By staff reporters Chen Qian, Wang Shanshan and Zhao Hejuan

A top executive for China’s largest juice maker, Huiyuan Juice Group Ltd. (HKSE: 01886), is defending his company’s controversial takeover by U.S. beverage giant Coca-Cola Co.

Responding to critics in China who say selling Huiyuan to Coca-Cola would represent another domestic brand failure, Chairman Zhu Xinli told reporters September 9 the deal would benefit both companies and the Chinese economy as a whole.

Zhu also said a Coca-Cola takeover would encourage further development of the Huiyuan brand.

Huiyuan announced September 3 that three key shareholders had accepted Coca-Cola’s US$ 2.4 billion offer for a 66 percent stake. Coca-Cola said it would seek to buy the remaining Huiyuan shares if the deal is sealed.

The supporting stakeholders China Huiyuan Juice Holdings Co., Danone Group and Warburg Pincus Private Equity hold 38.5 percent, 21 percent and 6.4 percent of Huiyuan’s shares, respectively.

The proposed takeover is currently on hold pending a Chinese government anti-trust review. Meanwhile, the plan is facing fierce public discussion and some opposition.

The debate helped push Huiyuan share prices down 17 percent in the week after the announcement.

Huiyuan is the leading producer of 100 percent juice and nectar products on the mainland, with respective market shares of 42.6 percent and 39.6 percent, according to researcher AC Nielsen.

Huiyuan’s announcement was accompanied by the release of first half 2008 financial results showing slower growth.

The company reported a 391 million yuan gross profit for the first six months, down 22 percent year-on-year. Sales were off 71 million yuan to 1.3 billion yuan.

Xie Lin, a consumer industry analyst at JP Morgan, said China’s juice industry has been restrained by inflation pressure this year, but thinks the market shows great potential.

Chinese consumers drank 1.3 billion liters of juice in the first half of 2008, up 14 percent year-on-year, said AC Nielsen. Nationwide sales volume is expected to top 19 billion liters a year by 2012, said research firm Euromonitor.

Coca-Cola is counting on growing demand for non-carbonated drinks to fend off global rivals in the face of a declining market for its fizzy products.

The U.S. company offered HK$ 12.2 for each of Huiyuan’s Hong Kong listed shares, which were trading at HK$ 4.14 before the deal was disclosed.

Zhu said his company would work with Coca-Cola to meet all conditions of the deal, including shareholder approval and regulatory clearance.

1 yuan = 14 U.S. cents