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China insists on principle of market economy on Huiyuan takeover

(Xinhua)
Updated: 2008-09-11 09:21

"This 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," said Muhtar Kent, Coca-Cola president and chief executive officer (CEO). The acquisition would be the 55-year-old American-born Turk's first major move since taking the reins as the company's CEO in July.

Coke offered a figure of an exclusive soft drink review from Methodology Canadean Ltd, a British investigation company for the drinks market, showing the market share would be lower than 20 percent if the marriage was a success.

Currently, Huiyuan has a domestic market share of 13.95 percent among the 134 large drink producers in China, according to figures of Beijing Orient Agribusiness Consultant Ltd (BOABC), a professional consulting firm specializing in agri-business consulting services to the food business.

If successful, Coca-Cola would overtake France's Groupe Danone, which held a 16.3 percent share of China's soft drinks market in 2007, as the country's top brand with a 17.9 percent market share.

The marriage would be a challenge for domestic juice companies and might change the whole strategic situation of the juice industry, said Huang Bin, president of the Quanzhou branch of the Agricultural Bank of China in Fujian province.

Experts believe that despite the anti-monopoly examination, the case also faces the worries of Chinese people about the disappearance of a famous domestic brand. Many domestic news reports had the headline "Coca-Cola drinks Huiyuan Juice."

"The brand Huiyuan has been developed in China for many years, and has grown on Chinese people's emotional connection to the brand. That's why we cherish the brand," said Li whose employer had been doing business in the country since 1979. It was also a major sponsor of the 2008 Olympic Games in its fourth largest market country.

She emphasized Coca-Cola would preserve and develop the Huiyuan brand, with the company's resources of international marketing and product research for the Chinese customers.

In addition, there would be no competition between Huiyuan and Coke, because the latter's business was a subsidiary to the former, she said. Coca-Cola's Minute Maid juice and Qoo were juice drink brands while Huiyuan's strength was in pure fruit juice where it had a 46 percent market share, according to ACNielsen figures.

More hurdles had also emerged to disturb the potential union.

Public opinion has gone against Huiyuan founder and president Zhu Xinli of late, with many saying Coca-Cola was controlling him.

Some said Zhu behaved differently from before on the case as he had said, "I didn't sell Huiyuan when I was in trouble in 2004. I'll sell it now because they offer a good price."

Coca-Cola denied the blame, saying Zhu's words had not been influenced by the company at all.

"President Zhu is an experienced entrepreneur. My company respects him a lot. What he said was decided by himself," Li said.

Despite the hurdles, Li confirmed three major shareholders who held more than 60 percent of Huiyuan stock, including Huiyuan, Danone and US private equity firm Warburg Pincus, had approved the international marriage.

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