Coke out to quench mainland's thirst

IN A recent edition of Fortune magazine, Coca-Cola was described as a ''global soft-drink company . . . more focused, more single-minded, and, surprisingly, more open about its intentions than at any other time in its 107-year history''. Roberto Goizueta, Coca-Cola's Cuban-born chief executive officer, is credited with taking Coke from being a US$4 billion (about HK$31.1 billion) operation in 1980 to America's sixth most valuable public corporation last year - worth US$56 billion. With a share of 45 per cent of the world's soft drinks market, Coca-Cola sees its future outside its established markets in, what it describes as, the ''New Worlds of Opportunity''. These include China (population 1.2 billion); India (840 million); Africa (568 million); Indonesia (191 million); East Central Europe (124 million); and the Commonwealth of Independent States (293 million). ''These markets account for a majority of the world's population and simply cannot be ignored,'' said R. Fenton-May, the outgoing president of Coca-Cola China. Based in the region for 14 years, Mr Fenton-May has overseen much of the company's push into China, and will be leaving shortly to take up a new position at Coke's head office in Atlanta. ''Coke is no stranger to China,'' Mr Fenton-May said. Between 1927 and 1930, Coke built three plants in China - in Shanghai, Tianjin and Qingdao. ''By 1948, the Shanghai operation had become the first Coca-Cola plant outside the United States to sell one million cases of Coke a year,'' he said. ''Since July, our plant in Shanghai has been pushing out three million cases a month.'' Last year, about 750 million standard cases (each with 24 eight-ounce bottles) of Coke were sold in China, making it the second largest market in Asia behind Japan, which sold two billion standard cases. Coke's share of the China market was just over 10 per cent. ''Our China market grew 10-fold in the 1980s, and the government is projecting it will grow by a factor of four in the 1990s,'' Mr Fenton-May said. He added that ''by the year 2000, I would expect our market in China to approximate that of Japan''. Coca-Cola re-entered the China market in 1979 and, in 1981, began a joint-venture bottling operation in Beijing with the Cereals Oil and Foodstuffs Import/Export Corporation. ''In those days, China was just beginning to open the door,'' Mr Fenton-May said. ''In 1984, the door was opened just a little bit more, which allowed us to do business with the Ministry of Light Industry, the government entity historically responsible for the soft-drink business in China. ''Then, in 1985, we started to talk to the China International Trust and Investment Corporation (CITIC), China's biggest entrepreneurial conglomerate. ''By 1987, we had a firm strategy for local partnerships with the Cereals Oils and Foodstuffs Import/Export Corporation, the Ministry of Light Industry and its affiliates and CITIC. ''We invested with each of them to the point where we now have 13 plants. Swire became involved in one of our joint ventures with CITIC, which has two downstream joint-ventures in Nanjing and Hangzhou. ''Having got that part of the operation up and running, we began negotiating with the government, over a two-year period, for the next group of plants to be located in the interior of the country. ''In this phase, we will be looking at 10 plants and will involve Swire and Robert Kuok's Kerry Group.'' Mr Fenton-May said Coca-Cola in China today comprised three on-shore Chinese partners and three off-shore partners - the Kerry Group, Swire and Coca-Cola. Coca-Cola's investment in the first 13 plants was US$100 million, and the firm expects to spend a further US$150 million in the next phase of development. ''Taking into account parallel investment by our Chinese partners, total investment will be around US$500 million by 1996,'' he said. ''With the size of its population and magnitude of its economy, China is a very important market. Not only for us, but for any Western consumer goods company.'' ''None of the markets in Eastern Europe or the former Soviet Union approximate in size to what we have in China.'' Mr Fenton-May said Coca-Cola was well-placed to make major inroads into the China market ''because we have managed to develop the right infrastructure''. ''In 1985, we realised that, unless we removed the foreign exchange barrier, there would be no growth and we would never see our full potential. ''The government gave us permission to build our concentrate plant in Shanghai - to make the flavour essence that goes into Coke - and to sell it in China in local currency. That was a big step forward for us. ''We then set about working with the Number Two Hubei Auto Works to build soft-drink delivery trucks, started working with glass companies and got our traditional suppliers of cans and filling equipment to invest in local companies under licence. ''Our goal was to have everything we use made in China and that goal has been achieved.'' Mr Fenton-May has been replaced by John Farell as president of Coca-Cola China.