Coca-Cola Co.’s Nigerian operation will invest $600 million 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 flavored 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 at his office in Lagos, Nigeria’s commercial hub. “Our objective is to provide whatever beverages you need across your life stages,” he said.
The money is part of a pledge by Coca-Cola to invest $17 billion in Africa by 2020. Global Chief Executive Officer 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% stake in Nigerian juice and dairy company Chi Ltd. for $240 million and said at the time it intended to take total control within three years.
Rising Costs
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 gross domestic product 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, 41, 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 getting under pressure, expenditure in products like ours start becoming inaccessible to most consumers,” he said.
Staying Relevant
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 70% currently, Njonjo 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,” he said.
The soda maker has also increased investment in distribution and innovation, the regional head said. “It is all about looking at how much money consumers have and how do I become relevant to consumers,” Njonjo said.
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