Coke offer for Huiyuan triggers widespread worry in China

(Xinhua)
Updated: 2008-09-04 16:59

BEIJING -- The public was reminded of the sore memories of lost domestic brands when Coca-Cola announced its offer to take over China Huiyuan Juice Group Limited, a Hong Kong-listed company that owns the Huiyuan juice business throughout China.

While Coca-Cola and Huiyuan both seem satisfied with the deal, many ordinary Chinese think otherwise.

Huiyuan juice and bottles of Coca-cola on sale at a super market in Yichang, Hubei province, on September 3, 2008. The world's biggest beverage maker Coca-Cola has offered to buy China's Huiyuan Juice for $2.3 billion, 300 percent more than its last closing price.[Asianewsphoto]

In an online poll posted by major portal Sina.com, more than 80 percent of the over 76,000 interviewees voted against the acquisition of the leading domestic juice maker. A similar proportion held the opinion that the acquisition, if successful, would verge on a foreign capital's attempt to wipe out domestic pillar brands.

Established in 1992 in east China's Shandong Province, Huiyuan spent years developing its nationwide network and had raised its annual output capacity to 2.2 million tonnes.

Having just been listed among the top 25 domestic brands last year by China Brand Union Association, Huiyuan had the largest share in the Chinese juice market and was the pride of many Chinese as an example of a domestic brand that competes successfully among its international rivals.

"Huiyuan would become a brand under Coca-Cola, which has achieved a major strategic triumph. It will get not only the top brand in China, but also the market. It would take Coca-Cola back to the top of the Chinese beverage market," said brand marketing expert Li Guangdou.

"But it would mean a heavy loss to Chinese domestic brands, which are under severe crisis now," said Li.

Though the global beverage maker said it would keep the Huiyuan brand after the acquisition, analysts doubted whether it would give support equivalent to its original juice brand Minute Maid.

Their worries are not without reason -- seven years after being sold to multi-national giant Procter and Gamble, the annual production of formerly major domestic brand Panda washing powder was reduced from 60,000 tonnes to 4,000 tonnes, as its new owner set the brand aside and showed more interest in promoting its own labels.

Three major shareholders of Huiyuan are said to have accepted the offer. They held approximately 66 percent of the Huiyuan shares. But the $2.4 billion dollar deal still waits government approval.

The application has been sent to the Ministry of Commerce for approval, but the detailed timetable or result has not been disclosed.

According to DLA Piper UK LLP lawyer Liu Cheng, whether the deal would get approval is closely related to its influence in the industry after the acquisition, and whether the Chinese anti-trust law would include the juice market under its regulation.

If the market share of Huiyuan and Minute Maid together exceeds 50 percent, it might pose difficulty in winning approval, said Liu.