Coke Attempting Purchase of Chinese Drinkmaker
The folks at Coca-Cola are fond of saying their product “adds life” but apparently life isn’t adding enough to its bottom line in China so the company is hoping adding red bean will do the trick. On Friday, the soft drink behemoth announced it intended to pay $400 million to acquire protein drink maker China Culiangwang Beverages.
Culiangwang, which sells under the name China Green, specializes in multigrain, protein beverages containing such ingredients as red bean and oat, types of drinks known in the industry as “still-beverage,” a category that includes teas, juices, energy and sports drinks and one that has seen consistent growth.
“The proposed acquisition is in line with Coca-Cola China’s strategy to continue providing a diverse range of beverage products to Chinese consumers, with plant-based protein drinks representing a growing beverage category in China,” Coke said in a release announcing the proposed sale.
CHINA MARKET DIVERSITY
Of course, the world’s largest beverage maker also has a long-held strategy of making money and, to that end Culiangwang is attractive to Coke as it continues its attempts to diversify its beverage portfolio all over the globe. In 2012, Coke paid about $980 million to acquire about a 50 percent of Aujan Industries, a still-beverage company in the Middle East. Six years ago, Coke attempted to buy China Huiyuan Juice Group for $2.4 billion in what would have been the largest acquisition of a Chinese food/beverage producer by a foreign company, but the deal was eventually scuttled by China’s Ministry Commerce on antitrust grounds. Last year Coke paid about $4 billion to buy minority stakes in energy drink maker Monster Beverage Corp. and Keurig Green Mountain.
The reasons for the acquisitions are simple: soda, which still represents about 70 percent of Coke’s total revenue is not selling like it used to. Sales have declined in the United States in part because carbonated drinks are usually listed as a major contributor to the nation’s skyrocketing obesity and diabetes numbers. Around the world, soda has less of a cultural stronghold in many nations which are more inclined to drink plant-based drinks.
SELLING TO CHINESE TASTES
When the company re-entered the Chinese market in 1979 – after three decades away due to the Communist takeover – it experienced years of healthy growth. But Coke, which has 43 plants in China, saw Chinese volumes rise just four percent last year.
Plant-based protein drinks have grown at about 18 percent a year in China since 2008. Many Chinese are lactose intolerant and see the protein drinks as a healthier alternative to regular milk, the research firm said. Milk safety also became a major concern in 2008, when locally made melamine-contaminated milk powder may have killed at least six infants in China.
How Businesses can Adapt and Prosper in a Post-Pandemic Economy