Bottlers kick off restructuring to turn around fortunes

By Winsley Masese

Kenya: Almasi Beverages Ltd has embarked on a restructuring plan that seeks to give its three merged bottlers an edge over competitors. This will see it grow its net income by 25 per cent each.

The amalgamation of soft drink makers; Kisii Bottlers, Rift Valley Bottlers and Mount Kenya Bottlers will see them adopt a different management style by scaling down on its board “The ambition of Almasi to grow the business by double digits each year and grow profit after tax by a minimum 25 per cent by 2016,” stated the firm’s Chief Executive Richard Wooding.

New production line

 Wooding said Mount Kenya Bottlers in Nyeri will receive about Sh1 billion ($12.5m) in recapitalisation to construct a new production line besides training its staff. “The new production line will be constructed on the same land the bottler sits on,” he said, adding that this would be the first stage.  The restructuring will also happen to the remaining two bottlers. Besides the new plant, Almasi will also introduce the Enterprise Resource Planning to improve its efficiency.

“This will first be done in the Nyeri plant and will enable us take the best manufacturing practices developed in any of the three plants and apply it in the others,” he noted.

Having the three operating, as a single entity will enable the company enjoy economies of scale and leverage in its bargaining power, especially for raw materials, instead of buying them separately. “Instead of starting from scratch, we will take what we have developed in one bottler to another and that is the larger vision of applying the best manufacturing and management practices in the rest,” he reckoned.

Last year, Wooding said Nyeri plant had reached its capacity as demand exceeded its supply. The same happened to Rift Valley Bottlers. In Kisii, however, there was spare capacity. Wooding argues that by working together, Kisii Bottlers would have plugged the deficit in the two bottlers.

This will enable each bottler not face shortage in the supply of soft drinks in case there is a major breakdown as the two will supply the other. With the soft drink company registering a 12 per cent growth against a seven per cent growth recorded in the carbonated drinks and soft drinks last year, he sees a positive outlook in the coming years. 

Growing affluence

“This is boosted by the increasingly growing affluence among the population coupled with improved purchasing power,” Wooding observed. This growth in urban centres as well as rural areas will see the creation of new outlets as more and more people open new outlets.

“Though we project a 12 per cent growth, we have bottles to accommodate to about 70 per cent growth,” he noted. The company is also developing a new distribution network. “Getting into business with coca cola is exciting if you manage it well and we are always looking on how to expand our distribution network.” Part of the changes include the separation of the commercial force handling the wholesale and retail outlets. “As we work together and apply the same management philosophy, the units are becoming more efficient, and we are getting better yields,” Wooding said in his office in Westlands.

“We are exploring ways in which to bring the three bottlers to the same level of improved efficiency by getting positive.” ICDC and Centum control about 75 per cent shareholding and institutional and individual investors own the rest.

The merged unit is the second largest in market share among the Coca-Cola bottlers in Kenya with 29 per cent, behind Nairobi Bottlers, which controls 48 per cent of the market. Coast Bottlers has 11 per cent market share and Equator 12 per cent. The beverage giant is also faced with new competition after top rivals Pepsi Cola recently switched on its Sh2.4 billion Kenyan plant.

The adoption of the new corporate structure will see Kisii Bottlers Ltd Chairman John Simba relinquish the position to Michael Nyachae, son to once influential politician and businessman Simon Nyachae.

Jelioth Karuri takes over from long-serving Timothy Tiambati as the chairman of Mount Kenya Bottlers while Kipngetic Bett takes over from Abraham Kiptanui as chairman of Rift Valley Bottlers.