16 Oct 2014 SoftBev set to be SA’s No 1 locally-owned soft drink company
Bowler has in recent years battled for satisfactory profits in soft-drink subsidiary Quality Beverages (QB) after finding it tough to replicate the success achieved in the Western Cape with brands like Jive and Planet in the tougher Gauteng market.
Initial speculation was that Bowler would commit to a diplomatic retreat from the soft-drinks side, perhaps selling the business to a larger player like Clover or Pioneer Foods (which bottles Pepsi) with clauses to retain the bottle manufacturing contract for the medium term.
Instead Bowler surprised the market by moving onto the front foot with a merger with KwaZulu Natal soft-drinks operation Shoreline, which markets the Coo-ee brand in the region.
The merger creates a new player, SoftBev, which will be capitalised at around R650m and churn sales of more than R1bn.
Perhaps more importantly, the merger will markedly improve utilisation of Bowler’s Gauteng bottling plant, precluding the transporting of Coo-ee product from KwaZulu Natal.
Bowler will retain a 46% stake in SoftBev.
The company’s core plastics packaging operation, however, will give away some profitability in no longer supplying “blown” bottles to QB but rather supplying the same quantity of pre-forms.
But this loss should be offset by Bowler being compensated by increased profitability from the new soft-drink arrangement.
The deal also seemingly signals the return of Bowler’s former MD and FD Michael Brain to an operational role, even though he describes his new role as chairman of SoftBev as “semi-executive”. Mahmood Ismail, the current CE of Shoreline, will become SoftBev CE with Ebrahim Ismail and Sharief Parker serving as MDs of Shoreline and QB respectively.
Brain said the deal was a remarkable opportunity. “We were able to take a quantum leap in critical mass.” If the merger is approved, SoftBev will become the largest locally owned soft-drink company in SA.
Brain said the enlarged SoftBev should not attract the attention of Coca-Cola. “We have stayed out of the cola market, and will continue to do this. But we will defend our soft-drink niche.”
Source: FInancial Mail
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