Coke: The Familiar Red Bottle Stays Red in China for a Reason

Selling into the Chinese market is certainly more art than science. But without question, it's more important to be connected with communist party members and their investments -- read, state-owned companies -- than necessarily having the best product or service. MetalMiner, Spend Matters affiliate site, has already written in the past about how US steel companies are peeved at China for not allowing them market access to buy Chinese companies (just as the Chinese are buying Western mining and base metal assets). But limited market access to China is not just reserved for metals companies -- or even those that are responsible for sourcing tens or hundreds of millions of dollars annually from the region for export reasons. It's even limited to brand-name food and CPG companies with serious assets in the region who don't play the Chinese government Guanxi game.

Consider the case of Coca-Cola, one company who arguably knows how to game the Chinese system better than anyone. According to The Financial Times, Coke is trying to launch a major market expansion into China. Even though it "already owns two of China's three best selling sparkling drinks," by 2020, "it wants to have four more $1bn brands in what has become its third-largest market by revenue". The article suggests that Coca-Cola's investments in China have so far paid off, with revenues growing at a CAGR of 19% since 2004, distancing itself from Western rivals like PepsiCo in the process.

But how is the venerable beverages provider helping the Chinese enjoy the Coke side of life more often? By getting close to the government, that's how. Muhtar Kent, who serves as President and CEO of Coca-Cola’s China operations told the FT that at a recent meeting with China's vice-premier for economic affairs, that the communist party member praised them "for being the only US company to have a pavilion at the 2010 Shanghai World's Expo". Moreover, Coke is in bed with state-controlled Cofco Coca-Colar, a bottler "whose management has close ties to the central government".

All of which suggests to me that Coke has kept its trademark red colors for a reason on the Chinese Mainland. After all, if you're the 'real thing' in China, you might as well be red.

Jason Busch

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