Companies

Coca-Cola raises stake in local juice company

minute maid

East Africa Coca-Cola general manager Peter Njonjo during the launch of Minute Maid. Photo/FILE

Coca-Cola has increased stake in a local juice manufacturer it owns with local investors through bottling companies that sells its products in the region.

A notice from the Competition Authority indicated that a subsidiary of an Atlanta-based firm, Coca-Cola Export Corporation has increased its ownership Coca-Cola Juices Kenya Limited, the manufactures of Minute Maid juice to 66.03 per cent.

Sources familiar with the deal reckon that Coca-Cola grew its stake in the juice makers after local shareholders failed to participate fully in a rights issue, hence diluting their shares.

The local shareholders own the remaining 37.07 per cent stake through bottling firm like Kisii Bottlers, Mount Kenya Bottlers, Rift Valley Bottlers, Coast Bottlers and Nairobi Bottlers—which are owned by firms like Centum Investment.

“The Competition Authority authorises the proposed acquisition of 66.03 per cent of the issued shares of Coca-Cola Juices Kenya Limited by the Coca-Cola Export Corporation,” said Wang’ombe Kariuki, the Competition Authority’s director general through the latest Gazette Notice.

The deal gives Coca-Cola full control of the local juice firm that was started in 2002 through a joint venture between the US firm and the bottling firms that have a franchise deal with the beverage giant.

In Kenya, Coca-Cola has preferred to offer marketing support to the bottling firms who are left with the production and supply function of its soda brands.

But the additional stake in Coca-Cola Juices Kenya Limited, which was known as Beverage Services Kenya Limited (BSK), will deepen the role of the US company beyond the publicity role.

Chris Kirubi, who is a director and shareholder of Nairobi Bottlers, said that some of the local shareholders in the juice business have been looking to reduce their ownership.

“The bottling companies have for some time wanted to exit the deal and leave Coca-Cola Company to run the juice business,” said Mr Kirubi.

Coca-Cola is locked in the fight for control of the ready-to-drink juice market segment with Del Monte and Kevian Kenya, which sells the Pick N Peel brand.

The battle has seen the protagonist announce multi-billion shilling expansion plans to capture the health-conscious juice consumers in East Africa, a market that Del Monte has dominated over the years.

READ: Fruit farmers gain as firms battle for juice market

The increased activity in Kenya’s juice market has not only resulted in a vicious price war at retail outlets of the ready-to-drink juice market segment but is offering fruit farmers a steady market for their produce.

The juice makers are contracting farmers in the Rift Valley, eastern and central regions to supply its juice processing plant with fruits, especially mangoes and passion.

Market estimates in 2011 placed Coca-Cola’s Minute Maid’s stake of Kenya’s juice market at about 11 per cent with Del Monte controlling a significant share. Kenya’s growing middle-class provides a ready market for juice as it increasingly seeks alternative to carbonated soft drinks, in which Coca-Cola enjoys a near monopoly.

But its grip on the soda market is coming under renewed attack with the return of its global rival Pepsi Cola and the global beverage giant is diversifying its regional business with a focus on the juice market.

READ: PepsiCo plant reverses drop in soft drinks production

The change in ownership in the juice plant in the latest deal to face the Coca-Cola affiliates after Centum raised its stake in the merged Coca-Cola bottlers after buying out minority investors last year.

The investment firm increased its stake in the merged unit dubbed Almasi Beverages to 43.5 per cent from 35 per cent in a Sh426 million deal.

Almasi Beverages was the product of the merger of Kisii Bottlers, Mount Kenya Bottlers and Rift Valley Bottlers.

The three bottlers have been operating as distinct companies with their own managers, boards of directors and shareholders including Centum that had 44 per cent stake in Rift Valley, Mount Kenya (28.6 per cent) and 23.8 per cent in Kisii as at March last year.

[email protected]