Coca-Cola's Re-Entry and Growth Strategies in China

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Case Details:

Case Code : BSTR140
Case Length : 12 Pages
Period : 1978-2004
Organization : Coca - Cola
Pub Date : 2004
Teaching Note : Available
Countries : China
Industry : Beverages

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This case study was compiled from published sources, and is intended to be used as a basis for class discussion. It is not intended to illustrate either effective or ineffective handling of a management situation. Nor is it a primary information source.

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Background Note

In the early 1920s, Coke made its entry into China with bottles imported from its plant in the Philippines. In an effort to localize production, two bottling plants were opened in 1927. These plants were located in Shanghai and Tianjin, and in 1930 another was opened in Qingdao.

Coke faced setbacks during the World War II when the Japanese occupied China and took over its plants. However, in 1946, after the war ended Coke opened a bottling plant in Guangzhou. The Shanghai plant had the distinction of being the most up-to-date and fastest bottling line in China, and in 1948 became the first overseas plant to make annual sales of more than 1 million cases. This was great progress for Coke, even though the customers in Shanghai were mostly expatriates. When the People's Republic of China (PRC) was formed in 1949, all foreign companies were asked to cease operations and leave the country. Coke shut down operations in China and its bottling plants were nationalized by the government.

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State owned companies were formed to produce beverages and some of these companies used the former Coke plants to produce soft drinks. In case of the Shanghai plant, the equipment was shipped to Beijing to be re-installed in a factory there.

For almost 30 years after the PRC was formed, foreign direct investment and direct production activity by a foreign company were not allowed. Only the state-owned foreign trade corporations were allowed to have contact with foreign businesses and to carry out exporting and importing of goods.

Coke's Re-Entry in China

In December 1978, Deng Xiaoping (Deng)⁷ announced the 'open door policy'. This policy was part of Deng's larger plan for economic reforms in China. An open door policy meant that China would allow foreign trade and investment...

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7] Deng Xiaoping was the Vice-Chairman of the Central Committee. The Central Committee is the highest authority within the Communist Party of China, the sole political party in the People's Republic of China. He was also the Vice-Premier of the State Council, which is the chief civilian administrative body of the country. The State Council is chaired by the Premier and consists of the heads of each governmental department and agency. There are about 50 members in the Council.