For the whole category strategy, Coca Cola, the beverage giant, should be more “light loaded” in China.
COFCO Coca Cola, the major shareholder of COFCO Coca Cola, both announced that “Coca Cola bottler production Holding Co., Ltd. (hereinafter referred to as:
According to the agreement, Coca Cola company and its Chinese bottling partners, Swire Coca Cola Co., Ltd. and COFCO Coca Cola Beverage Co., Ltd., will split and merge the production and operation of the non aerated beverage business of the former Coca Cola bottling manufacturer production Holding Co., Ltd. into Swire Coca Cola Co., Ltd. and COFCO Coca Cola Beverage Co., Ltd. through equity transfer. After the reorganization, the bottling plants wholly owned by Swire cola and COFCO Coca Cola will be increased by six and five respectively.
At present, Swire and COFCO are “two parts of the world” in Coca Cola’s bottling territory in China. This transaction means that after the establishment of the “dual bottler” model in 2017, Coca Cola has made another major adjustment to China’s bottling system. Since “Coca Cola bottling Holdings” is responsible for coordinating the production of this beverage giant’s gas free products in China, Costa instant coffee and many other gas free beverage production modes,
“As an important part of Coca Cola’s whole category beverage strategy, the non aerated beverage business is an important engine to promote the development of China’s business.” Coca Cola China said in reply to the snack generation’s query today that it believed that the restructuring would have a positive impact on the sustainable development of its overall business, promote better production line layout and investment in the future, and further enhance system synergy and innovation. Let’s take a look at the latest arrangement.
Through this transaction, Coca Cola will clear its shares in “Coca Cola bottling Holdings”, and the buyers are Swire Coca Cola and COFCO Coca Cola.
According to the above agreement, the restructuring object “Coca Cola bottling Holdings” has a number of bottling plants. On the date of the announcement, the company was held by three parties, coke South Asia Holdings and coke China Industries (a direct or indirect wholly-owned subsidiary of Coca Cola), Xingju (a wholly-owned subsidiary of Swire) and COFCO beverages (a wholly-owned subsidiary of COFCO Coca Cola) with respective shareholding ratios of 38%, 41% and 21%.
After the transfer, Swire Cola will wholly own the beverage preparation and packaging business of “Coca Cola bottling Holdings” located in Nanning, Hangzhou, Foshan, Wuhan, Dongguan and Suzhou; COFCO Coca Cola will wholly own the beverage preparation and packaging business located in Yingkou, Jinan, Shijiazhuang, Changsha and Chengdu.
“After the end of the transaction, the original production line or plant in use will be owned by COFCO Coca Cola or Swire Coca Cola, and the details will be subject to the agreement of all shareholders.” Coca Cola China said. So, how much are these assets worth? The xiaoshidai search announcement found that the total basic cost of COFCO Coca Cola trading was about 544million yuan, while Swire did not disclose relevant data.
In addition to equity changes, more importantly, this transaction will lead to “great changes” in Coca Cola’s production in China. In the future, the two bottlers will arrange the production of all products by themselves. “This equity transfer and reorganization will split and merge the production and operation of the non aerated beverage business of the former Coca Cola bottler production Holding Co., Ltd. into Swire Coca Cola Co., Ltd. and COFCO Coca Cola Beverage Co., Ltd.” Coca Cola China told xiaoshidai. The company said that the businesses involved in this transaction include the non aerated beverage production companies and branches of Coca Cola China system located in 13 cities, and the brands involved mainly include: meringue, shuidongle, Chunyue, Chun Chashe, explosive, sunshine, Costa Costa Costa (bottled drinks), etc.
How will the production of these brands change before and after the transaction? Xiaoshidai learned today that originally in the Chinese Mainland market, Coca Cola’s non aerated beverages (Note: excluding bottled water) were produced by “Coca Cola bottling Holdings” and then provided to the bottling plants of Swire and COFCO for sale. While Swire and COFCO bottling plants are only responsible for the production of aerated beverages and water, such as Coca Cola, Sprite and other soft drinks. After this transaction, the bottling plants of Swire and COFCO will hold the production decision-making power of Coca Cola’s non aerated drinks, and there is no need to wait for unified supply. “This transaction will change the previous mode of centralized production and local distribution, and realize the regional production of Coca Cola’s gas free beverage business in China.” The company also stressed that it will continue to promote the development of the non aerated beverage business as always, and provide brand strategy, marketing, consumer insight and other support for bottling partners. This equity change will not affect local market supply and consumers. According to the announcement of Swire and China food, the above delivery still needs to meet the prerequisites such as anti-monopoly approval. Swire announced that the transaction is expected to be completed on or before March 31, 2023.
Coca Cola’s starting point for restructuring is to better promote the “full category strategy” and the development of its business in China. “As an important part of Coca Cola’s whole category beverage strategy, the non aerated beverage business is an important engine to promote the development of China’s business.” Today, Coca Cola China pointed out in its reply to the snack generation’s query that for its non aerated beverage business, restructuring will optimize production management efficiency, improve supply chain synergy, and help speed up production deployment and new product launch. The company also said that the further optimization of the supply chain will enable Coca Cola to focus more on its competitive advantages, focus more on brand and product building, and work together with bottlers to achieve more efficient operation efficiency and stronger profitability. COFCO also gave a similar reason. China Food announced that the restructuring is expected to enable the company to achieve cost synergies, optimize capacity utilization, streamline some operations and save distribution and transportation costs, thereby improving production profits.
From this strong adjustment, under the whole category strategy, Coca Cola is eager to “drink” more non soda markets. Zhan kunjie, the CEO of this carbonated beverage giant, once stressed the need to promote the transformation of Coca Cola into a more flexible and agile full range beverage company. He believes that consumers are looking for more beverage choices to meet the various products they enjoy in different needs, emotions and times. In a separate exchange not long ago, Qing Lijun, the party secretary and CEO of COFCO Coca Cola, also told the snack generation, “we should not only do a good job in soda and fruit juice products, but also do a good job in other categories.” “If any enterprise wants to develop (whole category) beverages, it can’t only invest or grow in its own advantageous categories, and the growth has a ceiling. This shows us what areas we should expand opportunities in.” Qing Lijun said that for its 11 categories, COFCO Coca Cola will comprehensively analyze the concentration, sub categories, peers and other industries, “but it is more important to do consumer research” and launch new products that can really meet the demand.
Picture: COFCO Coca Cola’s 11 categories include: soft drinks, fruit juices, water, milk drinks, energy drinks, tea, coffee, functional nutrient drinks, sports drinks and plant proteins, and alcoholic beverages. “Now it is more time for us to see opportunities in the market and take the initiative to ask for this product. Coca Cola will support us to make this product. The responsibilities of both parties are very clear.” Qing Lijun said, “Coca Cola has thousands of products in the world, which can be directly taken from the product library to make (formula) adjustments to make it more in line with the needs of the Chinese market, and we are responsible for listing and making the products successful.” In addition, Party construction, CEO of Swire Coca Cola China, also emphasized in a separate exchange with the snack generation, “we have a high degree of attention to each category, mainly based on consumer demand, and follow the demand to make innovation and adjustment.” “In the Chinese market, you can see that (we) didn’t just sell soda very early.” He said, “I joined Swire Cola in 1994, and the impression is that we began to sell bottled water in 1996 and 1997.” Later, the company successively expanded to fruit juice, tea drinks, coffee, energy drinks and other categories.
Swire Coca Cola full range beverage
In fact, Coca Cola is also accelerating its layout around non aerated drinks. For example, in 2021, the company launched the “zhibaishuo flagship store” on the e-commerce platform, which specializes in selling plant-based drinks. In September of the same year, keniu, a joint venture between Coca Cola and Mengniu, launched xianfeile