Coca-Cola's future more localized and diverse in China

Muhtar Kent (center), chairman and CEO of Coca-Cola, signed the refranchising agreement on Nov 19 with Zhao Shuanglian, chairman of COFCO, and John Slosar, chairman of the Swire Pacific. Provided to China Daily

The world's leading beverage brand The Coca-Cola Company aims to refocus on core strengths after the refranchising of all its bottling operations in the China market, said senior executives.

"The heart of Coca-Cola's business has always been strong brands," said Muhtar Kent, chairman and CEO of Coca-Cola.

He said the move is a vital transformation for the company to return to the strategies that deliver Coco-Cola values to its 25 million retailers globally.

"We produce, distribute, sell and operate locally. Partners are part of the local culture in every market and community in which we operate," Kent said. "We create value for all our stakeholders through this franchise system."

On Saturday, Coca-Cola signed an agreement to divide its bottling system in China between two franchise partners, COFCO Corp and The Swire Pacific Ltd. Previously, it had three major bottling groups: Bottling Investment Group China owned by Coca-Cola, COFCO Coca-Cola Beverages Ltd and Swire Beverages Holdings Ltd.

As Coca-Cola's two longstanding partners in China, the companies have worked together for more than three decades, since Coca-Cola first returned to the Chinese market in 1979.

This initiative is part of Coca-Cola's global strategy, initiated three years ago to return to its core business. It has already completed the franchising transition earlier this year in Germany via a new bottling business named Coca-Cola European Partners, and will finish the refranchising in the United States by the end of 2017.

Globally, Coco-Cola operates locally in 207 nations with franchise bottlers. It owns bottling plants and franchises in markets such as the US, Europe and Japan.

Kent said the refranchising efforts will improve the efficiency, capability and scale of the company's local partners, in which they could invest more to deliver better services to customers in a fast-changing market.

Zhao Shuanglian, chairman of COFCO, said the beverage industry is key to COFCO's long-term strategic plans.

"As a win-win, trusted partner of Coco-Cola for more than 30 years, we will continue to build efficient marketing channels and offer the best-quality products for consumers," he said.

"The scale effect, regional synergy and cost optimization that the new initiative brings will certainly boost Coca-Cola and its partners to achieve a new leap forward in China," Zhao said.

Ma Jianping, vice-president of COFCO, said the collaboration with Coca-Cola will also play a role in expanding COFCO's international business and transforming its governance and management systems.

"We will explore new products tailor-made for consumers from home and abroad amid the rising middle-class and diverse demands of the market," Ma said.

John Slosar, chairman of Swire Pacific Ltd, said he is optimistic about the long-term growth prospects for the beverage industry in China.

"We are convinced that this realignment will optimize the Coco-Cola system, accelerating growth and enabling us to win in the market," Slosar said.

Last year, production of soft drinks in the domestic market reached more than 170 million tons, up 8.6 percent year-on-year. Since 1979, Coca-Cola has invested $9 billion in China, its third-largest market by volume after the US and Mexico. It is currently investing $4 billion locally for future growth, in a project spanning from 2015 to 17.

Kent said that China is going through an economic transformation, shifting from a purely export-driven economy to a more balanced economy.

It is not only led by exports, but also by consumer development and expenditure.

"We feel very confident about the future growth prospects of the Chinese economy. You shouldn't look at what has happened in one or two quarters, but the prospect of many years," he said, adding that the goal for Coca-Cola is to innovate and stay ahead of Chinese consumers' demands.

Curt Ferguson, Coca-Cola's president of Greater China and South Korea Business Unit, said no matter the dips and rises in the economy, the company sees unlimited potential as it forges ahead and explores.

"China is certainly an aggregate and will surpass all of our business one day throughout the world," said Ferguson.

He added that the tremendous growth in local business has pushed Coca-Cola to innovate a series of new brands, such as orange juice and a lemon drink containing natural honey, both developed in China.

"Sometimes the right path is the harder path, such as incorporating sustainability. "In China, for every ounce of water we use, every milliliter of water, we replace 123 percent more than we consume," he said.

"As for innovation in the future, we will keep on expanding our portfolio according to the taste of our Chinese consumers," Ferguson added.

He said online platforms are now a vital marketing channel for Coca-Cola. "We are selling huge quantities of products through e-commerce platforms in China, not only through Alibaba Group, but also others like JD.com and Womai.com."

Currently, Coca-Cola has a total of 500 sparkling and still brands and 3,500 products globally.

It has more than 15 brands and offers over 50 beverage choices to Chinese consumers, who enjoy 150 million servings across the country every single day.

wangjinhui@chinadaily.com.cn

(China Daily 11/22/2016 page15)