The strategy of Coca-Cola in China

Chinese “Economic Reform and Opening up” policy was started in 1978; in the same year, the Coca-Cola Company returned to the Mainland market, becoming the first foreign enterprise who entered Mainland China after 1949. Therefore, its 30-year exploration can be regarded as an epitome and reflection of foreign direct investment in China. In the following chapters, I would like to focus on three aspects: Coca-Cola’s return journey; its strategies in Chinese market and the competition against local players. As we already had the example of KFC in China I found it interesting to focus on the example of another international company in China, especially because Coca-Cola is the first one to enter Mainland’s market.

In 1927, the Coca-Cola Company made its Chinese presence with two bottling plants established in Shanghai and Tianjin. Three years later the third plant was added in Qingdao. The Shanghai plant ranked as the largest Coca-Cola bottling plant outside the United States in 1933 and became the first plant outside the United States to sell one million cases annually in 1948.

With the foundation of People’s Republic of China (PRC), all foreign companies were asked to leave. The Coca-Cola’s plants in the Mainland were nationalized and the equipments were used for the production of local soft drink.

[...] To sum up, one can assert that foreign competitors such as Uni- President and Kirin Brewery Company are already implementing many means to grab as many market shares as they can and especially in the booming tea- drink oriented market. This constitutes a main threat for Coca-Cola as the tea-drinks market is progressively overcoming the carbonated-drinks market. A domestic competitor “Future Cola” produced by Wa Ha Ha: Future Cola is manufactured by Hangzhou Wahaha Group. This group holds market shares in China, and constitutes the third-largest manufacturer of fizzy soft drinks in China behind Coca-Cola and Pepsi Cola. It is even distributed abroad (by Reed's, Inc. [...]

[...] (Source Euromonitor) The first step of this strategy is the launch of an already existing brand in their range: Minute Maid, which is specialized in fruit juices. The second step has recently hit the headlines: The Coca-Cola Company's made $ 2.3 billion bid in September for premier juice maker China Huiyuan Juice. China is Coca-Cola's fourth largest market, and the proposed transaction would be the company's largest overseas acquisition. If the deal goes through, it could strengthen Coca-Cola's stranglehold in one of the world's fast growing beverages market. [...]

[...] In 1986, Coca-Cola took advantage of the British queen’s trip to China to improve its brand recognition. It offered 200,000 US dollars, which was much beyond its annual revenue in China at that time to China’s Central Television station (CCTV), helping them buy the documentary on this queen’s trip produced by BBC. In return, CCTV permitted a Coca-Cola commercial to air on the state-run network, which was a signal that the company could promote its products to Chinese consumers in a high-profile way. [...]