The move signals the company's determination to further localize its product in the fast-growing Chinese market, China Daily reported on Saturday. Under the terms of the agreement, Tianjin Jinmei Beverage Co Ltd, a producer of concentrate which contains the basic ingredients for making soft drinks, has become the new owner of Tian Yu Di (Heaven and Earth), a brand launched earlier this year by Coca-Cola China Ltd. The transfer also includes a detailed formula for the product, which hit the Beijing and Shanghai markets on a trial basis earlier this year.
"This contribution reflects Coca-Cola's considerable efforts to help build the local soft drink industry through the free transfer of intellectual property rights," says Pan Beilei, vice-chairman of China National Council of Light Industry. Tianjin Jinmei Beverage Co is a 50-50 joint venture established in 1987 between Tianjin Beverage Factory and a subsidiary of Coca- Cola Co. "It is the first free transfer of a brand name to a local company in Coca-Cola's history," confirms Steve Chan, vice- president of Coca-Cola China operations, adding that the company would again transfer a brand name if there existed considerable market demand in the future.
Prior to the deal, Coca-Cola Co claimed it had invested several million dollars in research and development for the brand. "But the sum is far from demonstrating the potential commercial value of the brand, because the invisible assets will depend on its popularity among consumers and its future sales in the market," Chan says. Coca- Cola Co will continue to be responsible for advertising, marketing, technology and quality control of the Tian Yu Di brand under the co-operative agreement. "We will both share the costs and benefits of promoting the brand since Coca-Cola is also an equity holder in this joint venture," he says.
Industry analysts say Coca-Cola is seeking to extend its business wings to fruit-based drinks while conforming to China's policy to boost domestic industry since the nation has announced restrictions on setting up carbonated drink joint ventures. Coca-Cola Co and its 18 bottlers operate as a local business in China. By 1997, there will be 23 Coca-Cola bottling plants, representing an investment of more than $500m in China, the company says.
Copyright November 1996, Crain Communications Inc.