As reported to Bloomberg, beverage maker The Coca-Cola Company (KO) has plans to invest more than $4 billion in China from 2015 to 2017 to combat the rising competition in the soft drinks market. The company has also introduced new products and intends to build new plants to meet the growing demand of Chinese consumers.
The cola giant is ramping up its investment in China as the company and its bottlers seek to double global revenues to $200 billion in 10 years ending 2020. This investment of $4 billion is in addition to the previous investment plan of $4 billion for China for the year 2012-2014.
Coca-Cola is also interested in acquisition deals in China and may add healthier drinks in its portfolio such as juice making companies or plant-protein drinks like almond milk. Chinese consumers are increasingly opting for healthier alternatives in food and drink, which has also attracted fast food chains such as McDonald's Corp (MCD) and KFC-parent Yum Brands Inc. (YUM).
Coca-Cola believes that the beverage market in China is still untapped and therefore has wide scope for expansion. Henceforth, Coca-Cola plans to open two facilities each year in China over the next decade. We note that the beverage industry is very competitive and sales are typically driven by promotions.
The company faces intense competition from another beverage giant PepsiCo Inc. (PEP). PepsiCo is also seeking to expand in the most populated nation. PepsiCo has collaborated with Tingyi Cayman Islands Holding Corp. and opened new factories and expanded its distribution network in China.
Coca-Cola still leads the soft drinks market in China and holds a 16% market share by total volume in 2012, according to data from market research firm Euromonitor. Though volumes have been declining in China for the past few quarters due to an economic slowdown, the company continues to be confident about the long-term prospects in this region. Coca-Cola holds a Zacks Rank #3 (Hold).
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