Coca-Cola's (KO) China Gambit Working: $400 Million Olympic Bet Wallops Pepsi

It’s an enormous understatement to say China is an important market for Coke (KO). The country is vital to Coke’s global growth plan and could soon rival KO’s sales in the US. So, it’s no wonder why the global behemoth is sinking $400+ million into its Beijing Olympic sponsorship. The details:

  • $80 million for four-year Olympic sponsorship rights and $320 million spent on ads, promotions and other marketing globally
  • Beating other sponsors to punch: In 2001, KO had “Cheer for China” billboards all over Beijing only hours after the city won the right to host the Games
  • Using basketball star Yao Ming in their advertisements (for years had represented Pepsi (PEP))
  • China campaign focused around “shuang”, which is like “awesome” or “cool”, but with more bite to it

So, is it working? The early results are very positive:

  • 47% of Chinese identify Coke as a sponsor of the Olympics, while only 3% of respondents similarly associate other top-level sponsors with the Games, including McDonald’s (MCD) and Adidas.
  • Coke sales volume was up 18% in 2007 from the previous year
  • In 2007, KO claimed 22% of the country’s carbonated soft drink market, up 0.5% from 2006. Coke still trailed Pepsi’s 22.9% share, but PEP saw a dip from 23.3% market share the previous year.

Coca-Cola is only $5 off its 52-week low and a clear victim of the global slowdown. Add in growth prospects like those in China and it’s no wonder KO is one of Wall St.’s most beloved stocks (which, unfortunately, is often a reason to stay away).

See Also:
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