About two weeks back, Coca Cola had announced that it had acquired Xiamen Culiangwang Beverage Technology Co. for a value worth US$400 million. Xiamen Culiangwang is a China based company that is engaged in selling plant based, whole grain, and health conscious protein beverages and drinks. Coca Cola’s plan of action is quite clear. Plant-based beverages in China are a recent development and this segment is in the nascent stage in the dragon economy.
The growth of this product segment has been recorded to be exceeding 20%. This is a lucrative opportunity for the American beverage manufacturer to enter into the China market for beverages to make the most of this untapped product segment. This will also lead to enhancement of Coca Cola’s product portfolio with the introduction of non-aerated beverages. In fact, if Coca Cola takes this step, it might prove to be beneficial in the long run owing to the fact that the aerated drinks market in China is a shrinking one at present.
However, a key problem with respect to this is, that there are already quite a few firms that have already made and entry into this China market for non aerated drinks. Mengniu, Yili, and Deyufang are some of the key firms manufacturing plant based beverages that are already established brands in the China. In fact, collectively, these companies in 2013 had a market value worth US$6.8 billion.
One of the best ways of gaining competitive advantage in the market is by way of entering a market as a new comer. Since Coca Cola was one of the first ones to start the trend of aerated drinks, it till date holds a rather dominant position in the market for beverages. Therefore, when the role for Coca Cola gets reversed and it tries to enter the China market, it proves to be a rather challenging task.