INVESTMENTS: Coca-Cola has discovered an untapped market to save the soda business
As soda sales slow in the US, Coca-Cola is looking elsewhere for customers.
One of the major regions of focus: Africa.
Coke said in 2014 it would invest $17 billion in the continent from 2010 to 2020, a figure that tripled the amount spent in the previous decade.
In late January, the company announced its biggest overseas acquisition since 2012: A 40% stake in Nigeria’s largest juice marker, TGI Group’s Chi Ltd, which sells beverage brands such as Chivita 100% and Chi Ice Tea, with plans to buy the rest within the next three years.
“We are extremely optimistic about Africa’s continued economic and social growth and recognize the importance of ensuring we stay one step ahead of evolving consumer tastes by broadening our portfolio and introducing new products,” Kelvin Balogun, president of Coca-Cola Central, East, and West Africa, said in a statement about the acquisition.
While Americans are drinking less soda, there is still plenty of room for Coca-Cola’s growth in Africa. In the third quarter, SABMiller — a key Coke bottler in Africa — experienced soft-drink-volume growth of 13% in Africa, with a 21% increase in South Africa.
Chivita 100%, Chi Ltd’s 100% fruit juice brand.
In the US, per capita soda consumption by volume fell 25% from 1998 to 2015.
The soft-drink giant is succeeding not just by marketing Coca-Cola classics to African consumers. Coke is gaining new customers by marketing to local tastes.
Coca-Cola crafts products such as Sparletta Stoney Tangawizi and Krest Bitter Lemon at micro-distribution centers and distributes the sodas to local retailers, reports CNN. These are beverages that can’t be found anywhere else in the world, but are intended to make Coke the most relevant beverage producer in the area.
“The rate of growth in Africa is higher than that of Western markets and other parts of the world, so it’ll continue to become a larger and larger part of our revenue,” Coca-Cola CEO Muhtar Kent told CNN in January.
That also means the company has to grow outside of soft drinks.
As Coke diversifies its products available in the US with options like sparkling Smartwater, it is also working to provide non-soda options in Africa, an area where the Chi Ltd acquisition could be a key. In addition to juice, Chi brands include dairy beverages and snacks like sausage roll Chi SuperBite and Muff the Muffin.
Non-soda investments are also important due to shifting international nutrition trends. Coke has recently come under fire for playing a role in the rise of obesity globally. In January, the World Health Organization recommended that governments worldwide tax sugar-sweetened beverages, similar to Mexico’s 10% tax on sugary drinks that resulted in a 12% reduction in sales of taxed items.
By investing in local noncarbonated options as well as increasing per capita soft-drink consumption, Coke is dedicated to becoming the drink of choice in Africa. The company doesn’t care if new customers are sipping juice or a Diet Coke — as long as it’s a Coca-Cola brand.
Credit: Business Insider
