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Putting africa on coke's map
 

Putting africa on coke's map

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    Putting africa on coke's map Putting africa on coke's map Document Transcript

    • Putting Africa On Cokes Map; Pushing Soft Drinks on a Continen... http://www.nytimes.com/1998/05/26/business/putting-africa-coke... HOME PAGE TODAYS PAPER VIDEO MOST POPULAR TIMES TOPICS MOST RECENT Login Register Now Help Search All NYTimes.com Business Day COLLECTIONS > BOTTLER ADS BY GOOGLE Putting Africa On Cokes Map; Pushing Soft Drinks on a Continent That Has Seen Hard, Hard Times By CONSTANCE L. HAYS and DONALD G. McNEIL Jr Published: May 26, 1998 On the edge of the black South African township of Soweto, perched atop Vic de Villierss gas SIGN IN TO station roof, is a retired South African Air Force warplane, known as the Coke Bomber. Earlier E-MAIL this month, workers showed up to give the plane, which bears the Coca-Cola Companys PRINT trademark red logo, a fresh paint job, courtesy of Coke. Coke is now also paying Mr. de Villiers to illuminate the plane at night. Elsewhere in South Africa, in the vast Orange Farm shantytown outside Johannesburg, the refrigerators at tiny spaza shops, run out of the backs of tin and cinderblock houses, carry Coca-Cola products supplied by local distributors who have plenty of incentive to keep them filled with Coke bottles. Meshack Malindi, one such distributor, says if he can beat all his rivals to double-digit sales growth, he will win a trip to the soccer World Cup in France this summer. And to the north, in war-shattered Angola, local officials in the town of Bonjesus are awaiting the construction of a $30 million Coke bottling plant. Meanwhile, in Ghana, on the West African coast, another $34 million plant is already in full swing. ADS BY GOOGLE More Like This Coca-Cola Earnings Fall 21%, Reflecting Troubles in Europe THE MARKETS: Market Place; Stepping out a bit from Cokes... Profits Plummet at Coke Bottler As Recent Recall Takes a... These are among the many signs that Coke is heating up its efforts in Africa. Sure, Coca-Cola has been available in South Africa for 60 years and West Africa for 30, and its trademark glass Find More Stories bottles turn up in Ugandan villages, Madagascar roadside huts and Zairean refugee camps. But Bottler the company has long tended to ignore Africas underdeveloped markets and only recently has Douglas Ivester the continent acquired priority status -- a decision made largely by the new chairman and chief executive, M. Douglas Ivester. Mr. Ivester toured Africa in January 1997, nine months before getting Cokes top job. His Africa strategy, presented to the board in December, aims to double sales -- they were 712 million cases last year, a meager 3 percent of the companys global total -- in five years. The strategy has several parts: strengthening the bottler network, increasing the number of outlets and intensifying the marketing to consumers. During Phase 1 last year, an estimated 50,000 coolers and refrigerators were installed, many in places like Orange Farm that only recently got electricity, to put Coke products within easier reach. Coke is spending freely to build its network of bottlers and sales people, both on its own and through its anchor bottler, Coca-Cola Sabco. It is also using local institutions, from universities to soccer tournaments, to propel its strategy along. To be very candid, Africa has not historically been a real priority for the Coca-Cola Company, Mr. Ivester declared in a speech at the World Economic Forum in Davos, Switzerland, earlier this year. But over the past two years, we have come to a very different perspective. That shift came about, he said, because of population growth -- there are 610 million people now, possibly a billion by 2020 -- and disproportionately low sales. The per-capita consumption is 27 eight-ounce Coke servings a year, microscopic compared with North America (358) and Latin America (187).1 of 3 2011/12/24 11:38 AM
    • Putting Africa On Cokes Map; Pushing Soft Drinks on a Continen... http://www.nytimes.com/1998/05/26/business/putting-africa-coke... Even though Coke, at 20 to 80 cents a bottle (in returnable glass bottles), is relatively cheap compared with prices in the United States and Europe, Africans drink far more water, fruit juice and other beverages. The market is grossly underdeveloped with some very large populations, said Andrew Conway, a beverage analyst with Morgan Stanley. Not everyone agrees that getting the worlds poorest, most undernourished continent to double its consumption of a sugar-filled, nutritionally empty beverage is a good thing. The direct adverse public health effect is mostly on teeth, said David Sanders, a professor of public health at South Africas University of the Western Cape. As for indirect effects -- its an inefficient use of a low income. If people are encouraged to spend some of their meager incomes on empty calories, they wont have money to spend on more nutritious foods. In an interview, Mr. Ivester said he had personally researched the nutrition question. Actually, our product is quite healthy, he said. Fluid replenishment is a key to health, and when you have a population that has appropriate fluid intake, what you find is they have a lot less kidney problems and kidney disease. Although the World Health Organization says that kidney disease ranks low on the long list of illnesses that afflict Africans, Mr. Ivester said he had spent time with scientists who specialized in the issue, and some of them will tell you Coca-Cola does a great service because it encourages people to take in more and more liquids. Coca-Cola prides itself on promoting entrepreneurship, which the continent badly needs. A hawker who can raise $7 to buy a case can sell it quickly on a hot day and re-invest the profits in more. Sbu Mngadi, chief spokesman for Coca-Cola Southern Africa, pointed proudly to the Kunene brothers of Mpumalanga, South Africa, who started out as spaza shop owners selling Coke and now own a multimillion-dollar bottling business. Coke also does charitable work in Africa, paying for mobile clinics and college scholarships to the tune of about $7 million a year, Mr. Mngadi said, although Professor Sanders dismissed that amount as peanuts relative to its sales. Still, Cokes per-case profit margins are lower in Africa than in many other parts of the world. One analyst, Emanuel Goldman of Paine Webber, estimates profit in the region at about 24 cents a case last year, up 5 percent over 1996 but still only two-thirds of the company average. In any case, the terrain for expansion is tough. Twelve of the continents 55 countries have fought civil wars in the last decade. Some major highways are pocked with potholes big enough to flip a truck. In Angola and the former Zaire, trucks risk landmines and ambushes by soldiers- turned-bandits. And poverty limits sales growth. But as far as competitors go, Coke has the territory pretty much to itself. South Africa is the gateway to the continent and Coca-Cola never really left, even during the years of anti-apartheid sanctions. The company moved its syrup plant to Swaziland, a tiny nation virtually inside South Africa, selling off its bottling interests, but it continued to advertise and sell in South Africa. Pepsi, which did honor the sanctions and pull out, has twice tried to get back in, and twice failed. It is now sold in only 11 African countries but holds a 50 percent market share in Uganda and has a strong presence in Ethiopia and Nigeria. Africa is less of a priority for Pepsi, which is focusing on India, China and Russia, though it does not exactly admit that. Pepsi is a unit of Pepsico. We think theres a lot of growth opportunity in Africa, said a Pepsi-Cola International spokesman, Keith Hughes, and we intend to continue building a solid business to tap that. Over all, Coke has a 79 percent share of the African soft-drink market. Cokes biggest obstacle to growth in the region, says Michael Branca, a beverage industry analyst with Lehman Brothers, is themselves. On his 1997 trip, Mr. Ivester personally discovered the regions potential during an impromptu stop along the road between Johannesburg and Soweto. There was a squatters camp that had arisen there, with people coming from Mozambique and the outlying territories, Mr. Ivester recalled. I ran across this guy who was selling ice cream, he said. I started interviewing him about how much ice cream he sold, where he got it, how much money he was making. It was clear to me that an entrepreneurial environment exists at all levels of society, even in these squatter camps. Coke has one anchor bottler, Coca-Cola Sabco, based in Port Elizabeth, in which it holds a 21 percent stake, and scores of smaller ones. Some analysts think it will soon assemble at least one more anchor bottler -- important, since it is through them that headquarters in Atlanta drives its marketing and sales objectives. It vastly prefers to use fewer, more efficient bottlers than a fragmented network like the one that has slowed its strategy in India.2 of 3 2011/12/24 11:38 AM
    • Putting Africa On Cokes Map; Pushing Soft Drinks on a Continen... http://www.nytimes.com/1998/05/26/business/putting-africa-coke... With the strategy has come re-education for bottlers. Most of them saw their jobs only as selling Coke where people wanted it. The bottlers role, however, is not just about fulfilling demand, but about creating demand, said Carl H. Ware, president of Cokes Africa group. For example, last year a group of executives visited Angola, which is slowly recovering from decades of civil war, and glimpsed people feasting and dancing by lamplight in town squares late at night. Our strategy would call for us to get in there and place coolers, to help give people a simple moment of pleasure, said Charles S. Frenette, recently named Cokes chief marketing officer after two years running Coca-Cola South Africa. Coolers are not alone on the Angolan agenda. In September, Coke signed an agreement with the Government to build the bottling plant in Bonjesus, near Luanda. Similar agreements are being negotiated in other countries. The company makes sure most of the materials used in the plants, from the sugar in the processing to the wood in the crates, are locally produced. As a result, Mr. Ivester said, we are able to price the product in almost local wage terms so it is affordable. To create new customers, Coke is helping to open shops from Uganda to South Africa. By making irresistible offers -- it often pays the entire cost of a kiosk or an ice chest and sponsors business and management classes for budding micro-entrepreneurs -- it is generating markets where there might have been none. The infrastructure in terms of people and equipment that is already in place should enable them to capture per capita growth as Africa develops, said John D. Sicher, editor of Beverage Digest, a trade publication. Moving to the academic sector, the company has set up Coca-Cola Forums to train entrepreneurs, usually to work for Coke, at the University of Zimbabwe and the University of Nairobi in Kenya. What weve seen in South Africa is somebody who starts by standing on a street corner, then moving up to a kiosk, Mr. Frenette said. One of the chief marketing vehicles has been sports, especially soccer, Africas passion. Coke was lead sponsor of the African Cup of Nations, a continentwide tournament held this year in Burkina Faso, a tiny impoverished country that borders Ghana on the north. Every local bottler on the continent had posters and ads linking Coca-Cola with the Cup. To build good will and brand identification, Coke also re-sods local soccer fields and hands out new goal posts and scoreboards with the Coke logo. Coke supplied free soft drinks, telephones and transportation to officials and reporters at the tournament. On a continent where television stations are too cash-strapped to send their own reporters to the games, the company contracted with a reporter from a Nairobi station to present a nightly two-minute feature that it broadcast without charge to any station that asked. Its a very happy marriage, said Brendan Harris, Coca-Cola Africas marketing director. To be linked with soccer is very good for us; at the same time, we were able to put something back. ADS BY GOOGLE Clean your Mac Award-winning Clean-up utility for Top Performance of your Mac! MacKeeperapp.ZeoBIT.com Home Times topics Member Center Copyright 2011 The New York Times Company Privacy Policy Help Contact Us Work for Us Site Map Index by Keyword3 of 3 2011/12/24 11:38 AM