With its 1.33 billion people, China causes companies to just start drooling. The country offers such market potential and such a huge population that international companies such as PepsiCo and Coca-Cola cannot afford not to focus their efforts there.

Each company plans to invest more than $2.5 billion in China over the next three years, with the goal of achieving at least double-digit annual growth. New production plants will make their namesake drinks, as well as snacks, and company farms will grow potatoes and oats to support proximate sourcing. Pepsi also plans to build a research and development center for its Asian products to ensure that it correctly targets this new consumer market.

In some cases, the companies will sell the same products in China and in the United States; in other situations, they are creating new products to meet Chinese consumers’ tastes. Coca-Cola’s Sprite brand is China’s top-selling carbonated beverage, so it also had developed a Sprite-and-green tea mix. The “Minute Maid Pulpy Super Milky” combines fruit juice, milk powder, whey protein, and coconut bits. Not to be outdone, Pepsi offers cucumber-flavored and crispy prawn–flavored potato chips.

Currently China’s per person Coca-Cola consumption is only one-third the world average, and Coca-Cola earns only 15 percent of its net operating revenue from Asia as a whole (including China). Thus, it sees great opportunity in creating targeted products and making Coca-Cola red as important in China as it is in the United States.

Discussion Questions

1. Why are Coca-Cola and Pepsi investing in China? 

2. Why does Pepsi need a research and development center just for Asia?

Jeremiah McWilliams, “Pepsi, Coke in Race to Conquer China,” Atlanta Journal-Constitution, May 28, 2010.