China is at that stage of its economic development where it is developing indigenous brands. Huiyuan, the country’s biggest maker of fruit juice, is one, and sufficiently powerful a one for Coca-Cola to bid $2.4 billion last September to acquire the Hong Kong-listed business. But what would have been the largest takeover of a Chinese firm by a foreign rival has been blocked by the Ministry of Commerce, as we suspected it would.
This deal was always seen as the first big test of the new anti-monopoly law, and the proposed combination has been nixed on the ground that it would give Coke too dominant a market share; Huiyuan has 42% of the domestic fruit juice market. But, as the FT reported, Coke had been considering abandoning the deal because regulators were insisting that it would have to give up the Huiyuan brand as it was too valuable to fall into foreign hands.
That will have been noted far beyond Atlanta.
I remember back in the blue Mao suit days climbing a (small) mountain in central China and coming across s a battered old Coca-Cola vending machine, which no one could explain how it got there or why. At last month’s Olympics, Coca-Cola was everywhere, blanketing the games in Coke red. The American drinks company was arguably the big winner of the commercial games.
Now it is bidding $2.5 billion for China Huiyuan Juice Group, the Hong Kong listed holding vehicle for the China’s leading fruit juice maker. If the deal goes through, it would be the largest foreign acquisition in China, as well as Coca-Cola’s second largest ever.
The company, which has been operating in China ever since Deng Xiaoping reopened the economy in the late 1970s, is looking to expand its beverage business worldwide beyond cola as well as its presence in China. While Coca-Cola will bring production and distribution expertise to Huiyuan, the offer will need government approval — and that is far from certain.
Xinhua’s report points up two prospective difficulties: the potential monopoly position that the combined company would hold (though that is a bit rich in a country breeding national champions across 20 industries; that said this is will be the first significant test of last year’s new Anti-Monopoly Law); and the fact that Huiyuan is a famous domestic brand and thus worthy of protection. Much more to come here, this Bystander suspects.