Coke Sees China's Market as the Real Thing for Growth
Jul 29th 2011 8:00AM
Updated Jul 29th 2011 8:16AM
Coca-Cola (KO) reported strong second quarter results, with growth coming from emerging markets like China and Russia. China growth was led by 23% growth in sparkling beverages, and 36% growth in Minute Maid Pulpy. Minute Maid Pulpy emerged as a hit with the 'Burst of China Joy' integrated marketing campaign. Coca-Cola competes with companies like Pepsi (PEP) and Dr. Pepper Snapple Group (DPS).
Our price estimate for Coca-Cola near $72 implies roughly 5% upside to the market price.
Chinese Beverage Market
According to the market research company Euromonitor International, sales of soft drinks, including soda, juices and bottled water, almost doubled to $42 billion in China between 2006 and 2010. The same report indicated that China's juice market alone should more than double to roughly $24 billion by 2015.
According to Euromonitor, Coca-Cola held 17% of the Chinese market at the end of 2010. Tingyi, a well-known Chinese consumer company, claimed 13% market share with its leading drink, Master Kong, while the Hangzhou-based Wahaha Group had a 7% share. PepsiCo was fourth with 6% share.
Coca-Cola sees huge potential for its beverages in China, where per capita consumption is only 32 bottles of Coke products a year, compared to 150 in Hong Kong and more than 500 in the U.S.
Coca-Cola's China Thrust
Coca-Cola has been operating in China since 1979, and employs more than 30,000 workers and more than 40 bottling plants in the country. The company is optimistic about its expansion plans in China and expects the nation to contribute significantly in its '2020 vision' -- a plan to double its 2009 revenue of $100 billion by year 2020.
It is introducing a wider variety of package choices to promote both affordability and consumer experience. Coca-Cola is already ahead of its planned investment of $2 billion over the 3-year period starting with 2009 through 2011.
See our full analysis for Coca-Cola
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