Coca-Cola Launches Chinese Medicine Research Center in Beijing

The Coca-Cola Co. (NYSE: KO) announced yesterday in Beijing the official opening of The Coca-Cola Research Center for Chinese Medicine at the China Academy of Chinese Medical Sciences in Beijing. This research center is a part of the Company's long-term collaboration agreement with the China Academy of Chinese Medical Sciences.

"We see this center as an important step in strengthening our innovation pipeline for beverages that contribute to well-being," said Dr. Rhona Applebaum, vice president, chief scientific and regulatory officer of The Coca-Cola Company. "This collaboration will ultimately help us bring the insights and benefits of Traditional Chinese Medicine to consumers all over the world. As the world's largest beverage company, we can add global reach and world-class marketing skills to help promote Chinese wisdom in preventive holistic health through new and innovative beverages."

The company's China efforts are being advanced through the Beverage Institute For Health & Wellness. Founded in 2004, this Houston, TX-based organization supports nutrition research, education and outreach, with a primary focus on beverages. Launched in part to counter charges that sweetened beverages contribute to obesity, the institute has funded numerous projects devoted nutritional research including efforts to alleviate malnutrition. According to the institute's website, it is "responsible for evaluating emerging wellness trends and ingredients on behalf of The Coca-Cola Company, conducting clinical research in support of Company brands and establishing research programs that lay the foundation for the development of new beverages to meet the nutritional and wellness needs of consumers."

The company's Chinese efforts reflect two important trends:

1. The Chinese market is increasingly important to Coca-Cola. While its US market was flat in 2006, and unit volumes rose only 4% globally, volumes in its "North Asia, Eurasia and Middle East" markets grew 11 percent, led by double-digit growth in China. Sales in this region accounted for US$4.12 billion of the company's revenues. The increase in unit case volume in China was led by significant growth in both sparkling and still beverages. With 37 factories in the PRC, China is currently the companies fourth largest market, and the Beverage Institute's efforts should help Coke refine it's product offerings to meet Chinese consumer tastes. Company Chairman and CEO Neville Isdell recently stated that he expects China to be its largest market. "The 2008 Olympic Games would be a great opportunity for China, " he said.

2. Growing market share is going to functional or enhanced beverages. Functional beverages are those which have added ingredients to produce a specific health benefit or promote wellness. Beverage Marketing Corporation reports that functional drinks' U.S. volume have more than tripled over the past five years, compared with just 5% growth for the total beverage category. The importance of this market to Coca-Cola has been seen this year in it's acquisition of US$100 million (revenues) Fuze Beverages in February, followed by its May acquisition of Glaceau/Energy Brands Inc. for US$4.1 billion. Coca-Cola's research investment in Chinese medicine would be expected to support new product offerings globally.

The China Academy of Chinese Medical Sciences is China's national center for research, health care and education in Traditional Chinese Medicine. It is administered under the Ministry of Public Health through the State Administration of Traditional Chinese Medicine of the People's Republic of China. The Academy employs 3,100 professionals, including 800 doctors and professors working in 11 research institutions, five hospitals and clinics, and several educational and publishing branches. It is the most respected and trusted group engaged in research, education and practice in Traditional Chinese Medicine.

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