SPECIAL REPORT AFRICA
Pepsi makes a return to Africa Coke’s main rival in the soda business Pepsi has been making a comeback into the continent in the last 20 years including entries into South Africa, Kenya, Uganda, and Zambia and is also present in Nigeria and Ghana. Through its partnership with Varun Beverages Pepsi intends to grow into a number of southern and northern African territories in Africa, facing off with Coke, who have probably been in these territories for decades. In Zambia Varun is building a US$15 million plant, in addition to its Lusaka plant which was opened just 4 years ago, in Kitwe. It has invested US$30 million in the Lusaka plant, says the head of the Zambian and Mozambican business, Krishnan Shankar, according to African Business review. Despite having faced off in many territories around the world, the return of Pepsi will be fought using different strategies as both giants try to emerge victorious in Africa. For now Pepsi seems to use the pricing strategy as its market entry arsenal. The company pulled out of the Kenyan market in the 1970s, only to make a comeback with a US$28.5 million manufacturing facility in 2013. This time round it seems Pepsi will ensure it remains in the Kenyan market in the long haul, as it has done in Uganda and Tanzania, chipping away at Coke’s market dominance, if its performance in the two foodbusinessafrica.com
Image Courtesy: coca-cola
Coke’s Last Frontier, Africa offers the best opportunity for Coke to grow into the future due to the company’s already dominant position (it holds 29% of market share in Africa and Middle East) and due to the fact that other growth markets like China and India, are already crowded with local brands like Wahaha in China or competition from its rival, Pepsi. While Coke takes the lion share of the continent’s soda consumption, it is beginning to emerge that there is a resurgence of Pepsi in the continent and the rise of smaller players in the market, eating into the pie that Coke would very much like to have on its own.
countries can be replicated in Kenya. The company hopes that its pricing strategy, selling an extra 50ml of soda at the same price as Coke, will lead to consumers switching from Coke to its brands. Pepsi is also a significant player in Ethiopia through Moha Soft Drinks Industry, where it is building a new bottling plant 780 km north of Addis Ababa, to add to its seven plants. The group is also a major player in Nigeria, where it’s Pepsi, Mirinda, Aquafina and other brands are packaged in 9 bottling plants in the country. With the group amassing 13% of its net revenue from its Asia, Middle East and Africa region, “Africa is the new Asia,” Sanjeev Chadha, head of PepsiCo’s operations in the Middle East and Africa. Coke not taking the heat lying down The US$17 billion investment announcement by Coke in Africa is a big indicator that Coke is not willing to cede ground on its dominant position in the continent. Having spent US$5 billion in the five years to 2012 in Africa, Coke is ramping up the dollars to build extra capacity and increase its local sourcing component of raw materials from the continent through the Source Africa initiative, which will boost the programs it has had in some African countries. Coke’s recent and planned investment is spread across the breadth of the continent, much more than any other player. The company continues to invest in capacity, route-to-market and supply chain initiatives to ensure that even as other players come into the market, its position is maintained.
The beverages market in Ethiopia is “growing insanely”, according to Brooks Washington, principal of business development fund Roha Ventures, who are building a glass manufacturing plant in Addis. This is where Coke last year commissioned a US$20 million refurbishment and the installation of a returnable glass bottling line at its Dire Dawa plant to serve its growing consumer base. According to Curt Ferguson, CocaCola’s Middle East and North Africa President, Egypt one of Coca-Cola’s key anchor market given the country’s attractive population size. Coke has announced its intention to spend $500 million in investment in Egypt over the next three years including building a $100 million fruit juice plant and a new plant to bottle sparkling drinks and water. The company has recently invested KSh 1.2 billion (US$14 million) in Kenya in a PTE bottles production plant as it leverages on on-the-go packs to drive volume and margins. And the company is not taking new entrants lightly. In Uganda, where the entry of Riham soda almost upset the giant’s plans, Coke has been forced to match prices offered by the local player, while also launching a 350ml pack to compete with the 320 ml pack offered by Riham. In Rwanda, the giant has just commissioned a new bottling plant that nearly doubles its capacity. These and many more investments will ensure that Coca Cola maintains its lead in Africa even as other players jostle for space. FOOD BUSINESS AFRICA | AUG/SEP 2014
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