Friday, September 4, 2009

Coke to invest $200 million in Vietnam

HO CHI MINH CITY, Vietnam (Reuters) - Coca-Cola (KO.N) plans to invest $200 million in Vietnam over the next three years, nearly doubling its total investment since returning to the Southeast Asian country 15 years ago, CEO Muhtar Kent said on Friday.

"Over the next 10 years we see this market as reaching the size of a market that would be in our top 25 in the world level in terms of its total potential," he told Reuters in an interview.

The world's biggest soft drinks maker would consider acquisition opportunities if they arise, but was concentrating on organic growth for now in Vietnam, he said.

Like many other U.S. companies, Coca-Cola left Vietnam after the Communist takeover in 1975, but returned in 1994 when a U.S. trade embargo was lifted.

The new investment would be spent on creating production capacity, marketing and equipment, and Kent said Coke would "ramp it up even further over the following three-year period between 2012 and 2015."

"We will always seek what we call around the world bolt-on acquisitions," he said. "So far we have had very good results in terms of organic growth in Vietnam, so if there are any opportunities in the future we will look at them, right now we are focused on organic growth."

Coke's broad geographic footprint, especially in developing markets like China and India, has helped it weather the global slowdown.

Even though economists say there are signs economies are turning the corner, Kent said he was less concerned about the specter of inflation than economic growth getting back on track.

"We certainly can manage through inflation very well with our industry and products," he said. "I think for us the main concern would be a return to macroeconomic growth, and not inflation."

But he noted that "this business was built for times like these," with a wide reach and relatively low price.

"We are investing across the whole world... We believe this is a tremendous opportunity for us, this recession."

NO CHANGING U.S. MODEL

After PepsiCo Inc (PEP.N) reached an agreement to acquire its large U.S. bottlers last month, some analysts have questioned the future of Coke's North American business model, through which it sells drink concentrate to a network of independent bottlers that in turn bottle and distribute the drinks.

But Kent said he was "a firm, firm believer in retaining, in strengthening the franchise system."

"If your question is: 'Do you believe that you have to go ahead and fully integrate your business in the model that your principle competitor has announced?' my answer would be: 'No'," Kent said. Continued...
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