Coca-Cola, Sabmiller Deal to Beef Up Rwenzori Water

Coca-Cola Company and global beer firm, SABMiller group, have agreed to combine the bottling operations of their non-alcoholic ready-to-drink beverages, a move that is likely to strengthen Rwenzori water further.

The businesses to be combined are in Southern and Eastern Africa, the firms announced on Thursday.

In the new arrangement, a new firm called Coca-Cola Beverages Africa, will serve “12 high-growth countries accounting for approximately 40 per cent of all Coca-Cola beverage volumes in Africa”, according to a press statement from Coca- Cola.

The new company is expected to post annual sales of $2.9bn. SABMiller will hold the largest stake, controlling 57 per cent in the new firm Gutsche Family Investments (GFI) will control 31.7 per cent,while Coca-Cola Company will have 11.3 per cent, the statement pointed out.

GFI is the majority shareholder in Coca-Cola Sabco, the South African unit.

“As part of the transaction, the Coca-Cola Company will also acquire SABMiller’s Appletiser brand on a worldwide basis, and acquire or be licensed rights to a further 19 non-alcoholic ready-to-drink brands in Africa and in Latin America, for an approximate cash consideration of $260m,” said the statement.

“SABMiller will retain ownership of its non-alcoholic malt beverages in Africa and Latin America and will retain its Coca-Cola franchises in El Salvador and Honduras,” it added.

In Uganda, the announcement places Rwenzori mineral water at the heart of the deal. Rwenzori would now be bottled by Coca-Cola Beverages Africa, a move that is expected to further strengthen Rwenzori’s brand in the market.

It is not clear whether the name Rwenzori will be dumped for another brand. Nevertheless, Coca- Cola’s interest in Rwenzori will see it widen its share in the bottled water industry in Uganda, especially now as the public becomes health-conscious over what it eats and drinks.

Rwenzori, which was first acquired by SABMiller (SAB.L) in 2010, and commands more than 65 per cent of the bottled water market in Uganda share, according to industry data. In the market here, Coca-Cola already has Dasani mineral water.

Uganda’s bottled water industry is not short of challenges. The problem of counterfeited water remains rampant in the market, which affects the sales of the other companies.

The new bottler firm, to be headquartered in South Africa, is expected to concentrate more on branding. If successful, the new Rwenzori could beef up SABMiller’s revenues in Uganda, especially where beer sales have not grown as fast as anticipated.

Interacting with journalists recently, Greg Meltcalf, the managing director of Nile Breweries Limited (NBL), part of SABMiller, said: “We have seen beer volumes here drop. And you know people assume beer demand is something that always grows, but it’s not really the case when you say the disposable income doesn’t affect the consumption.”

On the other hand, however, the water industry has been growing so fast, which gives the firms a way out to boost sales. There are more than 30 registered bottled water brands in the country. More than 30 more brands are not registered, according to Uganda National Bureau of Standards (UNBS).

Top Coca-Cola management said they remain committed to Africa despite the stumbling blocks.

“A combined Coca-Cola bottling operation is further evidence of our commitment to Africa, and our firm belief in the tremendous growth prospects that the continent offers,” said Muhtar Kent, the chairman and CEO of the Coca-Cola Company.

Alan Clark, the SABMiller chief executive, said: “Soft drinks are an important element of our growth strategy. This transaction increases our exposure to the total beverage market in Africa. The opportunity is significant, with favourable demographics and economic development pointing to excellent growth prospects.”

The transaction will be completed in two phases. The first will combine the operations in nine countries: South Africa, Kenya, Ethiopia, Mozambique, Tanzania, Uganda, Namibia, Comoros and Mayotte, the firms said.

In the second phase, SABMiller intends to contribute its Swaziland soft drinks bottling business, and the soft drinks bottling businesses of its listed subsidiaries in Botswana and Zambia to Coca-Cola Beverages Africa.

Source : The Observer

Releated