Coke to build bottling plant in Malaysia

Coca-Cola said it will build a new bottling plant in Malaysia and invest 1 billion ringgit ($NZ428 million) over the next five years to boost growth in the Southeast Asian market.

The investment comes as the world's largest soft drink maker gets ready to end its franchise with a local bottler after sales remained stagnant over the years.

Coca-Cola is expected to let its decades-long contract with a unit of Singapore's Fraser and Neave expire in September 2011.

The contract, which covers mainly the bottling and distribution of Coca-Cola and Sprite brands, was worth 421 million ringgit a year.

Glenn Jordan, president of the company's Pacific Group, said in an interview with The Associated Press that a third of the 1 billion ringgit will be invested in an eco-friendly plant on a 12 hectare site in the southern state of Negeri Sembilan.

The rest will be plowed into sales and merchandising assets, product innovation and marketing to beef up the company's presence in Malaysia, where the annual per capita consumption of Coca-Cola is well below that of many countries in the region, he said.

The plant is expected to be operational by mid-2011, he said.

"This investment will enable us to support our core brands, Coca-Cola and Sprite, enhance our competitive edge and increase our geographic coverage,'' he said.

Jordan said Malaysian investors have 15 per cent stake in the new bottling facility, with the Armed Forces Fund Board holding a 10 per cent stake and private firm AAD Equity, led by former finance minister Daim Zainuddin, 5 per cent.

The investment will directly create 600 to 800 new jobs at the bottling plant, and is expected to create between 6,000 and 8,000 jobs with local suppliers, he said.

Jordan said Coca-Cola's move to end its franchise with Fraser and Neave was an ``amicable separation" as both companies have different growth strategies.

He said growth in Malaysia's nonalcoholic beverage market has been relatively slow at between 4 and 6 per cent over the last five years, compared to double-digit growth in some other regional markets. He attributed this to a lack of aggressive competition and insufficient diversity in the product range.

"We are here to revolutionize the way we sell our products. We see a lot of opportunities here," Jordan said.

He declined to give growth targets but said the company aims to achieve "healthy growth" and be more competitive in Malaysia.

At the groundbreaking ceremony of the plant earlier, Prime Minister Najib Razak welcomed Coca-Cola's long-term commitment to Malaysia.

"I take it as a strong signal that the world's most recognised brand is expanding in this important market and enhancing its contribution to the Malaysian market,'' he said.

Coca-Cola said last month that international sales added fizz to its fourth quarter, to lift profit up 55 per cent.

Jordan said Asia contributed about 18 per cent to Coca-Cola's global sales.

Rapid urbanisation, rising affluence and a large youth population in Asia are driving sales and making the region one of the most important markets for Coca-Cola, he said.

Coca-Cola has said it expects Asia to be its biggest driver of growth in this decade, and has made large investments in emerging markets such as China and India.