On
August 4, The Coca-Cola Company, the world’s largest beverage company, and Mengniu
Group, one of the leading dairy companies in China, signed a contract for a
high-end low-temperature milk project. The signing ceremony was held in Hefei
city, Anhui province. The CEO of Mengniu Group and the marketing general
manager of Coca-Cola both attended the signing ceremony.
According
to a report, the total four-phase investment of the low-temperature milk
project is RMB 2.1 billion, with a first-phase investment of RMB 500 million. The
project is estimated to be put into production and sold in the third quarter of
2021, bringing a whole new brand of low-temperature milk to consumers over the
country.
Collaboration
to increase dairy market presence for both Coca Cola and Mengniu
According
to a Chinese analyst in the food industry, the collaboration between Coca-Cola
and Mengniu group will yield benefits for the two companies in terms of their
brands, consumers, and markets. It will also have an important effect on both
companies’ future development.
Taking
full advantages of both companies’ dairy processing technology, brand influence,
and distribution channel, the collaboration will increase consumption of
Chinese dairy products. According to a news report, in early January 2020,
Coca-Cola announced its acquisition of the remaining shares of Fairlife LLC
from its joint venture partner Select Milk Producers. According to Fairlife’s
previous website, Fairlife was established in 2012 with it’s headquarter
located in Chicago. The company’s main business was to produce dairy beverages
such as fa!rlife YUP! and CORE Power.
The
high profit of low-temperature dairy products attracts many companies to join
in the low-temperature diary industry. In 2013, Mengniu Group and the French
company Danone established a joint-venture company to do business in the
low-temperature yogurt industry. After that, Mengniu Group continued to launch
other new low-temperature dairy products such as Guanyiru milk with BB-12 and
YoyiC. According to Mengniu’s 2019 financial report, the sales volume of
Mengniu’s low-temperature dairy products has continued to rank first in the
low-temperature dairy industry for 15 years.
According
to a report on market management and competition strategy of China's dairy
industry from 2020 to 2026, the growth of low-temperature pasteurized milk in
2018 is higher than UHT milk, with a steady growth of around 5% in the sales
volume. An analyst in the dairy industry believes that with the limited
increase in traditional carbonated drinks, Coca-Cola’s move to the dairy
industry is to seek better growing space for its market.
Coca
Cola already established in Chinese market through COFCO Corporation
A
successful collaboration between Coca-Cola and Mengniu Group is possible
because of COFCO Corporation. COFCO Corporation is one of Coca-Cola’s main
packaging companies in mainland China. The relation between COFCO Corporation
and Coca-Cola can be traced back to 1978 when Coca-Cola returned to China’s
market after 30 years with the help of COFCO Corporation. On April 14, 2000, COFCO
COCA-COLA Beverages Ltd. (COFCO COCA-COLA), the joint venture company of
Coca-Cola and COFCO Corporation, was established. COFCO Corporation holds a 65%
share of COFCO COCA-COLA, while Coca-Cola holds a 35% share. In 2016, Coca-Cola
separated 19 regional markets from COFCO COCA-COLA.
Data
shows that the profit of COFCO COCA-COLA in 2019 exceeds RMB one billion, with
nine new joint packaging factories fully achieving profitability. By 2019, Coca-Cola’s
market coverage rate in cities reached 100%, and the number of Coca-Cola
customers has increased to more than 1.5 million, with a growth of 100 thousand
customers within three years, from which COFCO Corporation can enjoy 65% of the
benefits.
For
more information, please check our resources on China’s
Life Science market or email emarket1@cnchemicals.com with your target product name.