Coca-Cola Deepens Its Push Into Africa
February 01 2016 - 3:02AM
Dow Jones News
(FROM THE WALL STREET JOURNAL 2/1/16)
By Mike Esterl
Coca-Cola Co. has agreed to buy Nigeria's largest juice maker,
accelerating its push into Africa and deepening its diversification
drive in response to slowing soda sales.
Coke said Saturday it acquired an initial 40% stake in TGI
Group's Chi Ltd., which also sells dairy products and snacks, and
intends to buy the remaining 60% within three years. The deal
values Chi at a little less than $1 billion, according to a person
familiar with the matter.
The investment in Africa's largest economy represents Coke's
biggest overseas acquisition since 2012, when it paid about $980
million to buy roughly half of Dubai-based Aujan Industries, a
leading maker of juice and malt beverages in the Middle East.
The Atlanta-based beverage company increasingly is targeting
Africa for growth amid sluggish sales in more developed markets.
Coke said in 2014 it would invest $17 billion in the continent this
decade with bottling partners, about three times as much as in the
previous decade.
The transaction also signals a redoubled effort to expand beyond
core soda brands including Coke, Sprite and Fanta at a time when
health authorities in many parts of the world are singling out
sugary drinks for contributing to rising obesity and diabetes.
Last week a World Health Organization commission recommended
that governments consider special taxes on sugar-sweetened
beverages, following the example of Mexico, which introduced levies
on soda and junk food in 2014. The commission estimated the number
of overweight children younger than 5 in Africa has nearly doubled
to 10.3 million since 1990.
Coke had a 45% share of the $18.12 billion soda market in the
Middle East and Africa last year, but only 3.5% of the region's
fragmented $8.03 billion juice market. Closely held TGI was the No.
2 juice player behind Iran-based Alifard Co., with a 4.2% market
share and $337 million in retail sales, according to Euromonitor
International.
In addition to its Chi and Chivita juice brands, TGI's Chi Ltd.
sells evaporated milk and drinkable yogurt under the Hollandia
brand and snack foods including Muff the Muffins and Beefie Beef
Rolls.
"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," said Kelvin Balogun,
president of Coca-Cola Central, East and West Africa, in a news
release.
Coke and TGI, also known as Tropical General Investment, said
they would discuss other opportunities in the region to further
develop their relationship. TGI owns several other companies
ranging from poultry and fish farming to frozen foods and cotton.
Its businesses span a dozen countries including South Africa,
Morocco and China.
A Coke spokesman declined to elaborate on potential
opportunities, but reiterated that Coke's strategic focus remains
beverages.
The deal comes amid uncertainty about Coke's soda-bottling
partnerships in Africa after brewer Anheuser-Busch InBev NV agreed
last October to acquire SABMiller PLC, which bottles and
distributes Coke in South Africa and several other markets.
AB InBev is a bottler in Latin America for PepsiCo Inc., Coke's
chief rival. Many industry observers also say AB InBev eventually
could try to acquire Coke.
Coke agreed in late 2014 to combine bottling assets with
SABMiller and privately held Gutsche Family Investments to create a
joint venture spanning 12 African countries and about 40% of Coke's
soft-drink volumes on the continent.
The venture is expected to secure regulatory approval in the
first half of this year after South African authorities held it up
over job-loss concerns.
As part of that bottling deal, Coke also agreed to pay $260
million for the world-wide rights to SABMiller's Appletiser, a
carbonated apple juice, and the rights to another 19 nonalcoholic
brands in Africa and Latin America.
(END) Dow Jones Newswires
February 01, 2016 02:47 ET (07:47 GMT)
Copyright (c) 2016 Dow Jones & Company, Inc.
Coca Cola (NYSE:KO)
Historical Stock Chart
From Mar 2024 to Apr 2024
Coca Cola (NYSE:KO)
Historical Stock Chart
From Apr 2023 to Apr 2024