Capitalist Communist Regulators Block Coke's Bid

Source Article: China Blocks Coca-Cola’s $2.3 Billion Huiyuan Bid | www.bloomberg.com (article)

Implications:
1) Chinese Regulators Thinking Short-Term
2) Coke will invest and grow organically in China
3) Huiyuan Shareholders get Disservice from Regulators

Analysis:
The Chinese Blocking Coca-Cola(NYSE:KO) Corporations acquisition of juice-maker and rival Huiyuan just speeds up organic growth in this sector by Coca-Cola, which will become inevitable.

The regulators blocking the acquisition are not only engaging in protectionism, but will now "force" Coke to grow market share organically in the chinese domestic market through their own branding and products. This they will do, and eventually control the market share they were going to purchase through the acquisition.

Carbonated Soft Drinks are a slow growth portion of the packaged beverage business. It is a mature market, and in order to push volume and revenue growth, Coca-Cola must distribute and market other categories of packaged beverages.

Juices and juice blends, Teas of all flavors, energy drinks and bottled and flavored waters are all experiencing greater percentage gains in consumption annually than CSD's.

Coke, if the acquisition is ultimately denied, will need to emphasize these other categories of products in China in order to maintain volume growth, so all this move really does is give the Huiyuan shareholders a formidable competitor rather than a premium buyer for their shares in the product category.

The denial of this purchase is a short-term and short-sited move on the Chinese regulator's part.