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Coca-Cola to Invest Over $4 Billion in China

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Coca-Cola (NYSE: KO) is planning to invest $4 billion in China and build new plants, according to Reuters.

The $4 billion will be spent between 2015 and 2017, as the world's most popular beverage maker is facing increasing competition within the Chinese market. The company has already committed to investing $4 billion in the country through 2014.

Retuers quoted Shaun Rein, a Shanghai-based director of China Market Research Group as saying, “The beverage market is quite competitive right now and Coke is going to have to do a lot more acquisitions rather than growing through organic growth.”

Coca-Cola maintains a 16 percent market share by total volume in 2012, down from 16.6 percent five years ago. Chinese consumers are beginning to shun international brands like Coca-Cola, while embracing domestic brands such as JDB whose signature Jia Duo Bao Red Can outsells Coca-Cola in may provinces, despite being twice the price.

Coca-Cola's investments in China should not come as a surprise. According to Market Research, the Chinese carbonated soft drink market is expected to appreciate at a compounded annual growth rate of 3.5 percent throughout 2012 to 2017.

Coca-Cola's competitors are also heavily investing in the Chinese market. PepsiCo (NYSE: PEP) plans to open 10 to 12 new plants in China over the next few years with a $3.5 billion investment.

Coca-Cola joins the ranks of many American beverage and food companies that are looking at China to fuel future earnings. Starbucks (NASDAQ: SBUX) considers China one of its fastest and most important markets with over 3,000 stores. Yum! Brands (NYSE: YUM) is the largest restaurant chain in the Chinese market through its thousands of KFC and Pizza Hut stores across the country.

Shares of Coca-Cola are unaffected, trading up 0.2 percent.

Posted-In: Shaun ReinNews Guidance Global Best of Benzinga

 

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