Coke has made a cash offer to purchase China Huiyuan Juice Group, parent of the Huiyuan juice business throughout China. The U.S. beverage giant has offered $1.56 per share, and an equivalent price for outstanding convertible bonds and options, to grab an almost 66% stake in Huiyuan.
"Huiyuan is a long-established and successful juice brand in China and is highly complementary to the Coca-Cola China business," said Muhtar Kent, Coca Cola's president-CEO. The acquisition "will provide a unique opportunity to strengthen our business in China, especially since the juice segment is so dynamic and fast growing in China."
Deal with Wal-Mart
In March 2007, Wal-Mart Stores said it would start carrying Huiyuan fruit juice products in more than 3,000 stores in the U.S. Huiyuan has sold its products, mainly apple juice, in the U.S. since 2004, but the deal with America's largest retailer greatly expanded its distribution in the U.S.
In China, Huiyuan has been an active marketer. In a bid to raise its profile among young urban adults, Huiyuan signed a partnership deal in 2007 with MTV Networks to sponsor all of MTV China's events in the country throughout the year.
Last year, the marketer appointed JWT and DraftFCB to handle creative for its main Huiyuan brand and its sub-brand, Guo Xian Mei, respectively. It ended both relationships earlier this year without explanation and currently does not work with any multinational ad agencies.
Coke has sold carbonated beverage brands such as Coca-Cola, Sprite and Fanta in China since 1979. In recent years, the company has focused on expanding its portfolio with tea and juice products that are more popular with many Chinese consumers than sugary soft drinks.
Guo Li Chen (Minute Maid Pulpy) and Yuan Ye (Original Leaf Tea) are two of the new brands introduced by Coke in China recently. In Hong Kong, it introduced a green tea brand, Tian Yu Di (Heaven and Earth). Tian Yu Di is also a water brand in China.
Coke could get a major boost by acquiring Huiyuan, and not just from its lineup of popular juice brands. The Chinese company also has substantial distribution and raw-material-purchasing capabilities.
Founded in 1992, Huiyuan is one of the largest Chinese companies marketing fruit and vegetable juice and juice drinks. According to A.C. Nielsen, Huiyuan is the No. 1 producer in China of 100% pure juice. Huiyuan had a 37.9% share of that market at the end of last year, according to CCB International Securities.
Among non-100% juice drinks, Huiyuan has a 6% share, which it hopes to raise through the introduction of new products, such as a kiwi drink introduced under the brand name V-plus. Last fall, Huiyuan announced plans to invest $66 million to build new plants to meet growing demand in China for health drinks.