Coca-Cola Nigeria to boost sale, extend product range with $600m

Coca-Cola Company’s Nigerian operation will invest $600m by 2020 to boost sales, in line with a global strategy to extend the product range beyond its soft drinks.

The unit of the Atlanta-based beverage maker plans to expand its offering of drinks to include flavoured and condensed milk, iced tea and bottled water to meet demand in Africa’s most populous country, the President of the West Africa operation, Peter Njonjo, said in an interview with Bloomberg, adding, “Our objective is to provide whatever beverages you need across your life stages.”

The money is part of a pledge by Coca-Cola to invest $17bn in Africa by 2020. The Global Chief Executive Officer, Coca-Cola Company, James Quincey, has said the company needs to grow beyond its biggest brand and has called for the soda giant to become a “total beverage company,” being less reliant on carbonated soft drinks.

Last year, Coca-Cola bought a 40 per cent stake in Nigerian juice and dairy company, Chi Limited, for $240m and said at the time that it intended to take total control within three years.

Coca-Cola has felt the pinch of an economic slump in Nigeria caused by a decline in output and prices of oil, the nation’s main foreign exchange earner, and dollar shortages. The economy expanded by 0.6 per cent in the three months through June, ending five straight quarters of contractions that saw gross domestic product shrink by 1.6 per cent in 2016, the first time since 1991.

High inflation increased production costs, while the price of imported goods rose due to the dollar scarcity, just as consumers had less money to spend, Njonjo said.

Coca-Cola Nigeria, which has 3,600 direct employees, 11 bottling plants and 30 distribution depots across the country, is not listed in the West African nation and Njonjo declined to share details on production capacity or earnings.

After peaking at 18.7 per cent in January, the inflation rate fell to 16 per cent in August, while food prices have continued to surge.

This is “a big issue,” for Coca-Cola, present in Nigeria since 1951, Njonjo said.

“As disposable incomes start getting under pressure, expenditure in products like ours start becoming inaccessible to most consumers,” he added.

In response to the challenges in Nigeria, Coca-Cola increased prices, introduced new product sizes and sought more inputs locally. To reduce its foreign exchange exposure, the company plans to raise to 75 per cent the share of raw materials produced locally by 2020, from 70 per cent currently, Njonjo said.

Recent moves by the Central Bank of Nigeria to improve dollar availability have had a “positive impact” and the company is able again to import before it runs out of stock, he said.

“The only way that you can ensure that the business is sustainable is by taking prices up. Some of it we have passed to the consumers,” Njonjo stated.

The soda maker has also increased investment in distribution and innovation.

“It’s all about looking at how much money consumers have and how do I become relevant to the consumers,” he added.

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