Foreign Investment: Coca-Cola
How does a business return to a country that it left many decades ago?
After a military coup in 1962, Coca-Cola reduced its presence in Myanmar (Burma) and then was prohibited from returning when the US banned most foreign investment there. Now though, with the political climate slightly improving, the US has said that Coca-Cola can create a distribution network and open a bottling plant with a local partner.
First though, Coke has to introduce Myanmar to its cola. Concerned that people associate Coke with a black market and that sellers would charge prohibitively high prices, they imprinted an affordable price, 300 kyat (32 cents), on the bottle. Aware that it is tough to keep things cold in Myanmar because of rundown refrigerators and inconsistent electricity, they are distributing free samples with instructions:
- Drink Coke in a glass.
- Chill the bottle.
- Add 3 ice cubes.
- Pour Coke at a 45 degree angle.
- Add some lime.
Finally, they let people know that Coke was “delicious, refreshing” and bottled locally.
Reading about Coke’s joint venture, I wondered about the impact of Myanmar’s lack of business friendliness. Corruption, questionable property rights, excessive government control and no real financial institutions placed it at #172 in the Index of Economic Freedom, near Cuba and North Korea (the only 2 countries in the world where Coca-Cola is neither produced nor sold legally).
Maybe though the situation will resemble the impact of McDonald’s on the Russian economy during the early 1990s when they opened the Moscow McDonald’s. Bringing Western style capitalism, McDonald’s paid higher wages to employees, they installed modern technology and they generated a network of local entrepreneurial suppliers.
Perhaps the capitalism ripple that McDonald’s created in Russia could be replicated by Coca-Cola’s foreign investment in Myanmar.
Sources and Resources: News about Coke’s Myanmar return were in a BBC report, a Planet Money blog, a Bloomberg article and a Quartz column. To see more about the Myanmar economy, the Index of Economic Freedom provides detail.