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Peggy Sito

Visitors to the mainland will soon be able to enjoy the same taste of Coke that people do in the West.

After years of reliance on cane sugar as a sweetener for its mainland-made product, United States beverage giant Coca-Cola is about to switch to high-fructose corn syrup - a processed sweetener used in most countries around the world.

The move is driven by health concerns in the West.

Hong Kong-listed Global Bio-chem Technology Group said it and its US joint-venture partner and commodity provider Cargill recently signed contracts to supply high-fructose corn syrup to beverage bottling plants and food companies in northeastern and eastern China.

Global Bio-chem did not identify its customers but analysts believe Coca-Cola is in the line-up.

The joint venture will initially supply 500,000 tons - half of its production capacity - of the sweetener to two of Coca-Cola's bottling plants in eastern and northern China.

Coca-Cola has more than 20 bottling plants in China, according to analysts.

Global Bio-chem, which was listed on Hong Kong's main board in March 2001, produces corn refined and corn-based biochemical products in China and sells them locally and in Asia.

Starting out as a producer of corn starch, the company has diversified into corn-based bio-chemical products such as lysine, high-fructose corn syrup, modified starch and glutamic acid.

Global Bio-chem chairman Liu Xiaoming said the three-year contract was a start to entering the vast mainland market.

'For the company, it is an important first step and the road will be easier to walk in future,' he said.

Analysts said the long-awaited deal removed doubts that Global Bio-chem could meet quality requirements of the US beverage giant.

But it was too early to predict the earnings outcome at this stage, they said.

Mr Liu said that profit contribution to the group this year would be minimal with such a small initial order.

'But we can break even this year,' he said.

Mr Liu believed the outlook would be clearer in the next three to five years.

'We will increase production capacity by building new plants if demand is strong,' he said, adding that the outcome would be determined largely by mainland consumers' acceptance of the new taste.

HSBC analyst Jeannie Cheung said in her latest research report that the profit margin of the deal relied on sugar prices, which plunged in the past year.

She estimated the venture would need to get about 2,500 yuan (HK$2,347) for every ton of the corn syrup to break even.

Mr Liu said the price of sugar fell more than 20 per cent to 2,800 yuan a ton last year but he believed it should stabilise this year.

He said the company wanted to speed up its expansion within two years in preparation for growing competition from mainland and foreign rivals in the wake of China's accession to the World Trade Organisation.

Mr Liu said the firm this year planned to build a 300 million yuan plant in Liaoning capable of producing 100,000 tonnes a year of glutamic acid - a raw material for monosodium glutamate.



Coca-Cola to give China a taste of the real thing