Why Coca Cola is planning to invest $12bn in Africa by 2020

Having weathered the global financial crisis storm, the firm’s president for East and Central Africa, Nathan Kalumbu, outlines its plans for the future to THE EASTAFRICAN

How is the African non-alcoholic beverage market responding to African and global economic recovery so far this year?

In general, the impact of the global economic recovery on Africa and other emerging markets was not as intense as it was in the more developed countries.

The growth momentum that we began to see in 2008 continued into 2009, and the economic growth in 2009 coincided with the 2010 FIFA World Cup event, all of which have supported our growth this year. We continue to invest and focus on building strong brands in this region.

Looking at the recovery, and events in industries that compete for the same share of the consumer pocket, do you expect the price wars we are seeing in the mobile phone voice market to translate to more consumer discretionary spending that will benefit your brands? What has been your experience with the introduction of cellphones on consumer spending in African markets?

In spite of the huge growth in demand for communication over the past five years, affordability remains key and as competition drives pricing downward in certain markets, it is likely to result in an increase in cellphone usage as well as a potential increase in disposable income, all of which will have an impact on other industries as well.

In more economically depressed areas, consumers often have to choose between airtime and other products, and companies should strive to stay as relevant as possible to these consumers so that they continue to be part of their considerations.

As for the impact of cellphones on consumer spending, there is no doubt that this has been significant; the percentage penetration of cellphones in African markets has been significant, but it has done a lot more than just suck money out of the economy, it has stimulated growth as well and this economic growth, coupled with urbanisation and a move to global consumer trends, has generally had a positive impact on business in Africa.

Looking back to 2008 at the time we faced the global financial crisis and the resulting recession in most of the African markets. The Coca-Cola Company operates in sub-Sahara Africa, how did your brands respond to the economic shocks and what lessons did you draw from the experience?
The impact of the global recession in many of our markets, was largely institutional, in that there are very little levels of personal debt, the challenges were thus more around securing lines of credit and foreign exchange to continue our systems’ capacity investments to keep up with growth in demand.

Countries with heavy reliance on commodities saw the biggest impact on devaluation of forex, weak exports, inflation and unemployment for example in Zambia, Angola and the DRC, where we saw probably the biggest impact on consumer demand. As far as learnings go, these are as follows:
We should never stop communicating with our consumers.
We have learnt to improve our flexibility and speed of response.
We value the need to collaborate with governments and suppliers around keeping our products affordable.

In any crisis, cash is king, and must be managed well.

We continue to support business partners through the crisis, as this is critical in building sustainable relationships.

Which of the 27 markets that you run, in terms of economic blocs were heavily affected and how did you respond? Which of these markets is Coca-Cola the dominant brand, and which are contested by major multinational brands?

As I stated earlier, the impact of the global economic recovery on Africa and other emerging markets was not as intense as it was in the more developed countries.

Countries that are dependent on commodities such as DRC, Zambia and Angola experienced some level of impact, not forgetting Kenya, given its reliance on horticultural exports.

With regard to how we responded, I’d say that we have a long-term perspective of our business in Africa.

This means that short-medium term shifts in economic fundamentals have not influenced our long term view of our businesses in the region.

Despite the crisis, we have continued to invest in capacity, capability and in marketing our brands.
With regard to competition, the non-alcoholic beverage space across the East and Central Africa region is highly competitive and all markets are contested by both local as well as international players.

We continue to see increased competition across all categories, from sparkling beverages, to juice, energy and water, in all the markets in which we operate.

There has been a global movement encouraging healthier lifestyle choices in developed markets. How has this affected the way you have managed your brand portfolio in the last 10 years in Africa?

Generally, our products provide refreshment, enjoyment, nutrition and hydration, and we deliver on those promises in every country in which we operate! We continue to expand our beverage portfolio to meet our consumers’ evolving needs and preferences, with beverages for every lifestyle and every occasion.

We are moving very quickly to become a truly total non-alcoholic beverage company in the region. Globally, Coca-Cola is the world’s largest fruit juice company and in the top three in bottled water, we are also making good progress in smaller niche areas such as sports and energy and our product portfolio is evolving to reflect this.

How has the increased focus on product innovation globally affected how you manage the product lifecycle of your big and traditional brands like Coke, Fanta, and Sprite? How has this affected the choices that you make to meet consumer demand and fight competition in an increasingly global marketplace?

We have an incredibly broad portfolio of brands, and we firmly believe – and our results prove – that if we have brands that people enjoy, and generate excitement around the category through effective, impactful refreshing marketing for our brands, our portfolio of brands will continue to grow.

For us, as you know, it’s all about consumer choice, and it’s about providing consumers with great tasting beverages that fit their active, on-the-go lifestyles.

We do that by offering a wide variety of beverages in different pack sizes, to meet consumer needs and desires.

With this variety, consumers can make sensible beverage choices compatible with their lifestyle.

The opportunity for Coca-Cola as a market leader in the non-alcoholic ready-to-drink beverages sector, in a growing beverage industry, remains significant. Our aim is to continue expanding our portfolio of brands to meet consumer needs.

Do supermarkets make it easier when they import Coca-Cola system brands from Europe that have not been launched here in the local market — long before you make plans to introduce them in African markets?

We enjoy good relationships with all supermarkets, who are our key customers across the world. Some supermarkets import Coca-Cola system brands into our region, from different parts of the world, in order to meet a niche consumer need. These imports however form a very small segment of our business.

Your company pioneered the trend of managing your marketing communication across Africa from Nairobi hub. Has this helped your brands talk better to consumers across the continent? What level of similarities do you see talking at a continent that is so diverse in culture, income levels and geography?

We believe that consumers around the world are more alike than different, whilst our products fulfil very basic physical and emotional needs, so finding common ground is not that difficult.

We believe that good insights are universal, whilst great creative transcends cultural differences. The challenge comes with message interpretation of our marketing messages, so we do a lot of research to make sure that the subtleties of interpretation do not de-rail the intention of our advertising.

It helps, for instance, that Nairobi is a very cosmopolitan location and we actively encourage diversity in our teams and those of our agency partners.

How does Coke manage to thrive in post-conflict African countries that most multinationals would not dare venture into? How many countries do you operate in and what is your level of investment on the continent?

We have invested in Africa for the long-term and our belief in the continent is enduring and unshakable. Africa has proven to be one of the most resilient regions in the world.

Indeed, I dare say, we are the only multinational with a presence in every country across the continent.

Our belief is that our strong partnerships with local enterprises, such as our bottling partners, our customers and our distributors, our partnerships with governments and our communities, our ability to understand our consumers better, have all supported our continued success and scale of contribution to some of the most challenging countries in Africa.

In the East and Central Africa region, which we manage from Nairobi, we cover 27 countries in Sub-Saharan Africa. In totality, over the past 10 years, the Coca-Cola system has invested more than $5 billion on the African con­tinent, and we plan to invest another $12 billion by 2020.

Looking over the past five years, where has the biggest growth in terms of products come from? What has driven this growth, is it marketing spend or innovation? Has your marketing spend grown as much?
The growth we are seeing today, results from a combination of several dynamics. We are seeing growth in consumption trends across all categories in the region.

There are also emerging consumer trends that are driving growth in the water, juice and juice drinks categories, as consumers seek more choice.

The one thing I have to acknowledge here is that the strength of our consumer connections to our brands, appear to be consistent, if not stronger, across the continent.

We continually speak to our consumers, through our innovative marketing campaigns and ensure that our product is available and affordable, where it needs to be consumed.

Do you expect the communication revolution (mobiles and increased internet bandwidth) and massive spending in infrastructure in places like DRC, and the opening of the Northern corridor trade route to Ethiopia and Southern Sudan going to affect your growth?

Certainly! The impact of the communication revolution has been significant and has changed consumer spending.

It has stimulated growth as well and this economic growth, coupled with urbanisation and a move to global consumer trends, has generally had a positive impact on our business in Africa.

We especially see a big opportunity coming through this platform because the vast majority of the youth- who form the majority of our consumers- can now affordably interact on social media platforms such as facebook, twitter, myspace, blogs etc.

We now see the digital media as the next phase of interaction with our consumers.

So far, in countries like Kenya, our bottling partners use mobile banking to manage inventories in stores that they serve and boost sales. In many outlets, the sales force is able to track and communicate product levels real-time to the plant and stimulate new orders some of which are paid for via mobile banking.

This has increased our product availability per unit outlet.The opening up of the Northern Corridor is a definite opportunity.

We see a number of wins when this finally comes through. For instance, Ethiopia which mainly uses the Port of Djibouti will be able to serve the Southern part of the country from Lamu Port.

This will ensure that our bottling partners in the region enjoy reduced costs of transportation, while the improved accessibility will enhance our distribution and product affordability and availability.

The businesses that will come up to take advantage of the economy created by the Lamu port and its resort cities will add on new outlets to sell our products.

How is the company responding to environmental issues related to climate change?

We recognise that our business is only as strong and sustainable as the communities and environments in which we operate. Climate protection is a focus for the entire Coca-Cola system.

We believe that climate change can impact the sustainability of our business, and we are diligently working to minimise the environmental impact of our products and operations.

In several of the countries in which we operate in Africa, including Kenya, we have entered into partnerships with others to recycle PET packaging.

We have upgraded our cooling/refrigeration equipment to environmental friendly refrigeration, which are CFC-free, across the region. In all our bottling plants, we are taking specific action to reduce our carbon emissions and energy usage, in a way that will advance energy efficiency.

We have Energy Management systems in place to monitor our use and assess areas for improvement, helping us to achieve our global targets for our energy management and climate protection.

Our crates are heavy metal free – i.e. They do not have lead in them, and are therefore more environmental friendly.

Our glass packaging – It is our goal to continually look for ways of reducing the material that we use in our packaging.

The current glass packaging that we use is at least 45 per cent stronger and 25 per cent lighter than what we used previously. There is less energy used in lightweight technology, and hence less pollution.
On PET recycling, we initiated a partnership earlier this year, with other players, to collect and recycle all our PET bottles, in order to minimise environmental pollution in areas of operation. We are currently also exploring other partnerships with like-minded entities, in order for us to ensure that our impact is significant.

We are also leading a number of other sustainability initiatives that directly impact the environment.

One of the most notable ones is our Replenish Africa initiative, dubbed RAIN, and which was recently recognized by the MDG Trust Awards for its contribution to environment conservation and water management.

Across 18 countries in Africa, we have made a commitment to provide clean water to over 2 million people in Africa, by 2015.

Through RAIN, The Coca-Cola Company has committed $30 mill over a period of 6 years, and we are working with other partners, such as the USAID, to deliver on this

We have made a commitment to provide clean water to over 2million people in Africa, by 2015.