New regional soft drinks players shake up US duopoly

The duopoly of US firms in the soft drinks industry in East Africa will be tested through competition with new entrants.

The entry of Harris International Ltd and Sai Beverages Ltd (SBL) into Uganda, Bakhresa Group into Tanzania, and Crystal Beverages Ltd to Rwanda is set to shake up an industry that has been dominated by CocaCola and PepsiCo. Harris International also exports its soft drinks to South Sudan and Rwanda.

In January, Pepsi started local production of its brands in Kenya, giving competition to Coca-Cola, which had dominated the Kenyan market for decades.

The realignments in the region’s soft drinks market have triggered product innovations, including new packaging, as well as price wars.

READ: Pepsi plant to stir up competition in Rwanda's beverage market

Coca Cola franchise holder in Uganda Century Bottling Company has unveiled a new 350ml disposable soda bottle selling at Ush1,500 ($0.56), priced higher than Sai Beverages Ltd’s soda of similar volume at Ush1,000 ($0.38).

Harris International Ltd is selling its 320ml sodas in non-returnable bottles at a price similar to that being offered by its immediate rival Sai Beverages.

Before the new firms entered the market in Uganda, Coca-Cola and Pepsi had been selling their 300ml returnable bottled soda at Ush1,000 ($0.38); Century Bottling Company sold their 500ml disposable bottled soda  at Ush2,000 ($0.77),  and Crown Beverages Ltd sold a 500ml Pepsi for Ush1,800 ($0.7).

New firms selling their soft drinks, especially cola flavours, in disposable bottles appear to have taken some of the market from their rivals.

However, there have been disputes and accusations of trademark and intellectual property infringement. In April, Century Bottling Company took Harris International to court on allegations of trademark infringement in relation to the production of the Riham Cola brand.

The global soft drink producer said it was seeking an injunction restricting Harris International from further infringement on Coca-Cola brand contents.
The row originated from the 500ml bottle, which according to Century Bottling Company, was similar to theirs.

As a result, Harris International changed its bottle top colour from red to chocolate brown. Meanwhile, production of the 500ml bottled soda has been halted until negotiations are complete.

The companies are guarded on market share numbers, but going by production volumes and distribution networks, Century Bottling currently has the upper hand; its annual production stands at 25 million cases compared with Crown Beverage’s 20 million. Harris International produces 34,000 cartons (a carton has 12 sodas)  of its three flavours per day, making it the third largest producer of soda in the country.

Sai Beverages produces 20,800 cartons per day of its seven flavours. With a $10 million investments, the firm plans to unveil seven more flavours in the next six months.

Rwanda’s Crystal Beverages Ltd is also seeking a piece of market share with its Crystal Cola in Rwanda and Burundi; Tanzania’s Bakhresa Group is looking for markets in Tanzania and Uganda.

Although sales of Coca Cola in Kampala declined due to the entry of new players early this year, they have now gone up.

“Immediately Riham hit the market, our sales dropped from 70 cartons a day to an average of 60 cartons per day. However, with the introduction of Ka-Mini (the 350ml bottle), sales have again gone up. Consumers are streaming back due to brand loyalty,” said Rashid Kagoye, a manager at Agma Holdings Ltd, a Coca-Cola depot in Kampala.

The same consumption pattern has been noted at Coca-Cola’s depot at National Theatre and Kiseka market.

Price wars

Pepsi has taken the battle for consumers to Coca-Cola in Kenya, with the offer of its 350ml non-returnable bottled brands selling at the same price as its rival’s 300ml bottles.

Pepsi is selling its 350ml drinks at Ksh23 ($0.26), translating into more volume for consumers at the same price as Coca-Cola’s 300ml glass bottles.

Coca-Cola made a similar move for its 300ml bottles in response to the rival’s return to Kenyan market in 2010, lowering its price to Ksh23 ($0.26), but increasing the price of the 500ml bottle to Ksh37 ($0.42).

Peter Njonjo, general manager at Coca Cola for the East African franchise, acknowledged the heightened competition in the region, but expressed confidence that the firm would maintain its market leadership.

“Competition will always follow opportunities. We are confident about our business in the region in the long term,” he said in an interview.

Pepsi expects to cut operating costs with the installation of a new plant at Ruaraka, Nairobi.

The company has invested Ksh2.4 billion ($27 million) in the plant as it seeks to take advantage of the demand for soft drinks, which has grown steadily over the past decade with consumers’ increasing disposable incomes.

Sai Beverages chairman Amarnath Patel said the soft drink market in East Africa is still immature, due to the few firms in production and hence limited choice for consumers.

He added that the company, which also operates in Angola, Mozambique, Democratic Republic of Congo, and Zambia, plans to use Uganda as a hub to tap into the regional market.

“We have established our fifth branch in Uganda,” Mr Patel said, adding that they are exporting their products to Rwanda, South Sudan and Kenya.
Norton Kingwill, the country manager at Century Bottling, said they are not worried about the competition.

“We have launched a new 350ml plastic pack for Coca-Cola and Fanta Orange in response to our consumers’ request for affordable and convenient packs,” Mr Kingwill said.