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Coke Deal Highlights PR Failings — Media (HK)

BEIJING — Western brands need to raise their focus on public relations following Coca-Cola’s failed US$2.3 billion bid for domestic titan Huiyuan Juice Group, say sources in the market. The bid was touted as the biggest foreign acquisition deal of a Chinese company in history,as well as Coca-Cola’s largest foreign purchase. Coca-Cola spent six months negotiating with the Government in order to facilitate a successful merger.

Yet, according to David Wolf, founder and CEO of Wolf Group Asia, Coca-Cola did not spend enough of that time courting the Chinese people. Huiyuan is seen as a national icon, and when details of the bid emerged, intense public outrage included death threats made to Huiyuan’s CEO.

It wasn’t until mid-September — after the deal became public in China — that Coke turned to public relations agency Edelman to rectify its image in the market. Wolf said that was far too late to make a real difference.

“In the future, brands need to work on their communications approach at least three months before they even announce plans to acquire — they need to explain why they should go shopping in China clearly, often and to everyone,” he said. “Had there been popular support for Coke’s deal, the Government may have changed its mind.”

“With Coke there was immediate, angry commentary and hostile cartoons appearing in the media,” said one Beijing public relations source. “It’s a very sensitive subject for a Western brand to go after a successful Chinese company such as Huiyuan. It may be easier for companies to go after less successful brands because it’s always harder to convey the value of acquiring a successful company aside from handing over a large sum of money as a onetime deal.”

Analysts agreed that Huiyuan was considered too successful to sell to a Western company. It claims an estimated 40 per cent of China’s juice market, while Coca-Cola has 52 per cent of the country’s soda market and 12 per cent of its juice sector.

However, Dave Carini, analyst at Maverick China, said he would not rule out the possibility of future large-scale takeovers. “This one was about juice but the next deal might be oil, telecommunications, technology or agriculture. They’re all going to be completely different market landscapes. Brands should avoid taking this as an absolute ruling.”

Coca-Cola’s takeover bid for Huiyuan Juice was halted after the Government ruled the acquisition was in violation of anti-trust laws.

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