Coca-Cola Co. has opened two new bottling plants in China in the past two days, the latest moves in the Atlanta-based beverage giant’s plan to invest $2 billion in the Asian country over the next three years.
Coke worked with its China bottling partner, COFCO Coca-Cola Beverages Ltd., to put the new plants in the Xinjiang and Jiangxi provinces. The investment totals more than $30 million.
Xinjiang is probably best known in the West as the home of Turkic-speaking Muslim Uighurs who have historically clashed with the Chinese central government. The vast, arid province occupies almost all of China’s northwest, abutting Kazakhstan and other Central Asian countries. Located along the ancient Silk Road, Xinjiang has about 20 million people, and the Chinese government is working rapidly to develop the region for its natural resources.
Coke officials including Chairman and CEO Muhtar Kent joined Chinese Communist Party leaders in the provincial capital of Urumqi June 24 to herald the bottling plant as the next step in Coke’s feverish efforts to reach China’s consumers.
“This RMB 210 million ($30.1 million) investment in Jiangxi and Xinjiang represents the Coca-Cola system’s strong commitment to China and to consumers throughout China including in the less-developed areas in central and western China in creating job opportunities and building a better community,” Mr. Kent said in a statement.
Coke opened the plant in Nanchang, Jiangxi’s capital, on June 23. Jiangxi is home to 44 million people in south central China.
The two plants will directly create a combined 800 jobs, and officials estimate that downstream suppliers will create 8,000 more. Coke already employs 30,000 at its 38 bottling facilities in greater China.
Targeting China’s less-developed areas is a “wise and low-risk investment” by Coke, said Jagdish Sheth, Charles H. Kellstadt professor of marketing at Emory University‘s Goizueta Business School.
“First, China is a very large and fast growing market for carbonated beverages and competition both foreign and domestic is becoming intense,” Dr. Sheth said. “Second, bottling plants usually invite a local partner and in China, a local partner is a preferred way of doing business.”
China has emerged as one of Coke’s most important markets. Mr. Kent said in the Urumqi statement that the company’s business in China grew 19 percent last year.
Chinese antitrust regulators thwarted a $2.4 billion Coke bid to take over a majority stake in juice conglomerate Huiyuan Beverages Group last year. The government cited worries that Coke would have a presence amounting to a monopoly in the juice sector. Some experts said the decision reeked of the sort of tit-for-tat protectionism, retaliation against U.S. decisions that blocked Chinese investments.
The failed Huiyuan deal hasn’t stopped Coke, which proceeded to invest $90 million investment in a research and development center in Shanghai in March. Coke is also the premier beverage sponsor of the World Expo 2010, a huge month-long event expected to draw 70 million visitors.
In 2008, Coke had an entire pavilion in Beijing as part of its sponsorship of the summer Olympic Games.