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PepsiCo takes defaced advert row to the competition agency

Pepsi workers at a scene where a tree fell on its stand at last year’s Nairobi International Trade Fair. It says a competitor defaced its adverts. FILE
Pepsi workers at a scene where a tree fell on its stand at last year’s Nairobi International Trade Fair. It says a competitor defaced its adverts. FILE 

Global soft drinks giant PepsiCo has petitioned Kenya’s competition watchdog to take action against its rival over the removal and defacing of its advertising material.

PepsiCo says that rival bottler, whom it did not name, has been curtailing its marketing campaigns geared at gaining a larger share of Kenya’s soda market in the complaint to the Competition Authority of Kenya (CAK).

The disclosure is made in CAK’s latest annual report which was forwarded to Parliament Monday. 

“SBC Kenya Limited complained of removal and defacing of its advertising material by a competitor,” said CAK in its 2013 annual report. “The case was at the initial stages at the close of the reporting period,”

PepsiCo, through its local franchise bottler, Seven Up Bottling Company (SBC) Kenya Ltd, has over the past three years been locked in a market share war with Coca-Cola, which has dominated the Kenyan market for decades.

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Coca-Cola used price cuts and multi-billion- shilling investments in its seven local franchises to defend and grow market share.

PepsiCo made its re-entry into Kenya in late 2010 and has been relying on imports to serve the local market.

But with importation being a costly affair, PepsiCo established a Sh2.4 billion local production plant in Nairobi to produce its soft drink brands.

The move ushered in a vicious battle for control of the market as PepsiCo sought to cut the dominance of Coca-Cola. PepsiCo, for instance, offered a larger product of 350ml bottle that is retailing at the same price as Coca-Cola’s 300ml bottle.

Coca-Cola cut its prices from Sh25 for the 300ml soda to Sh23 in June 2012 to raise consumption when inflation, which ranged between 18 per cent and 10 per cent, reduced the consumers appeal for non-basic items like soft drinks.

Seven franchises

Coca-Cola has also used multi-billion-shilling investments in its seven local franchises to defend and grow market share in Kenya.

PepsiCo has replaced Butch Moldenhauer, who helped the firm set base in Kenya, with an executive from SBC Nigeria.

The firm, which is associated with Lebanese businessman Faysal El Khalil, has named Naushud Bhamgara to steer the Kenyan operation.

PepsiCo’s complaint about anticompetitive behaviour by one of its competitors comes when rising demand reversed the drop in soda production witnessed in 2012.

The Kenya National Bureau of Statistics (KNBS) data shows that production of soft drinks stood at 317.4 million litres in the nine months to September last year and looks set to surpass the 359.5 million litres recorded in 2012.

The battle over adverts between the soda bottlers echoes that of brewers, East African Breweries Limited (EABL) and Keroche Breweries.

Keroche Breweries in 2009 protested that EABL was bribing bar owners not to stock its products and alleged that the listed brewer was defacing and pulling down its posters.

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