Making Coke Affordable in Ice-Cold Mongolia

Editor's note: GlobalAtlanta traveled to Mongolia last year. It is the next country to be featured in our series of Emerging Markets special reports.  
It's easy to take for granted that a cold Coca-Cola is just a cooler or vending machine away, no matter where you are in the world.
But in Mongolia, a sparsely populated nation with only 3 million people and very few factories, it's hard to overlook the logistics that make this possible.
Mongolia became a democracy in the early 1990s and is still ironing out its vision of capitalism. 
Despite growing interest in its mineral wealth, the country remains relatively undeveloped. Only a handful of paved highways intersect in Ulaanbaatar, the capital city. A few rail spurs jut north through Russia or south toward China, lined with trains mostly carrying exported coal.
Mongolia's frigid weather does provide one advantage, said Basil Kleu, a Coca-Cola Greater China general manager visiting from Shanghai.
"You can deliver Coke colder off the back of a truck than out of a cooler," Mr. Kleu said.
In 2002, before Mongolia was gaining so much attention, Coke opened a local bottling plant. It was a bet expressing confidence in a country that was small but ascendant, exotic but bent on connecting with the world.
Of course, it didn't hurt that rival PepsiCo had yet to build a factory here, but the choice to bottle domestically instead of import was about costs. (Canned Coke is still imported from Hong Kong, for instance.) The central factor is making Coke affordable to the average person, even if he or she only brings home a few thousand dollars per year. 
That has paid off in Mongolia, just as it has in China and elsewhere. When the Mongolia plant opened in nearly a decade ago, Mongolia's yearly Coke consumption was four eight-ounce servings per capita. As of 2008, that number had ballooned to nearly 70. Coke spent $22 million on a bigger plant east of Ulaanbaatar that opened Aug. 24, 2008.  
GlobalAtlanta visited the plant last year to learn how Coke relies on its bottling partner for local business insight while introducing marketing techniques that have enabled it to sell in nearly every country in the world.
With nearly half the population under the age of 24, Mongolia is a young nation that is growing better-educated all the time.
Foreign-trained business leaders are returning to participate in its growth, and the Internet and television are opening the younger generation's eyes to Western lifestyles. But even as it grows more cosmopolitan, marketing strategies in Mongolia have to consider local tastes, said Zol Orshikh, Coke's country manager there.
"You can't cut-and-paste on Mongolia," he said.
GlobalAtlanta spoke with some young people who resented the characterization of their country as a land of herders. The bucolic Mongolia of the past still exists, they said, but they also felt that there should be more focus on its modernization.
They've got a point, said Mr. Kleu.
"Many people believe Mongolians are still riding horses. If you had seen (Ulaanbaatar) seven years ago when I came, you wouldn't believe the evolution," he said.
Today, the capital city is prone to traffic jams in the late afternoon. Construction cranes add to a skyline where a few gleaming buildings tower over run-down Soviet-style apartment blocks. 
Coke's local bottling partner has had a front-seat to this development. MCS Group started as an energy consulting firm but has diversified into a variety of fields: cashmere, property, fashion, restaurants, and of course, beverages - including vodka.
Founded in 1993, just after the transition from socialism to democracy that coincided with the fall of the Soviet Union, MCS now employs more than 4,500 people and is one of the top three taxpayers in the country.
"They are an integral part of the Mongolian society now," Mr. Kleu said.
The partnership has allowed many Mongolian workers to receive training at the Coca-Cola University in Shanghai. Pepsi's bottling plant, operated through a partnership with GN Beverages, is providing similar benefits for the local workforce.
Getting there first has helped "entrench" Coke's brand, but the competition is good for the company and the country, said Mr. Kleu.
"It forces everyone to step up their game," he said. 

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