Coca-Cola's Long Term Goal in Myanmar

Coca-Cola's recent move to open a plant inside Myanmar, the first cola company to do so, represents Asia Pacific's growing significance for carbonates,according to Euromonitor International.

Coca-Cola opened the new bottling plant on 5 June, a tangible demonstration of its planned USD 200 million-investment in Myanmar over the next five years, according to the company.

Jonas Feliciano, Beverages Industry Analyst at Euromonitor, said the investment reflects both the opportunities that Coca-Cola sees in Myanmar as it builds towards a free market economy, as well as the soft drink giant's continued interest in Asia.

Soft drink growth in recent years has predominantly come from Asian markets.

Asia Pacific led all other global regions with over 54 billion litres in total volume growth in 2007 to 2012, according to Feliciano, who added that while markets such as Japan, China and Indonesia led this growth, Thailand and Vietnam are also key players.

"Coca-Cola is hoping the beverage landscape in Thailand is indicative of Myanmar's potential," he said.

In 2012, Thailand had more than USD 4.4 billion in off-trade soft drink sales with USD 2 billion coming from the carbonates category, according to Feliciano.

He argued that the company's strength lies in its Coke brand, so establishing itself as the dominant beverage company will "really open the doors for its other products", such as its juices and bottled water brand.

First Mover Advantage

According to Feliciano, "the battle between global soft drinks brands in Myanmar could very well come down to first mover advantage."

Coke and Pepsi products are already available in the country. However Feliciano predicts that domestic bottling of Coca-Cola's brands will really help the company in the region through lowering the unit price and expanding the beverage's availability beyond more affluent consumers.

"If Vietnam and other Asian nations are any indication, securing relationships with local retailers and distributors as well as learning how to navigate Myanmar's retail landscape will be the keys to their success," he added.

Feliciano cited the example of how Pepsi's first mover advantage in Vietnam allowed the company to leverage early relationships for a vast manufacturing and distributional network.

However, he predicted that Coca-Cola's investment in Myanmar will take time.

 From 1994 to 2007, Pepsi continuously reported losses in Vietnam for its range of food and beverages, according to Feliciano.

"But that investment is finally paying off and the company has positioned itself well for future growth in that market," he said.

Feliciano predicted that Coca-Cola is going to face similar challenges early on in Myanmar, especially as the country continues to face the obstacles of transitioning to a free market economy.

However, he said he sees Coca-Cola's decision as a "smart" investment, as developing markets, especially in Asia, are key growth areas while soft drink consumption in Western Europe and North America reach saturation.

"Coca-Cola's first move may take decades to pay off, but it's better than being second," he concluded.

Source: FLEXNEWS