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said they would combine soft-drink bottling operations in southern and eastern Africa, in a deal that reinforces the U.K. brewer’s growing interest in nonalcoholic beverages.
A new company, Coca-Cola Beverages Africa, will serve 12 countries and supply 40% of all Coca-Cola volumes in Africa, SAB and Coke said on Thursday. SAB will hold 57% of the new business and Coke will own 11.3%. The remainder will be owned by Gutsche Family Investments, currently a major shareholder in Coke’s African bottling operations.
As part of the deal, Coke is paying $260 million for the world-wide rights to SAB’s Appletiser soft-drink brand and the rights to a further 19 nonalcoholic brands in Africa and Latin America.
For SAB, owner of beer brands including Peroni, Grolsch and Miller Genuine Draft, the deal is a further step away from its core brewing business. Soft drinks now make up 20.6% of the company’s total sales by volume, compared with 17.2% in 2009.
In part, that reflects stronger growth in nonalcoholic drinks versus beer. Volume growth in SAB’s soft-drinks portfolio was 5% in its most recent financial year, compared with just 1% for beer.
Bottling soft drinks is a much quicker and cheaper process than brewing beer—even if the margins are ultimately lower—and represents a much smoother and more reliable way to expand in Africa for SAB.
“Soft drinks are increasingly important for us,” Chief Executive
said earlier this month.
Atlanta-based Coke is in the middle of a cost-cutting drive amid falling soda sales in many of its key markets, especially North America. The company last year negotiated a merger between seven separate Spanish Coca-Cola bottlers in a bid to improve efficiency.
“A combined Coca-Cola bottling operation is further evidence of our commitment to Africa, and our firm belief in the tremendous growth prospects that the continent offers,” said
Coke’s chairman and CEO.
Coca-Cola Beverages Africa will have annual revenue of $2.9 billion, making it the biggest Coke bottler in Africa.
current chairman of Gutsche Family Investments, will head the new company, which will be based in Port Elizabeth, South Africa.
—Razak Musah Baba contributed to this article.