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"Marketing in China"

May 22, 2002

Mr. Patrick T. Siewert
President, East and South Asia Group, The Coca-Cola Company

It's a great pleasure for me to be here with you today. I'd like to thank the organisers at Nikkei for inviting me to speak and for putting together this excellent forum in which we can share our experiences and views.

Well, as you can imagine, the theme of this panel - 'marketing in China' - is a subject particularly close to our hearts and minds at Coca-Cola. China is very important in the plans of The Coca-Cola Company. We believed in the promise of China more than 70 years ago. And it's a country that we're excited about _ and very much focussed on today.

I'd like to begin by giving you a bit of historical perspective on our business in China. Then, at the risk of breaching my confidentiality agreement with the Company, I thought I'd disclose to you our 'secret formula'. And I'll finish by talking about how we reach out and create deeper relationships with the Chinese people.

First - the history. Our products first arrived in China in 1927. But it wasn't until 1979, under China's open-door policy, when we reentered the country and set the stage for today's business. In 1981, we opened our first mainland bottling plant in Beijing. We haven't looked back. Since then, we've invested more than a billion dollars in China. Our system now operates 23 bottling companies and 28 bottling plants.

This is China's largest bottling network and it provides us with great distribution coverage.

Any of you with experience operating in China know that to have a shot a success, you've really got to take the time to invest in the country. China is large and diverse and it's a long-term proposition. So you have to make the effort to patiently and diligently build your business over time. That's where our focus was decade after decade and our results today prove the wisdom of this approach.

Our sales volume in China has increased from just four million unit cases in 1986 to over 450 million today. Coca-Cola is the leading soft drink in China. Our major brands are consistently voted among the top five soft drinks in China.

China is now our 6th largest market in the world and still growing fast. In the first quarter of this year, for example, our China business reported double-digit growth.

Of course, we know we have more do to. But there's no question that we're in a solid and exciting position in China. How did we get there? By doing what we do best _ delivering great marketing to support our brands. Connecting with consumers _ meeting their needs.

We have, of course, a unique advantage in brand Coca-Cola... consistently ranked by Interbrand as the world's most valuable brand. Coca-Cola also consistently ranks as one of China's most trusted brands.

Coca-Cola is the heart of our business - it always has been and always will be. And throughout our history in China, we've been focussed on marketing that realizes the power and promise of our core brand.

I'm talking about marketing that adds a little magic to those special moments in people's lives. I'm talking about marketing that has energy, fun and 'bigness' and I'll give you a couple of examples in a moment. But first I suppose I should make good on my promise to share with you the 'secret formula' that's gotten our China business to where it is today. Well the formula is simply this: the commitment to be a truly local business... the commitment to become part of the fabric of local life in China.

Our philosophy about marketing in China _ or any other country for that matter _ stems from this local approach.

Our job isn't to distribute Coca-Cola _ or any of our other products _ to billions of people; it's to connect with billions of people, one person at a time. Our business, after all, is about building relationships. By forming relationships and strengthening them over time, we're establishing long-term connections with consumers and our brands. And to do this properly, we must understand the lives, the rhythms, the hopes and the aspirations of our consumers. And that means locating decision-making and innovation at the local level. For that reason, our China division office is located in Shanghai.

Our local approach defines everything we do. Our beverage concentrate is produced locally and purchased in local currency. We purchase more than 600 million dollars worth of ingredients, materials and packaging in China every year. Our system directly employs over 20,000 people in China. Almost all of them are local citizens. Our system also employs a further 400,000 people in China through a network of suppliers, distributors, wholesalers and retailers. All of these employees are local Chinese.

We compete in the nonalcoholic ready-to-drink beverage business. Marketing and innovation are fundamental to capturing growth opportunities in this category. Our efforts will always be led by brand Coca-Cola. But we must also keep pace with ever-changing consumer preferences for new tastes and new experiences. After all, our company purpose, our company promise is very simple: to benefit and refresh everyone who is touched by our business.

So in China, we not only produce and market Coca-Cola and our other global brands - we also develop new products specifically geared to local tastes.

We offer, for example, a variety of water and tea products under our locally developed Tian Yu Di "Heaven and Earth" brand, as well as a very successful carbonated juice-flavored drink called Smart.

Smart was launched in 1997. Within five years, it's become the fourth most popular carbonated soft drink in China. We've also recently introduced brand Qoo in China.

Qoo is a little blue cartoon character and a noncarbonated juice drink. It was invented right here in Japan. Today it's the number one juice drink in the country. In fact, Qoo was so successful here that we rolled it out to other Asian markets including Korea, Hong Kong, Taiwan and Singapore. Backed by some innovative marketing and promotion, the brand also sparked a consumer sensation in these new markets. So in the space of just two years, Qoo has expanded to become one of Asia's most recognised brands and Asia's leading juice drink. In China, Qoo was so popular it sold a million cases within its first 2 months! As you know, we make some significant investments in our marketing programs to support this family of beverage brands. Our marketing investments raise consumer awareness. They make people like and want and care about our products. And to successfully implement our growth strategy in China, we're focussed on consistent excellence in some key marketing activities. Let me give you an example of one major marketing platform that we've been relentlessly focussed on... the FIFA World Cup. In a matter of days, the eyes of the world will be on Japan and Korea as the two countries co-host the World Cup. Over 3.7 billion people the world over will be watching. A large share of that audience will be in China, where there's an unmistakable passion for soccer. We've therefore designed marketing programs that add fuel to this passion and tap into the emotional connections our consumers have with our brand and with soccer. Let me tell you the story of how we've done that. In January of 2001, Coca-Cola became the official beverage and a main sponsor of the national Chinese soccer team as it sought qualification to the World Cup Finals. With a television audience of 150 million for the first match, we organised a live telecast performance of a special song that we commissioned for the occasion. The song, performed by eight top singers in China, quickly and widely became regarded as the 'Team China Anthem'.

In August, during the World Cup Asian Qualifying Matches, we launched the first Team China themed advertising called "The Dream Never Dies". The ad reflected the tremendous support of Chinese soccer fans towards their national team. Let's take a look at that commercial...

In October, when China qualified for the Finals, we launched a special TV commercial to mark the achievement.

We also produced a commemorative can celebrating China's World Cup qualification and a video disc for consumers called 'The Road To The World Cup'.

Then we took the team to the fans. We organised a country-wide road show _ we called them "hero tours". The reaction among local soccer fans was amazing. And right now across the country, we're running a record-breaking number of locally-customized, volume-driving promotions. Everything from special packaging, World Cup star cards, ticket give-aways, flagbearer selections, and 'Finger Soccer' tournaments for school kids.

And we're working with our key customers on programs and promotions that strengthen those relationships as well. Earlier this month we launched another Team China commercial called "Home Ground Advantage". In this ad, a Chinese boy presents soil in a Coke bottle to Team China's players to wish them "home ground advantage" in the World Cup. The ad again reflects the support of Chinese consumers to their national team. Again, Coke is part of that special moment of passion and excitement. Let's take a look...

The result of these efforts? Coca-Cola is now the beverage brand most associated with soccer in China.

Our partnership with the Olympic Games is another example of a powerful marketing platform that connects with consumers and drives growth. Coca-Cola is the longest-standing corporate supporter of the Olympic Games. We've supported the Olympic Movement for more than 70 years. It's another example of how we seek to be aligned with the things that our consumers care about. Consumers around the world tell us every year that the Olympic Games are important to them. And we were delighted last July with the historic news that Beijing had been selected to host the 2008 Games. We had a special commemorative gold can on the streets within hours of the announcement and we were the only Company to do it, which tied us strongly to the event.

And during the Games and in the lead up to the Games, we're going to be rolling out some exciting new marketing and advertising and promotions to make the experience of the Games more memorable for the fans. It's our job to create this excitement and these connections... and we're looking forward to doing just this. There's no "Silver Bullet". Marketing isn't about just one great TV ad or a clever promotion. Marketing is about consistent, flawless execution...driven by strategy and consumer insight. As we market our brands, we must be innovators.

Because of the numerous beverage choices facing consumers in China, we have to continually introduce new reasons to choose our brands. We're constantly getting faster and more effective. And this requires hard-working and talented people, which we definitely have.

Let me finish by mentioning another way in which we create deeper connections with the citizens of China. As I mentioned earlier, the promise of our company is simple: to benefit and refresh everyone who is touched by our business. And we believe that good corporate citizenship is at the heart of this commitment. It's about making the effort to respond to causes that Chinese people care about. It's about finding genuine, sustainable ways to reach out and help meet their needs, to help improve their lives. And I'd like to take just a moment to tell you how important that is to us.

Take education, for example - a top priority for Chinese families. Since 1993, we've been a partner in China's rural school-building program called Project Hope.

The program is benefiting more than 30,000 students in rural areas who now study in 51 Coca-Cola Project Hope schools. At the same time, our Coca-Cola First Generation Scholarship program assists more than 600 students in major universities throughout China. These students are the first ever from their respective villages to enter universities. And now, to answer the Chinese government's call to help narrow the "digital divide", we've launched, as part of a pan-Asian program, a major e-learning and IT education program in China.

This program, that we call 'e-learning for life', is building Information Technology centers in 20 rural schools, providing IT training and Internet access to tens of thousands of Chinese students. To date, 15 e-learning centers have been set up.

Why pursue these programs? Because we know we can _ and should _ make a difference. Because we must be a responsible business citizen that people can count on. We must be a trusted neighbour and a welcomed friend in the communities we serve. Simply put, we will continue to do well by doing good.

We've already invested more than 3 million dollars in our citizenship programs in China. And you can bet they'll be more to come in the years ahead as we continue to tie our efforts to national and community priorities.

These beliefs...
... in our truly local business approach
... in our commitment to outstanding marketing and innovation
... in our commitment to corporate social leadership
... these beliefs are the ones that will drive the Coca-Cola business forward in 21st century China.

These are exciting times at Coca-Cola and exciting times in China. We're solidly positioned for growth in this complex market for years to come... and we're going to be intensely focussed on getting outstanding results from our marketing... as we continue to bring benefit to all those who touch our brands and our Company. At Coca-Cola, we're excited about where China is headed over the next few years... and about being a part of it all.

Thank you very much for having me here today.

Titles of speakers, names of companies, etc., were correct as of the time when the forum was held.