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Analysis of Case Coca-Cola and Huiyuan

Autor:   •  March 13, 2016  •  Case Study  •  2,297 Words (10 Pages)  •  704 Views

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Analysis of Case Coca-Cola and Huiyuan

Development of regulatory control over M&A in China:

China had been discussing and drafting the Anti-Monopoly Law for 13 years and put it into effect on 1 August 2008. The regulatory responsibility of M&A deals is divided into several departments. The Anti-Monopoly Committee of China’s State Council is responsible for overall organizing, coordinating and guiding. The Anti-Monopoly Bureau of MOFCOM is responsible for merger deals. The Price Supervision Office of the National Development Reform Commission is responsible for price-related issues. The Anti-Monopoly and Anti-Unfair Competition Bureau of the State Administration of Industry and Commerce is responsible for dominant market position issues.

For merger deals, if certain criteria are met, both sides of the deal should file an application and seek approval from the AMB.

Soon after the action of the AML, the Chinese government issued different kinds of guidelines and tentative measures to implement the details of the AML, including how to determine the relevant market.

Status quo of Chinese soft drink market and juice market

Soft drinks include fruit and vegetable juice, bottled water, carbonated soft drink, functional drink, concentrate, and ready-to-drink tea and coffee. The market shares are showed in the following diagram.

[pic 1]

The biggest five companies of soft drinks in China are Wahaha, Coca-Cola, PepsiCo, Tingyi and Uni-Present.

Juice industry has three market segment: 100% juice, nectar (25-99% juice) and juice drink (up to 24% juice). The top five juice brands are Minute Maid (Coca-Cola, 12.7%), Master Kong, Huiyuan (7.5%), Wahaha and Uni-Present. Huiyuan is leading in the 100% juice and nectar segments.

In the future, the total soft drink industry is expected to grow fast, in which juice industry will grow even faster while carbonated soft drink will possibly show some weakness.

For juice industry, one more thing to mark is that China’s juice consumption per capita is still lower than that of the US and even the world average, indicating there is still huge growth potential.

Coca-Cola’s market share of juice by value is growing fast in China, from 5.8% in 2005 to 12.7% in 2008; with its flagship brand Minute Maid taking 11.3% of the market share. By segment, Coca-Cola is focusing on the juice drink (up to 24% juice), where it takes 32.1% in total.

Coca-Cola is also taking 54.4% of carbonated soft drinks market of China.

For product development, Coca-Cola produce 100% of the concentrates used for CSDs in China and sourced over 95% of the raw materials locally. However, Coca-Cola doesn’t have any plantations in China. The company is planning to invest $90 million to establish an R&D laboratory to develop new products.

For marketing strategies, Coca-Cola invests a lot in inviting celebrities in its marketing campaigns and sponsoring sport and educational events. The company is official sponsor of 2008 Beijing Olympics. Coca-Cola also pays great attention to maintain good relationship with the government by participating in charity and social service programs.

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