The mark of“The Coca-Cola Company authorized Shanghai Shenmei Beverage and Food Co., Ltd for production” can be seen on the packaging of Coca-Cola, Sprite and Fanta sold in cities including Shanghai, Suzhou, Jiaxing, Wuxi, Nantong and Changshu.
Shanghai Shenmei Beverage and Food Co., Ltd (hereinafter referred to as“Shanghai Shenmei”) is Coca-Cola's largest and the most modern bottling plant in Asia. Coca-Cola was a shareholder of Shanghai Shenmei when the latter was established in 1988. As Coca-Cola reformed its bottling plants system in China and the Chinese market grew rapidly, Swire Group -- Coca-Cola's important bottling partner, took over the shares of Coca-Cola, becoming the holding company of Shanghai Shenmei.
Shanghai Shenmei, whose shareholder was Coca-Cola when it was established, has developed into an enterprise with 54 percent of its shares held by Swire Group; The company now has operated factories both in Minhang District and Jinqiao District; Registered in Minhang Economic and Technological Development Zone, the company now moves to the China (Shanghai) Pilot Free Trade Zone. The development of Shanghai Shenmei accords with the city's reform and opening up and the city's attraction for foreign investment.
Shanghai's Sino-foreign joint ventures target customers in the Yangtze River Delta
In the 1920s, Coca-Cola opened bottling plants in Shanghai and Qingdao. During World War II, Coca-Cola suspended its business in China. At the end of the 1970s, it came back to China as a symbol of America.
In April 1981, Coca-Cola returned to the Chinese mainland and established the first bottling plant in the roast duck factory of COFCO Group's Beijing Branch. In 1983, the company established a second bottling plant in Guangzhou.
However, Coca-Cola cannot tear itself from Shanghai.
In 1986, Coca-Cola put forward an idea of building a beverage concentrate plant in Shanghai.
What is a beverage concentrate plant? A senior employee of Shanghai Shenmei said,“The global business model of Coca-Cola is that other countries buy the beverage concentrate to produce concentrated sugar syrup which will be manufactured into finished product in bottling plants. The Coca-Cola Company in China will produce concentrated sugar syrup according to the recipe and then ship the syrup to the bottling plants around China.”
The recipe should be kept in confidential. Initially Coca-Cola required a sole proprietor to run the concentrate plant in Shanghai. However, at that time, a foreign sole-capital enterprise was not allowed.
What is the solution? Just like the process of the establishment of diplomatic ties between China and the U.S., China played an important role in giving a solution.
China proposed a solution: Coca-Cola builds two plants in Shanghai— a beverage concentrate plant and a bottling plant, and then hands over the bottling plant to China. The two plants will be combined to a joint board with each side taking half shares.
Coca-Cola approved the plan. As a result, the first cooperative venture of China and the United States—Shanghai Shenmei was born.
Public data show that Shanghai Shenmei is co-managed by Shanghai Food Development Co., LTD, Shanghai Shantou Industrial Co., LTD, COFCO, and the Coca-Cola Company. Shanghai Shenmei has a registered capital of US$97.98 million with an investment of US$139.28 million. Personnel from both sides formed the management committee of the company. There are both beverage concentrate department and Coca-Cola battling department in the company.
Since Shanghai Shenmei was founded, Coca-Cola has started producing concentrate in the Chinese mainland.
In the beginning, the application should be submitted half a year in advance with 48 stamps of approvals to transport the concentrate to the bottling line in the plant of Shanghai Shenmei. But as the Chinese mainland was getting more open, the number of the required approvals decreased. Since China joined the World Trade Organization in 2001, approval was no longer needed. The process and time were shortened greatly, and product scale increased.
With the reform and opening up in the Chinese mainland proceeding, Shanghai Shenmei has expanded its business. It has built two large plants in Minhang Economic and Technological Development Zone and Jinqiao Development Zone with 12 production lines, including the advanced 1,500 cans/minute bottling line, 500 cans/minute PET bottling line, 540 cans/minute PET bottle blowing line, 300 cans/minute water and tea beverage bottling line, as well as water processing system, carbon dioxide purification system and syrup continuous manufacturing system.
Shanghai Shenmei is Coca-Cola's largest and the most modern bottling plant in Asia, with an annual sales volume of more than 200 million TEU. Shanghai Shenmei produces more than 100 kinds of Coca-Cola beverages, including the well-known“Coca-Cola,”“Sprite” and“Fanta” soda,“Chivalry” series,“Schweppes” series,“Minute Maid” orange juice,“Minute Maid Pulpy Super Milky,”“Queer,”“Monster,”“Aquarius,”“Georgia” coffee, as well as“Ice Dew” and“Pure Joy” bottled water.
The beverages produced and sold by Shanghai Shenmei cover cities including Shanghai, Suzhou, Wuxi, Changshu, Nantong and Jiaxin. The company has 60 agencies and 13 logistics distribution centers. Shanghai Shenmei not only satisfies the customers’ need of drinking Coca-Cola beverages in the Yangtze River Delta, but also brings profits to its shareholders.
Swire Group takes over Shanghai Shenmei and reforms bottling system of Coca-Cola
It is embarrassing to say it but remains a fact: Coca-Cola Company itself does not manufacture Coca-Cola beverages.
In the past decades, Coca-Cola handed over its bottling business in worldwide to its partners. The company has more than 10 bottling partners including some in its home country--the United States.
Several bottling plants like Shanghai Shenmei have been established since 1981 in the Chinese mainland, which belong to Coca-Cola's partner companies including Swire Group who invested and operated those plants. Swire Group cooperated with Coca-Cola Company to develop bottling plant in the Chinese Mainland in 1979. Before that, Swire Group has already taken charge of bottling operations in China's Hong Kong and Taiwan, and the U.S. for Coca-Cola.
With a pragmatic and moderate culture, Swire Group is a renowned British company with a history of more than 200 years, longer than Coca-Cola. The company has gradually entered the market of Hong Kong and then the Chinese mainland. Setting its headquarter in Hong Kong, Swire Group covers five business sectors. The main business of the beverage and food sector is bottling operation and cold chain for Coca-Cola.
Coca-Cola has refranchised the global bottling field to 100 percent in 2016, In the Chinese mainland, Coca-Cola also took the same action after 36 years it came into Chinese market. Swire Group’s bottling plants cover seven provinces in China. In the Yangtze River Delta, only bottling plants of Shanghai Shenmei do not belong to Swire Group. Once it could control Shanghai Shenmei, its territory would be complete in the Yangtze River Delta.
Coca-Cola wanted to make strategic adjustments, while Swire Group wanted to complete its“jigsaw,” each taking what it needed.
Swire Pacific Limited announced on Nov. 18, 2016 that its wholly owned subsidiary, Swire Beverages, would bid for the acquisition of certain assets of China Food Group in accordance with the laws of China. After the bidding and the general agreement were reached, the Coca-Cola bottling system in the Chinese mainland would be reorganized.
In the restructuring plan of Coca-Cola, it no longer directly owns the rights and interests of the bottling business in the Chinese mainland. As a result, bottling operations of Swire Group and COFCO increased as their franchised regions have been interconnected, cutting their distribution and general costs with higher efficiency and quicker decision.
On July 3, 2017, Swire Pacific Limited announced that the company's acquisition of Coca-Cola bottling business, alongside the transfer of rights of the Coca-Cola bottling business of Shanghai Shenmei Beverage & Food Co., Ltd, were completed on July 1, 2017.
Public information shows that Shanghai Shenmei is now jointly invested by Swire Beverages Holdings Limited and a number of Chinese-funded enterprises, while Swire Pacific owns approximately 54 percent of the shares and is the largest shareholder.
With reforming and opening-up, Shanghai Shenmei, originally an important bottling plant of Coca-Cola Company, has diverted from a foreign-funded company to foreign holding company after several rounds of negotiations, accumulating and attracting a large sum of foreign capital.
China becomes 3rd largest market for Coca-Cola
Swire Group believes the Chinese market could create more with great needs of non-alcohol instant beverages.“China has a potentially huge market due to its increasing population, urbanization and relative low consumption per capita in Chinese mainland compared to other developed markets.”
Patrick Healy, CEO of Swire Beverage, said on a public occasion,“We are glad to improve our cooperation with Coca-Cola Company. We are positive about the Chinese market because it serves as the third largest market in terms of sales volume. We believe that the world-class bottling plants system built by Swire Beverage in the Chinese mainland over the past 27 years would work to its advantage in the expanding franchised areas. In general, the reforming plan could improve our beverage business in the Chinese mainland and help us seize opportunities brought by the dynamic market, leading us to more achievements.
“John Slosar, Chairman of Board in Swire limited Company, also holds positive opinions. He said,“Our strategic partnership has been sustained for more than 50 years with Swire Beverage and Coca-Cola Company. Swire Beverage has become one of the largest Coca-Cola bottling company with important franchised areas covering Chinese mainland, America, Honk Kong and Taiwan. The reforming plan proved that we are dedicated to maintaining a sustainable strategic partnership with Coca-Cola Company. We expect that our bottling plant system in mainland China would be better and we could create longer value for shareholders under joint effort between Coca-Cola Company and us.”
A senior employee of Shanghai Shenmei said,“Coca-Cola was in 200 ml glass when it was first introduced into Chia. The retail price of it in Shanghai and Beijing is 2 yuan now compared to 0.15 yuan in the early 1980s. At that time, 0.15 yuan was not cheap, but 2 yuan is not a big deal as people’s income increased greatly in China. Coca-Cola is dedicated to popularizing beverage and making it available and reasonable to ordinary people who are also willing to buy.”
China is the second largest economy in the world with a large population as many less developed areas of China are catching up with the average level of the country, making it possible for China to surpass America in consumption of Coca-Cola. The situation in China is in favor of Coca-Cola Company and its bottling plants partners. As the largest consumer market in China, Shanghai is bound to create more for Coca-Cola Company and bring huge returns to investors.
The development of bottling plants in Shanghai illustrates great achievement of reform and opening-up as well as achievement of urbanization and development in Shanghai. Coca-Cola has scored great accomplishment after its comeback. It merges Chinese culture and American culture by making Coca-Cola a part of Shanghai residents' daily life and meeting their increasing material and cultural needs.“It has been 45 years since the normalization of Sino-U.S. relations. The relations between the two countries have seen historic progress despite difficulties, bringing tremendous benefits to the peoples of both sides.（Zhou Jian，Wang Xiaoyi）