Africa poised for non-carbonated evolution as Coke ups investment

By Oliver Nieburg

- Last updated on GMT

Related tags Africa South africa

Coca-Cola has announced plans to double its annual investment in Africa to $1bn and profit from the growing middle class by strengthening its non-carbonated drinks businesses in Africa, according to Reuters.

The move comes as the continent begins to mimic the West’s transition from carbonated to non-carbonated beverages, argued one analyst.

Drinks industry consultant John Band told that while the main spending priority among middle class Africans was on carbonated drinks, the developing world is gradually following the Western market’s move to more “premiumised options, like packaged waters and fruit juices”.

Coke look set to profit from this emerging trend. President of Coca-Cola’s South African unit, William Egbe said: "Over the past decade we've invested half a billion (U.S. dollars) every year across the continent ... We're doubling our investment."

Africa makes up around 6 to 7 per cent of the firm’s total revenues and Egbe added that he also expected that to double over the next decade.

Rise of the middle classes

And Africa’s growing middle class, according to Band, is expected to almost double from 32 million in 2009 to 57 million by 2020.

“People in that group aren't wealthy by any stretch of the imagination,” ​the analyst said. “But they've got enough cash left after basic household needs to spend money on cheap luxuries like packaged drinks - so they're an important growth market for drinks companies.”

Zimbabwe market potential

Coca-Cola’s South African chief pointed in particular to Zimbabwe where he said he foresees big growth as it eases its way back from years of economic recession.

"We never pulled out of Zimbabwe during the crisis ... and we're back there in a big way,"​ he said.

Band believed that Zimbabwe was a country with “a relatively educated workforce and relatively decent infrastructure by African standards. If the political system stays stable,” ​he said, “then it's got better fundamentals for growth than most of its neighbours”.

Non-carbonated product launches

Data from Mintel indicated the number of still drink product launches has begun to pick up gradually since the height of the recession in 2009.

Since 2007, statistics showed that the number of still drink product launches in Africa’s two largest markets, South Africa and Egypt, had risen from 161 last year to 190 in 2010 - launches before the peak of the crunch were recorded at 233 in 2008.

The statistics indicated that fruit-based still drinks were the subject of the majority of product launches and suggested numerous launches on the continent included claims to contain no additives/preservatives and/or reduced or no sugar content.

Recent Euromonitor research suggested Egypt was one of the most dynamic markets for carbonates, enjoying double digit off trade volume sales growth from 2005-2008 and a still healthy 8% growth in a recession-slowed 2009.

However, Euromonitor also found that while the market size of fruit/vegetable juice in the Middle East and Africa was expected to grow by 4 per cent and bottled water by 5 per cent, the projected growth for carbonated soft drinks was just 0.7 per cent.Coke’s African investment follows its strategy to double overall revenues by 2020. In September 2009 the company announced that it would double its investment in another fast growing economy by injecting US$200 million into Vietnam over the next three years.

Related topics Markets Carlsberg

Related news

Show more

Follow us


View more