But in the case of Huiyuan Juice, Coca-Cola is discovering that even US$2.3 billion isn’t going to buy off national pride in the mainland.
The company’s bungled bid for Huiyuan Juice has reached crisis point. Outside China, the proposal has made headlines as the biggest acquisition of a domestic firm by a foreign company. But in China, Huiyuan chairman Zhu Xinlin is being called a traitor by bloggers and the press for selling his 16-year-old business to Americans instead of building on the solid base cultivated at home.
The company’s bungled bid for Huiyuan Juice has reached crisis point. Outside China, the proposal has made headlines as the biggest acquisition of a domestic firm by a foreign company. But in China, Huiyuan chairman Zhu Xinlin is being called a traitor by bloggers and the press for selling his 16-year-old business to Americans instead of building on the solid base cultivated at home.
There are suggestions that the Chinese entrepreneur, who became famous after he appeared on China’s version of The Apprentice, has run into management difficulties and development bottlenecks, leading to sliding sales. His cash flow problems aside, the sale is indeed at odds with China’s ambition to establish more local brands.
China’s frustration is apparent. It is struggling to break with its status as a cheap, anonymous factory and join the global elite of consumer brands. Huiyuan may be missing an opportunity that - if it seizes - may lead it in the same direction as Lenovo, which has arguably come closest to achieving that status.
First, some perspective on China’s irritation. The country isn’t short of powerful brand names. Some have in fact gained international fame and fortune. Most notable among these early market adventurers are Huawei, TCL and Tsingtao. Brands such as milk supplier Mengniu Dairy and sports label Li Ning, meanwhile, offer future hope.
Yet, exasperatingly, these homegrown names remain some way off from achieving the vaunted status of international brands. And despite the country’s protection of ‘famous brands’ from foreign acquisitions, it’s hard not to speculate that these prospects too may become acquisition targets in due course.
For Huiyuan, the future is uncertain. How successful it will be after the acquisition and whether or not it reaches international consumers depends on strategies devised by Coke, which will face the complex challenge of synergising these domestic brands into a global portfolio.
But this is far from a done deal and Coke’s poor judgment of the national pride sweeping the country after the Olympics, as well as its unhurried response to negative consumer sentiment, may further derail it.
It could, however, prove to be an interesting case-study, not least because Coke has a long history in China and has spent generously to win over consumers. In the past, it has done well to respond to national pride through its advertising. However, the idea that it might have bought some more favourable consideration in business dealings in China as a Games partner appears to be of little significance in the face of this widespread opposition.
Predictably, rival local juice makers have set out to foil a deal that would give Coke a dominant share of the country’s juice market. Whether or not calls for the regulatory body to block the deal are heard, remains to be seen. Mergers and acquisition deals are notoriously difficult in China given state dominance of the corporate sector and red tape. Nationalistic pride often triggers protests when foreign firms gain influence over local businesses.
Coke’s attempted takeover is just the latest test of China’s openness to foreign investment after Carlyle Group admitted defeat in its three-year battle to buy a stake in Xugong Group. ArcelorMittal is also facing obstacles to expanding through acquisitions, while Singapore Airlines’ proposed bid for China Eastern Airline continues to stumble.
For Coke, at stake is a market predicted to see double-digit growth on the back of rising personal incomes and increased health awareness. With Edleman’s help, will need to act swiftly now if it is to strengthen its position on the battleground against arch rival Pepsi.
