Coca-Cola targets rural China

- Last updated on GMT

Related tags: Economics

Coca-Cola has confirmed that construction has begun on a new
bottling plant in the Zhangquiu City near Jinan, capital of
Shandong Province in east China. The move is part of a trend
whereby large food and drink companies are increasingly setting up
distribution and manufacturing operations in more rural areas.

An agreement was signed to begin construction of the plant with local government authorities to construct what will be the company's 29th bottling facility in the country on 29 December.

Although Shandong Province borders the more prosperous and economically advanced Shanghai Province, it has remained relatively undeveloped. With a population of 90 million, capital city Jinan only has a population of 2.5 million, an indication of just how rural this predominanly agricultural province is. But the company beleives that investing in such areas is the was forward.

The move ties in with an earlier announcement by Coca-Cola's​ China president Paul Etchells that the company was aiming to increase its penetration in less developed and rural areas of China.

Currently the company has over 600 dealers operating throughout the country, but distribution has concentrated on the key industrialised regions in the north-east and south of the country.

As market penetration reaches saturation point in many of the key provinces, such as Guandong and Shanghai Province, established company's such as Coca-Cola are now finding that in order to maintain market growth they are having to increase their reach in rural areas.

With GDP growth continuing to increase in excess of 8 per cent, the prosperity that was once confined to the larger urban areas is now starting to filter back into the countryside. This has occurred as many 'itinerant' city workers return to the country, bringing with them the necessary capital to set up their own businesses or invest in existing smaller family businesses.

This means increasing spending power in rural areas and it is something that food and beverage companies will continue to eye in the future.

Related topics: Carlsberg, Manufacturers

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