Atlanta-based Coca-Cola has bought a 40-percent stake in Nigeria’s largest juice company for $240 million — its biggest overseas acquisition since 2012 — as it seeks to diversify in the face of slowing soda sales in developed markets.
The transaction includes plans for a 100-percent buyout within three years of Nigeria’s Chi, held by Tropical General Investments Group (TGI Group), Coca-Cola said in a press release.
In 2012, Coke paid about $980 million to buy half of Dubai-based Aujan Industries, a juice and malt beverage maker in the Middle East, WallStreetJournal reported.
With sluggish sales in more developed markets, Coke is increasingly targeting Africa for growth, and announced in 2014 that it would invest $17 billion on the continent this decade.
Health authorities around the world are rebuking soda makers for contributing to increasing diabetes and obesity. The Chi acquisition shows an effort by Coke to expand beyond core soda brands including Coke, Sprite and Fanta, Forbes reported.
A January report by World Health Organization recommended that governments around the world tax sugar-sweetened beverages the way Mexico has. Mexico introduced 10-percent taxes on soda and junk food in 2014, and claims it successfully reduced sugar consumption by 6 percent on average, according to NYMag. The number of overweight children younger than 5 in Africa has nearly doubled to 10.3 million since 1990, according to the WHO commission.
Coke has around 145 bottling and manufacturing facilities in Africa, Forbes reported.
In 2015, Coke had a 45 percent share of the $18.12-billion soda market in the Middle East and Africa, but only 3.5 percent of the region’s fragmented $8.03-billion juice market, according to WallStreetJournal. TGI was the No. 2 juice player behind Iran-based Alifard Co., with a 4.2 percent market share and $337 million in retail sales, according to Euromonitor International.
TGI’s Chi brands include Chi and Chivita juice, evaporated milk and drinkable yogurt under the Hollandia brand and snack foods including Muff the Muffins and Beefie Beef Rolls.
Cornelis Vink, owner and chairman of TGI, said Chi will continue to invest in new products and production facilities, FinancialTimes reported.
“Coca-Cola will put its leading still drinks brands onto the Chi platform and contribute its know-how in innovation, branding and operational efficiency,” Vink said. “We were approached by many prestigious global companies and we decided to do a deal with the largest of them all.”
Nigeria’s central bank has limited the availability of foreign exchange to importers, and consumer prices have risen in Nigeria, Forbes reported. The country faces a tough year in 2016 after enjoying high GDP growth rates the past 10 years thanks to high oil and commodity prices.
But Nigeria’s economy is more resilient than many give it credit for, according to Forbes. There are still long-term opportunities. Over the last few years, 57 percent of the country’s growth came from services, 21 percent from agriculture and 9 percent from manufacturing, according to the African Development Bank.
Companies like Chi, which buys and sells in naira, still have huge potential, said Bex Nwawadu, CEO of Lagos-based private equity firm CBO Investment Managers, Forbes reported.
“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 press release.
From WallStreetJournal.
The deal comes amid uncertainty about Coke’s soda-bottling partnerships in Africa after brewer Anheuser-Busch InBev NV agreed in 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 percent 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.
