Coke Sends a Message to China Officials

Posted by: Bruce Einhorn on March 06, 2009

For almost half a year, Coca-Cola executives have been waiting for China to give the OK to Coke’s proposed takeover of Huiyuan, the big Chinese juice company. Coke announced the $2.4 billion deal in early September, but it can’t go through without officials in Beijing agreeing that Coke swallowing Huiyuan doesn’t violate China’s antitrust law. Here we are in March, though, and they’re still waiting. One way or the other, the wait is going to end soon: Coke and Huiyuan agreed to a March 23 deadline for the deal.

With that date in mind, consider the news today from Coke that it plans to invest another $2 billion in China over the next three years. Coke’s announcement of its China plans seems like a straightforward message to the folks in Beijing: Pay no attention to critics of the deal in China who are angry at the idea of a big, bad American company taking over one of their favorite brands. Or, as Coke CEO Muhtar Kent said (according to a statement Coke released today), Coca-Cola’s “commitment and confidence in China never wavers.” Take that, opponents of the Huiyuan deal! Given the dicey state of the Chinese economy right now, I suspect that’s a message Beijing officials are eager to hear.

One other thing: I confidently predicted on Sept. 8 in this Eye on Asia blog post that Chinese officials would give this deal a green light. Letting Coke do a deal in China would make it easier for Chinese companies to do deals overseas, I said. Since then, Chinese officials have been decrying what they see as protectionist measures around the world targeting China’s companies. Stands to reason, then, that Beijing would be more interested in setting an example by showing how open China is. By March 23, we’ll know.

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Reader Comments

Steven

March 6, 2009 12:12 PM

Why China has to give the permission? We still remember how US congress blocked Chinese companies' purchase of US companies. Ironically, we were so lucky, otherwise we should lose a lot in those US companies. Thank you, US congressmen!We learnt some lessons from you and we saved huge money. We are now able to buy much more with the same money.

jimi

March 7, 2009 01:27 AM

Unfortunately Coke needs China more than China needs Coke. Coke is just a sugar drink peddler that don't add much value to the Chinese culture. The only contribution that Coke has made to the US market is to make generations of American fat and obese. The current Depression in the US - makes emerging market like China, India or Russia even more attractive. Businesses in America should relook at how they want to add value to emerging markets - selling sugar water is low tech, unproductive activities that many of the companies in 3rd world countries are already doing.

Josh.Qin

March 7, 2009 03:23 AM

To tell the truth,I don't like to see a chinese big juice company be swallowwed by Coke;If we China want to develop the economic,we should have our own business.The multination company is not a good choice for us as what those big company need is the profit.

reddy

March 7, 2009 07:05 AM

Already Coco-Cola & PePsi both acquired 95% of the main drinking products around the world. Both Coco-Cola & PePsi wants to create monopoli in the world markets. Already in India they have acquired good brands like 'ThumbsUP','Maaza'... In Europe 80% of main cool-drink brands belongs to Coke & PePsi. Why should any country go under American monopoly. That is why there is nothing wrong if China takes protectionist measures.

Calmwater

March 7, 2009 05:48 PM

Chinese are true to the motto "quid pro quo, so if they behave themselves and let Coca Cola takeover the chinese juice company it wouldn`t loked good on the american balance sheet if they oppose any Chinese takeovers in the US home soil in near future.

Is US prepared to pay the price?

hgao

March 7, 2009 07:16 PM

--Given the dicey state of the Chinese economy right now, I suspect that’s a message Beijing officials are eager to hear.
it sound like booming american paper tiger is rescueing falling china. lol!

Reader

March 8, 2009 12:52 AM

China would be foolish to give the OK to an American beverage company Coca-Cola to purchase China's largest juice company. America has repeatedly blocked Chinese access to American companies. Why should China allow Coca Cola to gain a monopoly? This writer Bruce Einhorn is behaving unreasonably, and one-sided.

james

March 8, 2009 03:40 PM

Excessive consumption of caffeine and frutose is not good for anyone's health.

George

March 8, 2009 06:16 PM

After reading this Bruce's articles quite a few times, it is always funny to get feeling of his paranoid kind of perspective from an unfailing biased angle....you never get an end and there is no hope to get it right, Bruce

Steven

March 8, 2009 09:09 PM

China should charge special taxes or fees from those junk foods and beverage from US. Coke has no reason for existance at all. They make money on destroying people's health. I feel no wonder that Americans' average life expectancy is so short considering the wealthy they have and the life they are enjoying.

Squeezebox

March 9, 2009 11:24 AM

The problem with China is that they want to produce everything and buy nothing! If they really believed in fair (balanced) trade, they would allow Coke to buy their juice company. After all, America did let Lenovo buy
IBM's computer business. A Chineese company could very easily buy General Electric's appliance business if they wanted to.

Yonah

March 9, 2009 03:18 PM

This story made the front page of Anti-Cnn's site, so expect a heavy flow of Chinese zealots, racists, and patriots.

What they forget, is that Coke is a world wide famous brand and the company itself sells far more than just "sugar water", but let jealousy slide. Besides, sugar or not, these beverages are far saver than Chinese milk.

james

March 10, 2009 02:39 AM

@Yonah: you are wrong."Despite spending $230m (£115m) an hour on healthcare, Americans live shorter lives than citizens of almost every other developed country. And while it has the second-highest income per head in the world, the United States ranks 42nd in terms of life expectancy."http://www.infowars.com/us-slips-to-42nd-place-in-global-life-expectancy/

Interconnect

March 11, 2009 04:27 AM

Coke invaded the world with the brand a success story of brand management. Partnering with the Coke are McDonald and others which hurt millions of children with obesity. School marketing of Coke in emerging markets gives Coke access to children to exclusively drink of the school in countries where average summer temperature is 40 Celcius humidity 75% where sweating, children has no other choice to spend their pocket money on buying Cokes. Developing/emerging countries should learn the lesson from Chinese administration/authorities to charge premium of home grown organic juices, yogurt drink being branded by Coke and the children should be healthy and smart. The message should please be circulated to the World Consumers Day on March 15 on behalf of emerging markets, developing countries children most of their pocket money in schools on Cokes and not on milk, or juice. Coke sells these products on the developed world. Coke please treat the children as your family, as your children, as your consumer, and announce your family affiliation on the World Consumer DAy as a token of thank you to all school children a free water bottle on the World Consumer DAy, a Thank you to all children. Children will love Coke than more, than now. Regards eMail: interconnect.partner@gmail.com

Sarah

March 28, 2009 07:36 AM

I recently came across your blog and have been reading along. I thought I would leave my first comment. I don't know what to say except that I have enjoyed reading. Nice blog. I will keep visiting this blog very often.

Sarah

http://grillsblog.com

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BusinessWeek’s team of Asia reporters brings you the latest insights on business, politics, technology and culture from some of the world’s biggest and fastest-growing economies. Eye on Asia’s bloggers include Asia regional editor Bruce Einhorn, Tokyo reporter Ian Rowley, Korea bureau chief Moon Ihlwan, Asia News Editor and China Bureau Chief. Dexter Roberts, and Hong Kong-based Asia correspondent Frederik Balfour.

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