Coca-Cola To Begin Bottling Operations In Laos

Via The Wall Street Journal, a report on Coke’s planned bottling and distributions operations in Laos, which has seen high growth over the past decade and was recently admitted into the World Trade Organization:

Coca-Cola Co. KO -0.13% plans to begin bottling its products in Laos by 2014, moving in on Southeast Asia’s smallest economy, where rival PepsiCo Inc. PEP -0.14%has deep distribution lines.

While Coca-Cola’s beverages have long been available in Laos through third-party distributors, the Atlanta-headquartered beverage giant plans to build its first bottling facility in the country as part of a drive to deepen its presence across Southeast Asia. The move comes amid signs of slowing sales in China, its once-reliable growth engine, and as the company expands elsewhere in Asia.

ThaiNamthip Ltd.—Coca-Cola’s bottling partner in Thailand in which it has a stake—said Thursday it will invest $40 million over the next five years with Laos-based PT Construction Co. to establish bottling and distribution operations in the country.

The new joint venture, Lao Coca-Cola Bottling Co., will distribute Coca-Cola, Fanta, Sprite, Minute Maid and Namthip drinking water, ThaiNamthip said in a statement. It said it started distributing Coca-Cola products supplied by ThaiNamthip’s plants in Thailand on Thursday.

The move comes a month after the World Trade Organization voted to approve Laos’s entry into the trade body, and after the nation hosted its largest-ever summit of world leaders in the capital, Vientiane. Laos has been growing at 7% annually over the last decade, largely fueled by growth in the hydropower and mining sectors, and many foreign investors already in the country are expanding.

ThaiNamthip didn’t provide further details on the joint venture, but Coca-Cola Pacific’s communications director, Sharolyn Choy, said the investment will be spent over five years and the plant will be built in Vientiane province.

“With Laos getting into the WTO and integrating with the regional economy, it just makes sense for us to move in,” Ms. Choy said

Members of the Association of Southeast Asian nations are three years away from forming the Asean Economic Community, a trading bloc with around 10% of the world’s population. Asean had a combined GDP of more than $2 trillion in 2011.

Ms. Choy declined to comment on sales targets in Laos, but said Coca-Cola’s distribution will increase after the plant starts operations.

The joint venture in Laos follows Coca-Cola’s expansion elsewhere in Southeast Asia. In October, Coca-Cola said it planned to invest about $300 million over the next three years in Vietnam. It recently began distributing its products in Myanmar after a hiatus of more than 60 years, and said it is committed to building a bottling plant in Myanmar, but didn’t provide a time frame.

Ms. Choy said the plant in Laos will employ about 70 people, but declined to say when construction could begin or comment on production capacity.

The new facility, which is scheduled to begin operations in 2014, positions Coca-Cola to wage a cola war with New York-based PepsiCo, which has been operating in the country in partnership with a Laotian beverage maker and distributor.

ThaiNamthip will own 70% of the Lao Coca-Cola Bottling venture, with its local partner holding the rest.

Coca-Cola has an undisclosed stake in ThaiNamthip, an unlisted Bangkok-based company that was founded in 1959. The company has six bottling plants and distributes products in 63 provinces in Thailand. Coca-Cola’s other Thai bottler, Haad Thip, has a single plant and distributes Coca-Cola products in 14 provinces.

Laos-based PT Construction Co. specializes in hydropower and infrastructure development. The company is involved in the construction of the 1,285-megawatt Xayaburi dam, which will be the largest in Laos when completed in 2018.

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