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Suitors line up for a slice of firm that dared to take on Coca-Cola

FINANCIAL STANDARD
By Macharia Kamau | December 13th 2016

Businessman Peter Kuguru has received numerous offers for Softa Bottling Company after he announced plans to sell the firm.

But despite the many suitors, Mr Kuguru told Business Beat none has met expected thresholds.

The man who took Coca-Cola head on for close to 20 years said the firms that have bid to buy Softa may have misread his intention to sell, adding that while he might be down and almost out, he is not desperate.

“We have received so many applicants, but none of them has been considered favourably yet because they are all coming with conditions that do not work for us,” he said.

“One international beverage company offered us a franchise to produce and sell their products in Kenya, but wanted us to invest $5 million [Sh500 million].

“Some are offering peanuts, while others are trying to buy assets in parts and have offered to buy the water treatment plant, the carbon dioxide plant and other equipment separately. Once you sell in parts, then we will not have a plant.”

Still shopping

Kuguru declined to name any of his suitors, saying it would jeopardise the sale process.

However, indications are that PepsiCo could be one of the companies bidding to buy all or part of Softa Bottling Company.

An expert on the beverage industry in Kenya noted that the second-largest soft drinks maker in the world could greatly benefit from the Softa plant in its fight for market share with Coca-Cola in Kenya. Pepsi re-entered the local market in 2010.

Kuguru said Softa is still shopping for an investor or buyer for the plant, adding that he is looking to cede control.

“We are still looking for an investor or purchaser, whichever will present the best option for us. I am looking to sell a majority [of my stake]or all of it. I am getting old and looking to bring in some young and fresh blood,” he said.

The sale will bring to an end Kuguru’s epic battle for a piece of the soft drinks industry. He has won some battles, lost others, but through it all made a name for himself.

He is, however, walking away a distraught man – Kuguru thinks he has been in a fight was rigged against him.

He challenged a multinational that is seriously deep pocketed and had the backing of its home government.

Kuguru said the Kenyan Government, which should have been in his corner, also played a hand in his fall due to its inaction and selfish interests among senior officials.

Market wars

The manufacturer said many times the market wars were not always about who had a better strategy, but at times degenerated into physical blows, with his merchandisers and sales representatives being chased from the market.

“We fought very hard for many years. Our bottles were broken, our billboards torn and our retailers were intimidated and denied equipment, such as fridges and even stock if they were found to be stocking Softa brands. All this happened while the Government watched and did nothing,” Kuguru said.

At its peak, Softa had a thousand containers and, according to Kuguru, each employed at least 10 people, translating to 10,000 jobs. This was in addition to 200 people employed at the plant.

Kuguru said the containers were the company’s marketing channels, and worked in a market where the competition had a hold on retailers.

The strategy, however, started to crumble in 2007 after a crackdown on this marketing channel.

“In 2007, the Government demolished all our containers. Some people in senior offices were compromised to destroy our business. This was the beginning of our problems,” Kuguru said.

“A container cost us Sh200,000, translating to Sh200 million, plus supporting infrastructure. This is in addition to about Sh1 billion invested in the plant. It has not been easy to recover from this,” he said.

The plant only produces soft drinks once a month, putting out what the market can purchase – no attempts are made to push products through any marketing campaigns.

“We have shut down. We are producing just what the market can absorb. We produce once, close down and sell, when we finish, we produce again. The plant cannot sustain itself and is relying on other business lines.

“We have two plants with a combined capacity of 1,900 cases of soda an hour, but it is currently producing 4,000 cases a month. This is peanuts compared to the fact we were doing that in an hour. It is not economical.”

He is peeved not just by Softa’s unceremonious exit, but a general trend where a number of local manufacturing businesses have shut down, while other struggle to stay afloat.

Kuguru accuses the Government of standing by as local firms fail.

“We are losing employment opportunities for Kenyans due to the closure of locally owned businesses. Softa is one of them, but I am talking about many local companies and we are losing thousands of jobs,” he said.

“The Government is saying it is encouraging FDI [foreign direct investment]. I am not saying that foreign investments are bad, but why do we want foreigners to come and repatriate money from Kenya to their countries? Why do you allow your local industries to close at the expense of foreigners? Softa is just one case. Many companies are closing down.”

He added that many countries fight to keep local companies operational so they can provide jobs and create wealth.

Kuguru cited the recent intervention by US President-elect Donald Trump who reached a deal with United Technologies, which was in plans to relocate its Carrier Corp air conditioner plant from Indianapolis to Mexico. This would have seen more than 1,000 Americans lose their jobs. Mr Trump has also threatened to penalise American firms producing in other markets and importing goods to the US.

Kuguru accuses Kenya of being silent.

“In our case, it was difficult to compete with a player that had access to cheap money from its home government at a rate as low as 2 per cent, and enjoyed tax holidays at home,” he said.

“We fought hard for 20 years, borrowing at interest rates of up to 28 per cent in a ... hostile political atmosphere, no infrastructure, expensive power, expensive fuel and unavailable services.”

While he is exiting the soft drinks industry, Kuguru said he is still has a few years more to run his businesses before he calls it quits.

He said he would significantly focus on real estate, noting his appetite for risk is waning as he gets closer to retirement.

He ruled out the possibility of going into politics.

“I used to be in politics in my younger days but now it is not an option. There are too many younger Kenyans in their 40s and 50s that are capable. We need to give them a chance. But I can take up an advisory or supervisory role,” said Kuguru, who was once the national organising secretary for Kanu when the party was in power.

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