Pepsi comes back

By Jackson Okoth

Soft drink manufacturer Coca Cola has cited the high cost of doing business in East Africa as a major hindrance in its bid to penetrate the regional market.

The company recently increased its investment portfolio in the country, and now has its eyes firmly fixed on the larger EAC market that is slowly taking shape.

"We see the East African Community (EAC) as a real positive development. It will allow us to manage people, time and money for greater effectiveness," Ahmet Bozer, Eurasia-Africa Group President, Coca-Cola, told Financial Journal through an e-mail.

Coca-Cola views Pepsi's reentry into the Kenyan market as nothing new because the two are competing in other countries within the region.

The multi-national is stepping up its game in the country at a time when its closest rival Pepsi Cola, has announced it will return to Kenya, a market it abandoned years back.

While Coca-Cola is already facing competition in other East African markets, Kenya has for a long time remained its preserve market.

"Competition will always follow profitable opportunities anywhere in the world. Kenya is no exception," said Bozer.

Coca-Cola views Pepsi’s re-entry into the Kenyan market as nothing new because the two are competing in other countries within the region.

brisk trade

"We are confident and well positioned to reach the firm’s 2020 vision," said Bozer.

The company is already involved in brisk trade in the region and has increased its investments, expecting to benefit from cost advantages through expansion and harmonisation of taxes in the regional block.

A larger market will reduce the firm’s cost of doing business with benefits being passed on to consumers.

"With affordable brands, increased choice and innovation, consumers stand to enjoy the benefits of economies of scale," said Bozer.

Although it has made a lot of progress in achieving its objectives, the company acknowledges that penetrating the regional consumer space has not been an easy task and is full of challenges.

"Infrastructure remains a major challenge. Despite recent public sector investment in infrastructural improvement, there is need for a clear and common policy agenda by the members to reduce cost burden attributable to poor infrastructure," said Bozer.

While the movement of goods by road, rail or water must be a business enabler, this is still not the case in East Africa.

Both local and multi-national companies operating in the EAC region are still unable to compete fairly due to some major constraints, including those that limit their ability to transport goods within the market cheaply.

"In the European Union today, free movement of labour is a clear competitive advantage, something that the EAC has yet to fully embrace," said Bozer.

Move people

It is critical for cross border businesses or even multinationals such as Coca-Cola to be able to move people around freely not just for effective management of its business but also for knowledge transfers to locals.

Coca-Cola has over the last decade invested more than $5 billion in the African continent with plans to put in another $12 billion by 2020.

"Our belief in this continent is enduring and unshakable. For Kenya specifically, we have made significant investments in the country over the past three years, going well over $60 million," said Bozer.

It plans to invest $62 million in Kenya over the next three years.

This is in addition to Coca-Cola Africa Foundation’s kitty. In the last five years alone, it has invested nearly $35 million in Africa for community programmes aimed at combating malaria and HIV/AIDS. The foundation has also facilitated provision of water, entrepreneurship and education.

This is an investment of approximately $45 million in the continent by Coke and its bottling partners.

The firm is pumping more cash into the region at a time consumer demand for non-alcoholic ready to drink beverages market is growing.

It is riding on an incredibly broad portfolio of brands to generate excitement through effective and sustained marketing for its brands.