China trumps US: Coke ceo

WARC, 28 September 2011

BEIJING: Coca-Cola, the soft drinks group, believes China currently possesses several advantages over the US as a country to do business in, according to Muhtar Kent, the firm's chief executive.

Speaking to the Financial Times, Kent argued there were "many respects" in which it was now more straight-forward to trade in China than America.

As well as the streamlined formal channels that corporations can work through, the Asian economy offers major benefits thanks to the rivalry between regions to attract multinational enterprises, Kent added.

"You have a one-stop shop in terms of the Chinese foreign investment agency and local governments are fighting for investment with each other," he said.

During the first six months of 2011, China delivered 7% of Coca-Cola's global volume sales, as demand surpassed more than 1bn cases, a figure doubling that recorded just five years ago.

Bernstein Research, the insights provider, estimated China yields approximately 6% of Coke's annual operating profits, compared with the total of 19% for the US, which generates 41% of sales.

While Coca-Cola's bid to buy the Huiyuan Juice Group, an indigenous drinks manufacturer, for $2.4bn was blocked by the government in 2009, it has continued to ramp up local investment levels.

This includes a commitment to spend $4bn in the coming three years, alongside a similar $3bn plan recently announced for Russia, measured against some $1.3bn allocated to North America.

Kent said: "In China and other markets around the world, you see the kind of attention to detail about how business works and how business creates employment ... They're learning very fast, these countries. In the West, we're forgetting what really worked 20 years ago."

By contrast with China's fiscal discipline and inviting atmosphere for investment, Kent suggested the political deadlock and unfavourable tax regime on overseas earnings in the US posed obstacles.

"If you talk about an American company doing business in the world today with its Chinese, Russian, European or Japanese counterparts, of course we're disadvantaged," he said.

"A Chinese or Swiss company can do whatever it wants with those funds [earned in foreign markets]. When we want to bring them back, we are faced with a very large tax burden."

Data sourced from Financial Times; additional content by Warc staff

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