Coca-Cola moved to further strengthen its global reach by announcing plans to buy Huiyuan Juice Group for $2.4 billion, the company's biggest acquisition in China. The deal is part of the drive by the world's largest soft drink maker to buy up juice, water and other non-carbonated drink producers around the globe to diversify its product lines.
"Huiyuan is a long-established and successful juice brand in China and is highly complementary to the Coca-Cola China business," said Muhtar Kent, CEO of Coca-Cola Co. He said the deal was "a unique opportunity to strengthen our business in China, especially since the juice segment is so dynamic and fast-growing."
Huiyuan, one of China's best-known juice brands, generated total sales of 2.7 billion yuan (US$395 million) last year, according to France's Danone Group, which agreed to sell its 23% stake in the company. That sales figure represented 40% of China's growing juice market share, analysts said.
The transaction represents a huge increase in Coca-Cola's investment in the rapidly growing Chinese market. According to its Chinese website, its accumulated investment in China since 1979 totaled $1.25 billion.
If approved by local authorities, the deal would be the largest takeover by a foreign firm of a Chinese company, said Arthur Kroeber, managing director of the Beijing-based economics research firm Dragonomics. "Coke's in an interesting place in China: They've been here forever -- they've been here for 30 years -- (but) there's not a whole lot of profit growth for them in their existing soft drink market," he said. "You have huge volumes, but your margins are always microscopic, so you need to look at how you can diversify into new products lines."
As part of its global efforts to expand beyond carbonated drinks, Coca-Cola acquired Russian juice business Multon in 2005 and Mexico's second largest juice, nectar and fruit flavoured beverage producer Jugos del Valle, last year. Also last Coca-Cola bought specialist water and energy drinks maker Energy Brands, Inc., known as Glaceau, for $4.1 billion.
Copyright Agence France-Presse, 2008