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.”
Coca-Cola is competing with some of the well established local brands such as JDB, which sells herbal tea called ‘JDB Red Can’, and has more sales than Coke in many parts of China despite having double price than Coke.
According to Market research firm Euromonitor, the Coca-Cola Company dominates the drink market in China though the market share dropped in 2012 from 16.6% five years ago to 16 percent. Ting Hsin International Group, owner of food and beverage maker Tingyi Cayman Islands Holding Corp holds second position and increased its market share from 8.8% to 12% in the same period.
The economic depression in Europe and Asia made the Soft drink maker lose its target for April-June quarter. The problem may not be over as China’s economy is set to grow at its slowest pace in 23 years in 2013 owing to fall in export sales.
