Coca-Cola to invest $4b in China over three years

Coca-Cola products are seen for sale at a supermarket in Xuchang, Hennan province, May 26, 2013.[Photo / Asianewsphoto]

Company to use funds for boosting marketing initiatives and improving customer experiences

Global beverages giant the Coca-Cola Co plans to invest $4 billion over the next three years in China.

Speaking at a groundbreaking ceremony for the company's 45th local production site in Xianghe, Langfang city of Hebei province, on Friday, Muhtar Kent, its chairman and chief executive officer, said since 1979 the firm had invested $9 billion in China, which he called its "third-largest market by volume and critically important to the future growth" of the company.

"We are committed to investing here and growing long term," he said. "Apart from infrastructure and system-capability building, the new investments will focus on enhancing consumer experiences through improved marketing and local promotions with our loyal retail partners."

Kent said that the company and its bottling partners - COFCO Coca-Cola Beverages, Swire Beverages and Coca-Cola Bottling Investments Group China - will all invest significantly on expanding production capacity, distribution networks and facilities, and marketing.

Already the producer of leading brands including Sprite, Fanta, and Coca-Cola Zero, Kent said the company in China grew a significant 6 percent in sales volume during the second quarter of this year.

Its flagship brand, Coca-Cola, also had strong growth with volumes rising in double digits during in the same period, he said.

The 50,000-square-meter plant, costing $56 million, will become its key production facility in northern China with a total capacity of 250 million unit cases annually, from nine production lines for sparkling and still beverages.

When its first phase is completed in 2017, about 100 million unit cases will be added to its existing annual production capacity in northern China.

Following the groundbreaking of a new plant in Changsha, Hunan province, a fortnight ago, the new plant is the second Coca-Cola plant to be built under the $4 billion spending program.

Jason Yu, general manager of market research firm Kantar Worldpanel China, said the investment plan is a strong reflection of Coke's ambition to grow further in China, where the carbonated soft drinks market is seen as having huge potential in terms of per capita consumption.

Yu said the intense competition within the country's beverage sector means carbonated soft drinks producers have to be highly creative to attract attention and sales.

Last year, Coca-Cola launched a promotion in which it put international and local song names or lyrics on its bottles. The QR code on the label could be scanned to redirect to a song on the website sayitwithasong.coke.com, so it could be shared with a friend or a loved one, through Facebook or by mobile phone.

Yu said the "lyric bottle" was a good example of how established brands can engage consumers and use their packaging as a catalyst to drive sales.

Kantar Worldpanel figures suggest the carbonated soft drinks sector grew 3 percent less last year than in 2013, as companies were forced to introduce new products to try and capture customers. It said sales of energy drinks, 100 percent fruit juices, premium packaged water and yogurt drinks all grew strongly, as a result.

PepsiCo Inc, the US multinational food and beverage corporation which has always been viewed as Coke's rival, has seen its carbonated soft drinks sales drop significantly. Beverage volume rose 2 percent in Asia, the Middle East and Africa, but that was offset by a double-digit decline in China, according to its 2014 financial report.