Sale of Coca-Cola bottling stakes mulled

A bottling line of Coca Cola in Shijiazhuang, capital of Hebei province. [PHOTO / XINHUA]

State-owned China Foods Ltd is considering a sale of its stakes in Coca-Cola bottling factories, a move that would reshape its near duopoly on the mainland with Swire Pacific Ltd since the beverage giant began to refranchise its bottling operations.

China Foods is considering selling stakes in 10 Coca-Cola bottling companies in the country through a public tender, it said in a Hong Kong Stock Exchange filing on Tuesday.

The company will sell stakes varying from 7.15 percent to 100 percent through the China Beijing Equity Exchange.

Half of the bottling facilities listed for sale are joint ventures with Swire Pacific. No value was given.

China is the world's largest consumer market for food and beverages products, as an emerging middle class gravitates toward foreign brands. The sales could potentially leave Swire a big portion of bottling facilities in southern China if the Hong Kong-based company were to bid for it.

China Foods operates Coca-Cola bottling business in 15 provinces, with the majority of them located in northern China, including Beijing and Hebei province, according to the firm's annual report.

Swire operates 11 plants in seven provinces including Guangdong and Fujian. In the first half of the year, attributable profit from its China beverage business was HK$119 million ($15.3 million), a 51 percent drop from a year earlier due to the country's economic slowdown.

Shares of China Foods have declined almost 11 percent this year, while Swire Pacific has dropped 0.8 percent.

According to its half-year report, China Foods' soda water and juice sales have declined 5 percent and 18 percent, respectively, with bottled water up 27 percent year-on-year.

Coca-Cola Co in February announced plans to significantly speed up refranchising of its bottling operations, as it seeks to reduce exposure to facilities that are more capital-intensive and low-margin.

The world's largest soft-drink company that month signed a letter of intent to also refranchise its China bottling operations to China Foods and Swire.

Bloomberg contributed to this story.