By Peter Evans
LONDON-- SABMiller PLC and Coca-Cola Co. said they would combine
soft-drink bottling operations in southern and eastern Africa, in a
deal that reinforces the U.K. brewer's growing interest in
nonalcoholic beverages.
A new company, Coca-Cola Beverages Africa, will serve 12
countries and supply 40% of all Coca-Cola volumes in Africa, SAB
and Coke said on Thursday. SAB will hold 57% of the new business
and Coke will own 11.3%. The remainder will be owned by Gutsche
Family Investments, currently a major shareholder in Coke's African
bottling operations.
As part of the deal, Coke is paying $260 million for the
world-wide rights to SAB's Appletiser soft-drink brand and the
rights to a further 19 nonalcoholic brands in Africa and Latin
America.
For SAB, owner of beer brands including Peroni, Grolsch and
Miller Genuine Draft, the deal is a further step away from its core
brewing business. Soft drinks now make up 20.6% of the company's
total sales by volume, compared with 17.2% in 2009.
In part, that reflects stronger growth in nonalcoholic drinks
versus beer. Volume growth in SAB's soft-drinks portfolio was 5% in
its most recent financial year, compared with just 1% for beer.
Bottling soft drinks is a much quicker and cheaper process than
brewing beer--even if the margins are ultimately lower--and
represents a much smoother and more reliable way to expand in
Africa for SAB.
"Soft drinks are increasingly important for us," Chief Executive
Alan Clark said earlier this month.
Atlanta-based Coke is in the middle of a cost-cutting drive amid
falling soda sales in many of its key markets, especially North
America. The company last year negotiated a merger between seven
separate Spanish Coca-Cola bottlers in a bid to improve
efficiency.
"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,
Coke's chairman and CEO.
Coca-Cola Beverages Africa will have annual revenue of $2.9
billion, making it the biggest Coke bottler in Africa. Phil
Gutsche, current chairman of Gutsche Family Investments, will head
the new company, which will be based in Port Elizabeth, South
Africa.
Razak Musah Baba contributed to this article.
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