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Coca-Cola Expands Its Beverage Production in China With at Least 6 Facilities

By Rhian Hunt – Aug 17, 2020 at 11:57PM

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The new capacity should be operational in 2020, with more to follow in 2021.

Responding to positive Q2 sales figures in China, Coca-Cola (KO 1.12%) is pushing ahead with its plans to open half a dozen new production facilities there before the end of 2020. The new bottling capacity will cost approximately $36 million to complete, while the facilities are expected to crank out $244 million worth of soda and other soft drinks per year.

The facilities themselves are being constructed and operated by a partner of Coca-Cola, Swire Coca-Cola. Swire Pacific (SWRAY 0.67%) reported a huge $707 million loss for Q2, which ended on June 30, but hopes its China operations, including the Coca-Cola partnership, will enable weathering the COVID-19 economic storm. Swire is chiefly an aviation company, but chairman Merlin Swire states that "the long-term success of Swire Pacific will reflect the continued growth of the Chinese mainland and Hong Kong, and we are well placed to take advantage of new opportunities."

Soft drink bottles are lined up on a conveyor belt.

Image source: Getty Images.

While Coca-Cola also saw its revenue reduced by the novel coronavirus during Q2, China provided a bright spot. Chief Executive Officer James Quincey noted during the Q2 earnings call, "In China, we placed a big emphasis on our sparkling portfolio during the height of the lockdown," continuing, "as a result, the category grew 14% in volume this quarter, led by trademark Coke with strong growth in Zero Sugar offerings."

In the somewhat longer term, another of Coca-Cola's bottling partners in China, COFCO, is building a large facility in southern China, expected to produce around 187,000 tons of beverages annually. This facility is not expected to open sometime late next year, however.

Rhian Hunt has no position in any of the stocks mentioned. The Motley Fool has no position in any of the stocks mentioned. The Motley Fool has a disclosure policy.

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