Coca-Cola to Buy Chinese Juice Maker
The Coca-Cola Company announced today its intention to make cash offers to purchase China Huiyuan Juice Group Limited, a Hong Kong listed company that owns the Huiyuan juice business throughout China. Assuming full acceptance of the offers, the deal is valued at approximately $2.4 billion.
According to Erin Smith, Consumer Staples Analyst, Argus Research Company, "there are significant growth opportunities for Coca-Cola and beverage companies in China, and by entering the market through a local already established brand Coca-Cola has a better chance of success."
The Coca-Cola business in China has been operating since 1979 and is well known for its sparkling beverage brands such as Coca-Cola, Sprite and Fanta. In the last few years, the company has also introduced a number of still beverage brands, including Guo Li Chen (Minute Maid Pulpy) and Yuan Ye (Original Leaf Tea), with the objective of offering consumers a wide range of beverage choices.
In line with this, the Huiyuan acquisition "will deliver value to our shareholders and provide a unique opportunity to strengthen our business in China, especially since the juice segment is so dynamic and fast growing in China," says Muhtar Kent, president and CEO of The Coca-Cola Company. "It is also further evidence of our deep commitment to China and to providing Chinese consumers with the beverage choices that meet their needs."
If the offers are accepted, Coca-Cola will use its expertise as a global beverage company to further develop the Huiyuan brand to address the evolving needs of consumers. There are anticipated synergies that will drive operational efficiencies, particularly in the Huiyuan business' production footprint and in Coca-Cola's distribution and raw material purchasing capabilities.
"Coca-Cola can help expand this brand into new markets as well as improve the cost-structure of this business," says Smith. "While this acquisition will impact earnings in the near-term, it is a good growth strategy for the long-term."
According to Erin Smith, Consumer Staples Analyst, Argus Research Company, "there are significant growth opportunities for Coca-Cola and beverage companies in China, and by entering the market through a local already established brand Coca-Cola has a better chance of success."
The Coca-Cola business in China has been operating since 1979 and is well known for its sparkling beverage brands such as Coca-Cola, Sprite and Fanta. In the last few years, the company has also introduced a number of still beverage brands, including Guo Li Chen (Minute Maid Pulpy) and Yuan Ye (Original Leaf Tea), with the objective of offering consumers a wide range of beverage choices.
In line with this, the Huiyuan acquisition "will deliver value to our shareholders and provide a unique opportunity to strengthen our business in China, especially since the juice segment is so dynamic and fast growing in China," says Muhtar Kent, president and CEO of The Coca-Cola Company. "It is also further evidence of our deep commitment to China and to providing Chinese consumers with the beverage choices that meet their needs."
If the offers are accepted, Coca-Cola will use its expertise as a global beverage company to further develop the Huiyuan brand to address the evolving needs of consumers. There are anticipated synergies that will drive operational efficiencies, particularly in the Huiyuan business' production footprint and in Coca-Cola's distribution and raw material purchasing capabilities.
"Coca-Cola can help expand this brand into new markets as well as improve the cost-structure of this business," says Smith. "While this acquisition will impact earnings in the near-term, it is a good growth strategy for the long-term."