A Coca Cola bottling plant in Mozambique. Picture: COCA-COLA SABCO
A Coca Cola bottling plant in Mozambique. Picture: COCA-COLA SABCO

Lagos — Coca-Cola’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, Peter Njonjo, the president of the West Africa operation, said in an interview in Lagos. "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. Global CEO James Quincey has said the company needs to grow beyond its biggest brand and has called for the company to become a "total beverage company", being less reliant on carbonated soft drinks.

Last year, Coca-Cola bought a 40% stake in Nigerian juice and dairy company Chi Ltd for $240m and said at the time 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 0.6% in the three months through June, ending five straight quarters of contractions that saw GDP shrink 1.6% 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. The company, which has 3,600 direct employees, 11 bottling plants and 30 distribution depots across Nigeria, isn’t listed in the West African nation and Njonjo declined to share details on production capacity or earnings.

After peaking at 18.7% in January, the inflation rate fell to 16% 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 coming under pressure, expenditure in products like ours start becoming inaccessible to most consumers."

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% the share of raw materials produced in Nigeria by 2020, from its present 70%, Njonjo said. "The only way you can ensure the business is sustainable is by taking prices up. Some of it we have passed on to the consumers."

The company has also increased investment in distribution and innovation, Njonjo said. "It is all about looking at how much money consumers have and how ‘I become relevant’ to consumers."

Bloomberg

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