Coca-Cola, SABMiller to Team Up in Africa
Deal to Merge Bottling Assets Includes Coke’s Paying $260 Million for Appletiser Brand
Coca-Cola, whose CEO Muhtar A. Kent is pictured at the U.S.-Africa business summit in Washington last August, has teamed up with brewer SABMiller to improve their share of the African nonalcoholic drinks market. AGENCE FRANCE-PRESSE/GETTY IMAGES
Coca-Cola Co. and U.K. brewer SABMiller PLC plan to combine soft-drink bottling operations in southern and eastern Africa, in a deal that reflects both companies’ efforts to broaden their beverage offerings.
As part of the deal, Coke is paying $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. Coke has been diversifying beyond its core soda brands of Coke, Sprite and Fanta as more consumers shift to waters and juices.
In the U.S. earlier this year, Atlanta-based Coke moved to acquire minority stakes in energy-drink maker Monster Beverage Corp. and Keurig Green Mountain Inc , a maker of countertop coffee machines.
For SABMiller, whose beer brands include Peroni, Grolsch and Miller Genuine Draft, the deal with Coke marks a further step beyond its core brewing business. Soft drinks now make up 20.6% of SABMiller’s total sales by volume, compared with 17.2% in 2009.
The shift reflects in part stronger growth for nonalcoholic drinks. Volume growth in the company’s soft-drinks portfolio was 5% in its most recent financial year, compared with just 1% for beer.
“Soft drinks are increasingly important for us,” SABMiller Chief Executive Alan Clark said earlier this month.
Bottling soft drinks is a less-demanding process compared with brewing beer—even if the margins are ultimately lower—and represents a simpler way to expand in Africa for SABMiller.
The combined bottling operation will serve 12 countries and supply 40% of all Coca-Cola volume in Africa, the two companies said Thursday. SABMiller will hold 57% of newly created Coca-Cola Beverages Africa 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.
“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.
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.
Coke has dozens of large bottling partners around the globe. It prefers minority stakes in bottling and distribution assets, focusing on selling soda concentrate, which has higher profit margins and requires lower capital expenditures.
The soda giant is in the midst of refranchising its North American distribution and recently sold bottling assets in the Philippines to Coca-Cola Femsa SAB, its Mexican bottler. Coke also has been seeking a buyer for its German bottling assets.
Coke’s other bottling partners in Africa include Coca-Cola HBC AG, which distributes in Nigeria, and Castel Group.
SABMiller also distributes Coke beverages in Honduras and El Salvador.
The latest deal expanding SABMiller and Coke’s partnership comes amid industry speculation that Anheuser-Busch InBev NV, the world’s largest brewer, could be gearing up for another major acquisition.
Many investors and analysts think AB InBev could attempt to acquire SABMiller, the world’s No. 2 brewer by revenue. But there also has been speculation that AB InBev could make an even bigger splash at some point by expanding beyond beer and trying to acquire Coke or PepsiCo Inc., Coke’s chief soda rival. AB InBev, which has declined to comment on potential acquisition targets, already distributes PepsiCo drinks in Latin America.
