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Soft drink giants brace for war

BUSINESS
By Njiriani Muchira | August 19th 2012
Coca Cola and Pepsi brace for war

By  Njiriani Muchira

For over three decades, soft drinks giant Coca-Cola has dominated the Kenyan market with little competition.

Since PepsiCo exited the Kenyan market in the 1970s, Coca-Cola has held sway and vanquish competition  by unleashing its enormous financial capabilities in marketing and advertising.

One such competition was Softa, the soft drink manufactured by Kuguru Foods, which despite resonating well with the low segment of the market due to a ‘buy one, get one free’ promotion never really managed to make an impact in the market.

The only other form of competition has come from East Africa Breweries Limited (EABL), which entered the soft drinks market with the launch of Alvaro. The product, however, has achieved little in shaking Coca-Cola’s supremacy.

But after years of dominating, Coke is now facing a real threat from its old foe after PepsiCo re-entered the Kenyan market last year, albeit at a slow pace.

The competition is expected to take a more vicious route after it emerge that SABMiller, the beverage conglomerate that acquired Crown Foods, is planning to go full throttle into the soft drinks market.

When it acquired Crown Foods, which packages the Keriget brand of water, SABMiller discontinued the juice business in the company but it is now rethinking the strategy. 

PepsiCo, in partnership with its local franchise SBC Kenya Ltd, has been engaging in massive recruitment as it prepares to undertake massive investments in Kenya and try to wrestle the tight grip that Coca-Cola has on the soft drinks market.

Last week, PepsiCo advertised for several middle level management positions after completing the hiring of top managers. “SBC (K) has set up a world class manufacturing plant in Nairobi and shall be manufacturing well-known and widely consumed brands of soft drinks,” said the company.

Though PepsiCo, the world’s second largest food and beverage firm already has its products in the Kenyan market, the fact that it has invested in a Sh2.4 billion plant in the country is a sign of radiating confidence.

Unlike in the 1970s when the firm exited the country, Kenya has undergone  economic transformation and is among countries in the continent attracting unprecedented interests from multinationals.
 

Financial might
The growth momentum is expected to be maintained in the coming years, in the process cementing the belief that it is one of the critical growth frontier for multinationals seeking new markets as they traditional markets in the US and Europe stagnate. 

In coming to Kenya, PepsiCo is endowed with the necessary financial might it requires to wage stiff competition against Coke.

As of January this year, the company’s diverse product lines that are distributed across more than 200 countries generated retail sales of more than $1 billion each resulting in annual net revenues of $43.3 billion.

In Kenya, the company intends to concentrate on at least six of the brands that will be bottled and distributed at the Thika Road-based plant. They include Pepsi Diet, Pepsi Cola, Seven Up, Everess, Mirinda and Soda Water.

But even as PepsiCo strategizes on how to recapture the Kenyan market, it main rival Coke is not sitting pretty.

Coca-Cola has already embarked on three-year investment worth Sh5 billion aimed at expanding its production capacity and diversify into other product ranges.

The investment will go towards expanding the Nairobi and Kisumu bottling plants to increase their capacity as part of a move to also diversify into the juice market.

The company has already entered into contracts with farmers to guarantee a steady supply of raw materials for the new ventures.

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