Commodities

Soft drink volumes down for first time in nearly a decade

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Coca Cola Beverages Africa MD Xavier Selga. PHOTO | SALATON NJAU | NMG

Summary

  • Production of soft drinks slumped last year — the first time in nearly a decade — hurt by health safety measures imposed to contain the spread of Covid-19.
  • The measures included closure of restaurants and bars as well s prohibition of social gatherings.
  • Data by the Kenya National Bureau of Statistics data shows that production of drinks such as sodas dropped by 80.4 million litres in 2020, bucking a trend of increases since 2012.

Production of soft drinks slumped last year — the first time in nearly a decade — hurt by health safety measures imposed to contain the spread of Covid-19. The measures included closure of restaurants and bars as well s prohibition of social gatherings.

Data by the Kenya National Bureau of Statistics data shows that production of drinks such as sodas dropped by 80.4 million litres in 2020, bucking a trend of increases since 2012.

Beverage companies recorded production of 550.6 million litres in 2020, compared to 630.9 million litres the previous year.

Food and beverage companies are facing significantly reduced consumption as well as disrupted supply chains due to health safety measures imposed to curb the spread of Covid-19. At-home consumption has increased, but out-of-home consumption – which historically generates the highest margin – has come to nearly a standstill.

Businesses in Kenya were in 2020 hit by a series of stringent measures imposed to curb the spread of Covid-19 including several months of restrictions on travel in and out of Nairobi and Mombasa and dawn-to-dusk curfew.

This affected social gatherings such as parties and weddings as well eateries, thus lowering uptake of soft drinks.

Faced with reduced cash due to job losses and salary cuts, many households have cut back on consumption of items such as soft drinks that are deemed non-essential. Beyond Covid-19 fuelled drop in consumption of soft drinks, surge in demand for vitamin-rich juices as existing consumer demand for healthier, less-artificial beverages has been attributed to reduced intake of sodas.

Consequently, beverage market players such as Coca-Cola posted a drop in sales. Coca-Cola, whose portfolio includes Sprite, Fanta, recorded 13 per cent drop in net operating revenue to post Sh3.5 billion in 2020, down from Sh3.9 billlion in 2019.

“Covid-19 lockdowns put tremendous pressure on all retailers, particularly small, independently operated stores in high-density urban areas that depend almost solely on foot traffic”, Coca-Cola noted in their annual company report.

The Coca-Cola Company typically generates net operating revenues by selling concentrates and syrups to authorised bottling partners. The bottling partners combine the concentrates and syrups with still or sparkling water and sweeteners (depending on the product), to prepare, package, sell and distribute finished beverages.

The company introduced an application known as ‘Wabi’, that allowed operators to stay open during the pandemic and safely serve customers without having to physically open.

‘When a shopper places an order via a free mobile app, the platform pings nearby retailers. The first store to accept the order delivers the items to the shopper’s doorstep in 30 minutes or less. Wabi is now live in 23 major cities across Latin America, as well as Kenya, Vietnam and Malaysia,” says the company.