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China’s recent history is full of stories of Western companies who tried and failed to make their mark in the country’s growing markets. Yet for soft drinks manufacturer, Coca-Cola, China is now the fourth largest market globally, and the manufacturer is one of the most popular foreign brands in China (source: Eastday). So what is the secret to doing business in China? What can Coca-Cola’s success story tell you about marketing in China?
It was in the 1920s that Coca-Cola first entered the Chinese market. However the rise of communism following World War II forced foreign companies to withdraw from the country. When China was opened once again to foreign investors in 1979, the company was the first American brand to open up distribution in the country (source: Just Drinks).
At the time China’s soft drinks market was in its fledgling first stages. In 1980 the market produced 288,000 tons of product. 27 years later, the figure had increased by 176 times (source: Eastday). Currently, Coca-Cola dominates the soft drinks market in China, with a share of over 50%. It also boasts a 12% share of the fruit and vegetable juice market (source: Forbes).
The fact that Coca-Cola entered China’s soft drinks market at a time when it was only just developing gives us a key insight into the company’s focus, and provides a valuable learning point for anyone considering marketing in China.
When it comes to overseas expansion, a lot of companies focus on Beijing and Shanghai. These are the most developed areas with the biggest existing markets (source: Forbes). However, this makes competition fierce, and the market is crowded. What Coca-Cola did, and still continues to do, is consider the potential of growing markets. They build bottling plants in developing areas, such as Hebei. With a population in excess of 72 million, with a per capita GDP of US$5,259, Coca-Cola understands that Hebei has the potential to become a strong and lucrative market (source: Coca-Cola Company).
A huge part of Coca-Cola’s success in China comes down to its understanding of the important cultural concepts of face and relationship. Coca-Cola’s continued commitment to investing in China, as well as pouring funding into local community projects and environmental causes has helped them to build trust and show their dedication to Chinese consumers, their culture, and their country.
When Coca-Cola entered the market they adopted a policy of ‘Three As’. They made their product available, so that it was there for consumers to try. Second, they were confident their product would be accepted because of its quality and taste. Then they focused on affordability, so that consumers who liked the product would be able to buy it (source: Eastday).
At the centre of Coca-Cola’s efforts to break into China are some very simple concepts. Firstly, they were prepared to invest in growing areas, rather than chase profits in crowded markets. And secondly, they understood their target consumer, and made their product and business methods work to suit them.
(Image source: “Coca-cola Shield” | www.freedigitalphotos.net)