Juice Stuff

Juice is a popular category; its retail value in China was expected to grow 94% by 2012 compared to 30% for carbonated soft drinks. In one high profile incident the Chinese government rejected Coke's $2.4 billion bid to buy Huiyan juice, a leading juice company in China.

           

                                                                         Huiyuan Juice  

                                       

Foreign Direct Investment from all sources in China in 2010 rose to a record $105.7 billion, underscoring confidence in the growth forecasts. The Coca-Cola Company built its first bottling plant in China in the decade after the First World War and was the first company to distribute its products in China after Deng Xiaoping opened the country to foreign investors in1975. Today Coca-Cola has an ownership stake in 24 bottling joint ventures – in most cases indirectly through two Hong Kong based companies it partially owns: Swire Beverages and Kerry Group. Coca-Cola also operates a wholly foreign owned enterprise that produces beverage concentrate in Shanghai and is the direct joint-venture partner in a similar facility in Tianjin.

                                                        

                                                       Coca-Cola       Coca-cola's own Juice

The benefits of the company's success are widespread that in addition to the 14,000 employees Coca-Cola directly supports in China, the company's suppliers, distributors, wholesalers, and retailers employ an additional 400,000 people. Coca-Cola has updated the country's old state-owned facilities introduced improved product – quality testing, and provided training programs for managers in the industry. The company's total investment in China during the last 20 years has exceeded $1.1 billion. As well as selling its own brands it has also developed local brands through Tianjin Jin Mei Beverage Co. Coca-Cola is expected to invest $4 billion over the next 4 years to expand into other beverages such as fruit juice, which is very popular, and dominated by local producers.

Staying on top in China's beverage industry will not be easy for Coca-Cola. The company, along with other foreign soft-drink companies, is eager to see China reform its administrative policies: a new bottling plant currently requires a three-year wait for government approval, and concentrate production volume must be re-authorized annually. China's World Trade Organization agreements with the United States and the European Union do not address soft drinks specifically, though they do address national treatment issues that could level the playing field between foreign and local competitors. Another major hurdle facing the company is an increasingly competitive domestic beverage industry--in part because of Coca-Cola's own efforts to develop the industry's supply and distribution links. 

Why did Coca-Cola opt for joint ventures and local distributors? Probably, because of the problem of how to deal with local customs and markets. Joint ventures are the only way of doing business for a foreign business in china. And local distributors are the best way of understanding how to do business and communicate with local conditions. 

Sources: Coca-cola, & coca-cola china, Huiyuan Juice