cocacola.jpgCoca-Cola hopes this week to cement the next stage of its China strategy with the $2.4bn acquisition of HK-listed China Huiyuan Juice Group.

The government is expected to rule on the controversial acquisition, which was announced back in September, later this week. While Coca-Cola is already an established player in China's soft drinks market, the acquisition has attracted much opposition as it would be the largest foreign takeover of a Chinese company.

In a thinly-veiled attempt to influence decision, the US company announced it was planning to raise its ante in China by investing $2bn in the country over the next three years, which it is more than it has invested in the past twenty years.

The US consumer giant also recently opened a $90m “innovation and technology centre” in Shanghai, presumably in a bid to convince authorities that it is sensitive to charges of cultural imperialism. The new research centre, Coke's largest in Asia, will develop new products for China, where drinks like juices and teas are preferred over Coke's traditional mainstay, carbonated beverages.

No to be outdone, arch-rival Pepsi plans to invest $1bn in China in the next four years.

Needless to say, China offers huge potential for western consumer brands particularly now that their home markets are mired in recession. In Coke's case, its North American sales declined by 1 percent in 2008, while case in China rose by a mouthwatering 29 percent. There is still a lot to go for, as per capita consumption of Coke is just 24 units per person per annum, compared to over 400 in North America.

Western marketing professionals say Coca-Cola is one of the few multinationals that seem to understand the Chinese market. The US company built its first bottling plant in China in the decade following World War I and was the first US company to distribute its products in China after Deng Xiaoping opened the country to foreign investors in 1979.

More history of Coca-Cola in China here.

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