Mergers, Acquisitions, Alliances and Synergies Case Study

Case Title:

Coca-Cola’s Acquisition of China’s Huiyuan Juice: A Juicy Deal?

Abstract:
What is the best way for a company to attain stable revenue and command a larger market share – especially in an industry, where the life cycle of a product shrinks fast? How does a company manage its product portfolio in a way that continues to meet the customer demand and extend its validity? Among options galore, companies opt for either organic or inorganic growth. In today’s era of marketing where ‘Consumer is the King’, companies compete with one another to lure the consumers. This motto is equally relevant to the beverage industry, where the tastes of consumers matter a lot. Beverage companies constantly chart out new strategies to launch their products that suit the changing tastes and preferences of the consumers. Similarly, Coca-Cola, which believes in ‘glocal’ approach has launched products that matches with the likes and dislikes of the Chinese consumers and as a result is embraced as a local brand by the Chinese. However, carbonated beverages started losing their fizz with the outbreak of Severe Acute Respiratory Syndrome (SARS) in China in 2003. This triggered health consciousness among the people in China, which, in turn, has increased the demand for fruit juices than carbonated drinks. In order to fall in line with the changing preferences of the people, retain its market share and also to save itself from the declining stage of the Product Life Cycle (PLC), on September 3rd 2008, Coke offered to acquire Huiyuan Juice Ltd., a leading fresh fruit juice maker of China, for a premium price. Through this acquisition, Coke plans to diversify its product portfolio to cater beverages to different segments of Chinese consumers, the country in which the huge size of consumer base provides a great potential. However, the fickle-mindedness of the Chinese is a cause of concern for the company, as the life span of the beverages quickly gets shorter in China. Nevertheless, the success of the deal ultimately depends on Coke’s mettle to go through the anti-monopoly law of China. Even if the deal goes through the law, Coke has to face the litmus test of its capability in not just retaining the consumers, but in proving its market leadership as well.

Pedagogical Objectives:

• To examine the changing landscape of the soft beverage industry in China
• To understand the business dynamics of Coke in China keeping in view the various stages in the life cycle of different beverages
• To assess Coke’s strategy in acquiring Huiyuan and the expected synergies of the deal.

Keywords : Coca-Cola, China, Beverages, Mergers and Acquisitions, Competitors, Synergies, Carbonated Drinks, Huiyuan Juice, Anti-monopoly law, Bottling, Joint Ventures, Product Life Cycle, Logistics, Distribution channels, Pepsi