Secret brews in China: Coke's next big thing?
Company looks to herbal remedies for beverage boost


The Atlanta Journal-Constitution
Published on: 07/29/08

Beijing — Coca-Cola, a company first famous for mixing South American coca leaves with African kola nuts, is trying to repeat history.

For months, the Atlanta-based drinks giant has been working quietly to perfect prototype beverages using Chinese herbal cures. Analysts and executives suggest the project could be as important to the company's future as its original formula was to its past.

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Wang Xiaoyan, a researcher at the academy, mixes herbal medicines. Coke hopes new drinks will have global appeal.
 
CRAIG SIMONS/csimons@ajc.com
A pharmacist at the China Academy of Chinese Medical Sciences mixes herbal medicines in Beijing. Coke has partnered with the academy to create drinks based on traditional Chinese cures. But for now, developments have been kept quiet.
 
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The effort involves employees throughout the company of 90,500 but is shrouded in secrecy. Executives have rarely mentioned the collaboration beyond a short press release issued when Coke and the Chinese Academy of Medical Sciences opened a research center in Beijing last October.

Until this month, journalists had not visited the laboratory, called the Coca-Cola Research Center for Chinese Medicine.

Even after a journalist's tour of the facilities, many questions remain.

Zhang Huaying, Coke's director of the center, said the company was developing specific beverages but declined to provide details about what is in them, when they might be released or how much the company is spending on the effort.

"We're really working on it, and there are lots of things happening," Zhang said, adding that the effort is "serious" for the company, the world's largest producer of non-alcoholic beverages.

"The aim is to be global, but the source of the knowledge comes from China," she said.

While Coke may be reluctant to talk about potential drinks inspired by Chinese medicine, some analysts speculate that whatever executives are brewing could be a major step for the 122-year-old company.

Access Asia, a Shanghai-based market-research firm, said in a January report that Coke's aim may be nothing less than to create "the new product for the new millennium."

With consumers increasingly concerned about their health and wary of sugar-laden beverages, Coke is "looking for exotic herbal ingredients to make a completely new drink and sort of revolutionize the whole soft-drink industry," said Matthew Crabbe, director of Access Asia.

Just-drinks.com, which monitors the beverage industry, reported in May that Coke was planning to launch a Chinese medicine-based drink this year "to exploit the hype surrounding the Beijing Olympics."

Partly, Coke has been pushed toward developing more healthy alternatives to its traditional line of sodas.

Globally, the company's sales of soft drinks grew by 1 percent during the most recent quarter while sales of still beverages — including juices, teas and water — jumped 13 percent. In North America, Coke's largest market, sales of Coke Zero and Glaceau, the maker of VitaminWater, both posted double-digit increases while soda sales fell by 4 percent.

China's market — currently Coke's fourth largest — is following a similar path. While soft drinks accounted for 32 percent of China's beverage sales in 2000, in 2006 they were only 26 percent, according to Access Asia.

In China, Coke has tried to adapt to the changing consumer climate. Three of Coke's most recent product launches in the nation of 1.3 billion — Coke Zero, Original Leaf Tea and a line of Minute Maid fruit drinks — were aimed at more health-conscious customers and have done "tremendously well," said Christina Lau, a Beijing-based Coke spokesperson.

But experts said Coke should move more quickly to meet growing demand.

Chen Shuwei, a senior analyst at Beijing Orient Agribusiness, a consultancy in the city, said that Coke "has been slow to release new fruit juices and teas" and that Coke Zero sales had been weak because Chinese who are concerned about their diet "still see it as a cola."

While Coke has revealed little about what kind of Chinese herbal drinks it is considering, it has left some tantalizing clues.

At the Beijing research center, 40 people work in a laboratory partly financed by Coke. In one room, a machine extracted liquids from plants and mixed them into beverages. In another, a researcher used cell cultures to test traditional cures thought to slow aging.

Cao Hongxin, the president of the China Academy of Chinese Medical Sciences, said that the center "has a few projects" with Coca-Cola.

"Generally speaking, we want to create drinks that relieve fatigue and help the body fight off diseases," he said. "[Coke executives] all hope to develop a Chinese-medicine-based beverage quickly."

Traditional Chinese medicine has a history of thousands of years and doctors prescribe thousands of plant and animal cures. Sea cucumbers are believed to relieve constipation, for example, while nutmeg is considered a treatment for vomiting, according to a book published by the Beijing Science and Technology Press.

If Coke does create a drink infused with Chinese remedies, it would build on its own history.

John Pemberton, an Atlanta doctor, created an early Coca-Cola recipe in 1886 by mixing coca leaves, the source of cocaine, and kola nuts, which contain caffeine, with other ingredients, according to Mark Pendergrast, the author of "For God, Country, and Coca-Cola." After local businessman Asa Candler consolidated control of the company in the late 19th century, he took steps to remove cocaine from the formula. (Coke still contains "decocainized" coca leaves, Pendergrast said.)

Whatever ingredients Coke includes in its new drinks will undergo extensive tests to ensure they are safe for long-term consumption. At the Beijing research center, technicians used modern equipment to analyze everything from the DNA structures to the cellular biology of herbal cures.

But the labs are only "one angle" of a larger project that employs people working on product development, supply chain management, manufacturing issues, sales and marketing for the beverages in development, Zhang said.

"You're just seeing the leg of the elephant," she said, adding that the potential market is "not just in China, but all over the place."

Other Coke executives have said they hope whatever beverages Coke develops will have global appeal.

At an opening ceremony for the center last October, Rhona Applebaum, a Coke vice president and the company's chief scientific and regulatory officer, said the laboratory "will ultimately help us bring the insights and benefits of Traditional Chinese Medicine to consumers all over the world," according to a company press release.

What those benefits will be, however, remains secret. All Zhang would say is that Chinese medicine is "a good match" for Coke because it "stresses balance and bodily adjustment ... to help people stay healthy."

They also build on Coke's legacy. "If you think about it, Coke inherently is linked with herbal drinks," Zhang said. "In a way, Coca-Cola is an herbal drink."

— Staff writer Joe Guy Collier contributed to this article.

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