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Dateline: NANCHANG, CHINA

In an industrial park near this city of 4.9 million, umbrellas in bright Coca-c
 red line the road.
On a hazy June morning, Coke CEO Muhtar Kent is in Nanchang to open a $14 million bottling
plant, Coke's 37th in China. Dragon dancers perform as firecrackers explode in front of the
factory, while techno music punctuates a laser show inside. "We have unbending faith in
China's future," Kent tells the throng.

Only one detail mars the festivities: Behind the red umbrellas is a blue fence.
  blue. A
new
  bottling plant is under construction just down the street. Only two days after Kent
visited Nanchang, PepsiCo CEO Indra K. Nooyi was in the western city of Chongqing to
inaugurate a facility there and announce plans for five more, part of a $1 billion push in the
mainland. "This is going to be a massive market for us," promises Nooyi.

The 
 wars in China are heating up. Neither company releases sales or profit figures for the
country, but analysts say Coke has 52% of the carbonated soft drink market, Y .
  32%.
Coke also has the top soda brand, Sprite. But
 -c
 is No. 2, while Coke's flagship, c -
c
, is third. And
  marketing has won praise, with the company sponsoring a battle of
the bands competitions for user-generated ads, and a "Go China" campaign during last
summer's Olympics. "
  is more viral and gets to young people better," says Shaun Rein,
managing director of China Market Research Group in Shanghai.

Coke had hoped to bolster its efforts with a foray into juices. In September it offered $2.4 billion
for the mainland's top juice company, China Huiyuan. After sponsoring the Beijing Olympics,
opening research and development centers in Beijing and Shanghai, and planning $2 billion in
Chinese investment over three years, Coke seemed a shoo-in for the deal. But amid a
nationalist outcry, officials in March vetoed the tie-up, saying it would violate antitrust law.

That leaves Kent, who became CEO just weeks before the Huiyuan deal was announced, to
focus on Plan B. For starters, Coke is aggressively expanding production of its core brands.
"We understand the rules of the game," Kent says between sips of a Coke Zero. "Our way
forward is organic growth." The day after the Nanchang opening, he was in the far western city
of Urumqi to open yet another plant.

Given
  big effort, Coke is hoping to hold its rival at bay with better marketing. To reach
younger soda sippers, the company in June announced a partnership with Shanghai-based
Shanda Interactive, a Nasdaq-listed company that offers online games in China. The campaign
will promote c -c
 Zero in Shanda Internet cafes; Coke's Web site will give Shanda
gamers prizes; and Coke is sponsoring a contest aimed at drumming up story lines for Shanda
games.

Kent also hopes to boost sales of noncarbonated beverages. Last year, Coke launched Yuan
Ye ("original leaf"), a ready-to-drink tea. And it aims to get into juices with its Minute Maid brand.
The company developed Minute Maid Pulpy Orange, a drink with about 10% juice and pulp, in
China in 2004 and now offers it in six countries. All told, Coke has four Minute Maid flavors in
China--orange, pink grapefruit, tropical fruit, and grape with aloe vera pulp. "The fact is," says
Kent, "we have developed a strong juice brand that we can continue to build on."

~~~~~~~~

By Bruce Einhorn and Nanette Byrnes