CAK wants Coca Cola stockists to sell rival products

Almasi Beverages General Manager Japheth Ngetich (left) and Kenya Youth Employment and Skills programme USAID Chief Executive Mrs Joyce Wafula present a Coca-Cola ICE box kit to Hamfreey Omollo. [Caleb Kingwara, Standard]

The Kenyan subsidiary of giant beverages firm Coca Cola will be forced to open up its distribution channels to competitors. This is among the conditions for the approval of its acquisition of Almasi Beverages.

Coca Cola Sabco East Africa, a subsidiary of South African based Coca Cola Beverages Africa, recently concluded the acquisition of Almasi Beverages from Centum Investments giving the firm control of three bottling companies that the company owned.

Almasi was the holding company of Kisii Bottlers, Mount Kenya Bottlers based in Nyeri and Rift Valley Bottlers in Uasin Gishu County. The deal was in addition to buying Centum out of Nairobi Bottlers, with both transactions valued at Sh19.4 billion.

The move mirrors a consolidation that Coca Cola has been undertaking globally.

The Competition Authority of Kenya approved the acquisition but gave Coca Cola tough conditions. According to CAK, the firm will be expected to allow its distributors to stock competitor products, including reserving space for other soft drinks in the Coca Cola branded fridges it has issued to retailers and its partners across the country.

“The merged entity shall reserve the lower deck, or not less than 20 per cent of the total storage space of the coolers lent to SMEs for (non-alcoholic ready-to-drink) products of competitors,” said the CAK.

It was previously unthinkable for retailers to stock other products in the Coca Cola issued refrigerators, with the company having strict rules and known to repossess the fridges at the slightest provocation.

The firm will also be required to amend contracts with its distributors, who will now be able to stock competitors’ products as well as revise agreements that dictate prices and profit margins for the distributors. Coca Cola will only have a leeway to stipulate the maximum prices that distributors can sell its products.

“CCBA shall within nine months of completion of the transaction amend the agreements between the merged entity and its distributors to remove all clauses which stipulate the prices and profit margins for the sale of its products to the extent (if at all) the agreements contain such clauses. However, the merged entity should retain ability to set maximum recommended resale prices for its distributors,” said CAK.

Coca Cola is the largest soft drinks maker in the country, with its sodas, juices, water and other drinks commanding 70 per cent market share. Competitors include Kevian Kenya, the makers of Afia and Pick N Peel juices with a share of 4.76 per cent, Excel Chemicals (2.29 per cent), Del Monte (1.42 per cent) and Highlands (1.59 per cent).

The competition watchdog will also require the company to retain almost all of the permanent employees of Almasi Beverages. Coca Cola will be at liberty to lay off 11 of the employees but will have to keep the 1,700-odd employees of Almasi.

“The merged entity shall for a three year period following the completion of the proposed transaction retain 1,749 employees of the total 1,760 permanent employees. This condition supersedes any previous employment conditions imposed on the merging parties as a result of any prior merge decisions issued by the Authority,” said CAK.

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