The Coca-Cola Co's China operations are unlikely to affect its global growth amid a declining CSD market in the country, an analyst has said.
SIG's Pablo Zuanic said Euromonitor predictions for a 1.6% annual volumes drop for CSDs over the next four years means there is little for Coca-Cola to get excited about in China. The challenges are even more pronounced for Coca-Cola as it controls 70% of China's CSD market but only 5% of non-CSDs, where Zuanic sees more opportunity.
"Coca-Cola's CSD outlook in China does not seem so exciting, and will hardly help move the needle globally," Zuanic said, adding that recent refranchising of Coca-Cola's China bottlers will help "only in part". In November, Coca-Cola handed all of its bottling operations in China to existing partners China Foods, part of COFCO, and Hong Kong's Swire Beverage Holdings.
According to Zuanic, Coca-Cola's bottlers have been hit hard by China's stuttering CSD market, with Swire volumes down 6% and COFCO's down 1% in 2016. The analyst said Coca-Cola must focus on acquisitions in non-CSDs as well as R&D efforts in a market where CSDs account for just 13% of non-alcoholic-ready-to-drink beverage volumes. In comparison, CSDs take up 42% of the US market.
Zuanic cited Euromonitor figures that show China accounted for 6% of global CSD volumes in 2016. PepsiCo is the second-biggest player in CSDs behind Coca-Cola, with 26% of the market. Wahaha has a 1% share, Lotte 0.5% and China Huiyuan 0.3%.
In a report released this month, Euromonitor said 2016 saw stable growth for soft drinks in China as healthier and premium products grew faster and hybrid beverages became increasingly popular.
