Posted On: Thu 20 Sep 2018 By REUTERS
Coca-Cola (KO.N) is moving ahead with plans to take over Nigeria’s leading juice company Chi Ltd and aims to complete the deal early next year, a senior executive told Reuters.
The acquisition for an undisclosed price is one of several steps the U.S. company is taking in a global strategy to diversify from its core business of sugary sodas.
Last month it agreed to buy Costa coffee for $5.1 billion, and sources familiar with the matter say it is also bidding for GlaxoSmithKline’s (GSK.L) Indian Horlicks nutrition business.
“We are still on track to complete the acquisition (of Chi Ltd) by the end of the first quarter of 2019,” Peter Njonjo, president of Coca-Cola’s west Africa business, said on Wednesday.
Coca-Cola bought a 40 percent stake in the Nigerian juice and snack producer in January 2016, and said at the time it aimed to increase ownership within three years.
Juice sales form a central plank of the U.S. company’s attempt to offer drinks at a range of price points in Nigeria to improve affordability in a country where Njonjo sees high inflation and modest economic growth in the coming year.
Focusing on smaller bottles and cans is another way the company is trying to woo cash-strapped consumers in Nigeria, which emerged from its first recession in 25 years in 2017 but continues to suffer from sluggish growth and high inflation.
“Affordability will start becoming a bigger issue in this market than it was in the past. As a company, that is what we need to factor in as we are thinking about the future of our business in Nigeria,” Njonjo said in an interview.
He pointed to the introduction of a 30 centilitre bottle of Coke Zero for 60 naira ($0.20), compared with the standard 50 centilitre bottle for 80 naira, as just one example.
Njonjo said the company’s drive to diversify its product range could also give it more flexibility in a market where unemployment is high and the United Nations estimates most of the population of 190 million lives on less than $2 a day.
“We realize that in certain pack formats you can only go down so low,” he said in an interview at his office in the commercial capital Lagos. “But once you start looking at pouches and still products, like juice and drinking yoghurts, that allows you to start accessing much lower price points.”
Njonjo said the purchase of Costa could present a “significant opportunity” in Nigeria, despite the absence of a culture of hot-coffee drinking there.
“There definitely could be opportunity around ready-to-drink coffee here in Nigeria ... Having iced coffee, blends of dairy and coffee, packaged in different formats,” he said.
Njonjo said Horlicks, a malt-based hot beverage, was an “interesting proposition” that could be “a significant opportunity on the (African) continent”.
But while the company was researching drinks from locally relevant ingredients, such as ginger, he said he could not see a market for marijuana drinks - something the company has said it was closely watching in the past.
In January, Coca-Cola announced a global goal to help collect and recycle its packaging.
Njonjo said the company was working in Nigeria to collect bottles and find a way for them to be re-used through a partnership with cement-maker Lafarge in which bottles would be burned in kilns as an energy source.
A memorandum of understanding was being formalized and would be signed in the next few weeks, he said, adding that implementation would begin in the last quarter of this year.
He said the company was also working with Lagos state government on marine collection to remove waste from waterways in the city, which is built on a lagoon.