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SABMiller, Coca-Cola form African drinks giant

SABMiller and Coca-Cola plan to form one of the world’s largest bottling operations with annual revenue of almost $3 billion (R33bn) in 12 markets across southern and east Africa under the name of Coca-Cola Beverages Africa. Coca-Cola will also acquire the Appletiser brand from SABMIller.

In a joint announcement yesterday the three firms, including Coca-Cola Sabco, said Africa offered a significant growth potential in beverages, underpinned by rising personal disposal income, a fast-growing population and raising per capita consumption.

SABMiller will hold 57 percent of Coca-Cola Beverages Africa, with Coca-Cola holding 11.3 percent and the Gutsche Family, which owns 80 percent of Coca-Cola Sabco, will hold a 31.7 percent stake in the operation.

“With more than 30 bottling plants and over 14 000 employees, Coca-Cola Beverages Africa will be the largest Coca-Cola bottler on the continent, with the scale, complementary capabilities and resource to capture and accelerate top-line growth,” the companies said.

Through the world’s largest beverage distribution system, consumers in more than 200 countries enjoy Coca-Cola’s beverages at a rate of 1.9 billion servings a day.

SABMiller together with Coca-Cola combine to make a new company called Coca-Cola Beverages Africa. From left, its chairman Phil Gutsche; Nathan Kalumbu, president of Coca-Cola Eurasia and Africa; and SABMiller Africa’s Mark Bowman shake hands after the signing of the deal in Melrose Arch, JHB.

The new entity’s will have operations in 12 high-growth markets, which include countries such as Kenya, Ethiopia, Mozambique, Tanzania and Uganda, among others, its headquarters are planned to be in Port Elizabeth, Eastern Cape.

With beverage consumption growth slowing down in the developed markets such as Australia and the US, SABMiller focused its energies and investments on its African operations and Latin America. In their latest business update, the second-largest brewery in the world said its soft drinks growth of 9 percent was driven by Africa, Latin America and Europe.

Chairman and chief executive of Coca-Cola Company, Muhtrar Kent said: “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.”

SABMiller chief executive, Alan Clark, said soft drinks were an important element to the group’s growth strategy. “This transaction increases our exposure to the total beverage market in Africa. The opportunity is significant, with favourable demographics and economic development pointing to excellent growth prospects,” said Clark.

Phil Gutsche, Chairman of Gutsche Family Investments (GFI), said, “Our family sees this merger as an important and logical step to enable Coca-Cola Beverages Africa to optimise the opportunities for development in the rapidly-evolving Africa beverage market. We are very excited about the opportunity and are totally committed to ensuring that Coca-Cola Sabco’s distinctive culture is successfully integrated with that of our new partners in order to create an even more successful business in the future.”

Once the transaction is completed, it will be implemented in two phases.

The first phase will include bringing together SABMiller’s local bottling business known as Amalgamated Beverage Industries (ABI) and Appletiser and its soft-drink business in eight other African countries. The bottle-giant will initially produce and distribute beverages in nine countries including South Africa, Kenya, Namibia, Comoros and Mayotte among others.

The firms also announced that Coca-Cola Company would acquire SABMiller’s Appletiser brands on a worldwide basis, and acquire rights to a further 19 non-alcoholic ready-to-drink brands in Africa and Latin America for $260m.

In an interview with Bloomberg, Jonathan Fyfe, an analyst at Mirabaud Securities in London, said the pact with Coca-Cola would now present a potential burden for Anheuser-Busch InBev should it seek to acquire SABMiller. AB InBev has shown some interest in acquiring SABMiller.

Source:; Bloomberg

Additonal reading:

PE home to new beverage giant

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