China is the hometown of tea. Especially after the reform and opening up, the market for drinks in China developed rapidly. Due to the rapid speed of the growth in China’s soft-drinks industry, it has potentially become one of the biggest industries in China.
The Financial Times reported that the CEO of Coca-Cola once said that China was the right place to sell cola over even America. In 2011, China occupied almost 7% of Coca Cola’s global sales. In the first half of the year, Coca-Cola sold more than 1 billion boxes of its products in China, which is 10 times more than that 5 years ago.
Development in China
Coca Cola entered China in 1920s. The company has experienced three main stages during its time in China.
1. Primary stage: At the beginning, China’s policy had many restrictions on foreign companies. Therefore, Coca-Cola chose to work with a big food company in China. After two years, it decided to fully enter China drinks market by investing in some factories. By using this tactic, the company gained a competitive advantage over many domestic producers due to its scale and financing abilities.
2. Rapid expansion stage: China canceled the import quotas of soft drinks in 1992 and canceled license requirements in 1996. Coca Cola did not waste any time to take advantage of this opportunity. It built 10 factories in China in less than 5 years after 1992, spending about US $310 million in the process. Then the company invested another US $150 million to built 6 factories in northwestern China in 2001. There was no doubt that it was becoming one of the biggest foreign drink brands in China.
3. Full range of expansion: After over 20-years of development, the drink industry is flourishing in China’s growing market. Unfortunately for Coca-Cola, the popularity of soft drinks is decreasing, while the popularity of water and tea is increasing. Since 1996, Coca-Cola company began fraying away from its main product of soft drinks and began producing different drinks.
Contributions to China ( Market Research in China )
Coca-Cola helped promote the development of the local drink industry. Before Coca-Cola and Pepsi entered China, people only drank tea and cold water. After the entrance, they also brought a new model of producing modern drinks and the necessary funds China needed to revolutionize the industry.
The company also promoted reforms against state-owned enterprises in China. The companies that Coca-Cola cooperate with in China include some large and medium-sized enterprises. They can learn some marketing and producing techniques from Coca-Cola.
it also promoted economic development in China. A report from experts in Peking, Tsinghua and South Carolina Universities showed that, Coca-Cola company and its factories supplied more than 410 thousand jobs in China, and helped increase about 1.6 billion RMB in taxes every year to the local government both directly and indirectly.
Credit Photo: apresys