KELVIN BALOGUN

The Coca Cola Company, an age-long brand and household name in the non-alcoholic beverages sector of the economy, recently made a strategic decision to spread its tentacles across other segments of the market by acquiring 40 per cent equity shareholding in Chi Limited, a leader in the juice and dairy products market. The President, Central, East and West Africa of The Coca Cola Company, Kelvin Balogun, shares with Kunle Aderinokun, the essence of the deal as well as gives insights on the operations of the company across Africa, and Nigeria in particular

Coca Cola recently signed an agreement with Chi for the acquisition of 40 per cent equity shareholding in the latter. What is the takeaway from the deal?

TGI is the investment holding company of Chi Limited and Coca Cola has just signed a binding agreement to acquire an initial minority stake of 40 percent in Chi Limited. The take away from this is that it creates a strategic relationship between two beverage industry leaders in Nigeria with complementary categories. When you talk about of The Coca-Cola Company in Nigeria, you think of soft drinks, sparkling, and water brand.

When you think of Chi, you think of Caprisone, you also think of value-added dairy and yoghurt and milk products. So, when these two companies come together in partnership, you have complementary beverage categories in a single portfolio. And that is very exciting when you think about where Nigeria is at today and the opportunity that is available to us.

How is Coca Cola’s operation in Africa?

Now, Coca-Cola needs very little introduction as you know. You are familiar with us as a Nigerian company, but the truth is that we have very pervasive African footprint. We are in virtually every country in Africa. In one of my previous roles, I was able to take Coca-Cola to Somalia which was the only country we didn’t have bottling operation. Coca-Cola embodies belief in Africa even before the concept becomes commonly accepted and part of our footprint is production capacity right across the continent. We have about 145 bottling plants on this continent. We have over 70,000 system employees, of which 5,000 before the partnership in Nigeria. In my region, that is Central East and West Africa, we sell to over 700 million consumers, all across Africa over 1 billion consumers. We sell through 1.5million to 1.6 million distributors and retailers. When you think in terms of the economic impact our company has in any country we operate in, it is always significant. We are invariably among largest employers of labour in the countries we operate in.

How much has Coca Cola invested in Africa?

We have been investing in Africa well before it became fashionable to do so for more than 80 years, building plants, supply chain, distribution system and we are accelerating that investing going forward. Our chairman made a global commitment, between 2010 and 2020, we will invest $17 billion in Africa. This gives you an idea of how we have seen the continent over the years and how we will continue to see the continent. And it is not just investing in the commercial infrastructure alone, but as you are aware, we have a very strong sustainability agenda. We have a number of flagship programmes.

One of them is 5by20 initiative, which is a global commitment we made to enable the empowerment of 5 million women through our value chain by 2020 and Nigeria is a critical piece in this initiative. We also have another programme called Replenish Africa Initiative (RAIN), which is our banner programme in ensuring people have access to clean water. Our commitment is to give 2 million people access to safe water by 2015 and we delivered against that and have expanded the target to 6 million by 2020. And we also have programmes around sustainable agriculture which is our effort to backwardly integrate.

There is a programme we just ran in East Africa called Project Nurture, where we doubled the income of 5000 fruit farmers. So when you think about it, very pervasive, in the commercial sense and also in the sustainability arena and that also flows to Nigeria, the leading producer of sparkling, the leading producer of water and we have some of the world’s biggest brands here.

How do you see Nigeria as a market?

Most times, when people think about Nigeria, they tend to think in terms of some of the short term challenges the country is experiencing such as the current issues of exchange rate and devaluation. But the truth is that the country’s market fundamentals are really strong and very positive. This is Africa’s largest market and population. Up until last year, one of Africa’s fastest growing economies, highly urbanised with significant concentration of population in urban centres, which means they are highly accessible. By African standards, high literacy rate, very young population, early adopters of technology. We have one of the highest mobile penetrations of about 60 percent and with significant level of spending. We have one of Africa’s largest middle class and high net worth individuals. When you look beyond some of the short-term challenges that we have, you see a very exciting market – one of the most exciting in emerging market regions.

This is what really draws us in this partnership that we formed with Chi Limited where we bring our complementary portfolios and skills and knowhow to bear against what we believe will be an exciting market going into the future.

How do you see the partnership between Coca Cola and Chi?

It is an exciting partnership. The DNA of this organisation is the innovation, cost effective manufacturing platform, the extremely motivated and highly experienced and capable people working for this wonderful organization and the fact that they have built an amazing brand in Nigeria. If you put that right next to Coca-Cola’s deep innovation pipeline, our global skill brands, our knowhow in marketing, our knowhow in building commercial infrastructure, I think you will see a really powerful union that gives a lot of synergy we will be leveraging on not just locally but wherever the opportunities are going into the future.

What really attracted Coca-Cola to Chi?

I think is a wonderful opportunity for our complementary capabilities to enable both organisations to be a lot stronger. When you think about it, Coca-Cola is in sparkling, in water and in juice, but they are many categories in non-alcoholic beverage landscape that we are not in. In the fast growing value-added dairy, Chi is the market leader.

So, this is an opportunity for us to cover a wider portfolio through our partnership than we currently do. This actually works for them and for us. And we also think in terms of what they bring. When you are looking at business going into the future you need to think in terms of the skills you need to assess those opportunities.

They have been very experienced, they bring a value-added brand in value-added dairy, and we bring a very deep pipeline of global brand that we can avail to them, global supply chain that we can avail to them and further strengthen them as we go forward. So, when you look at it, there is a lot that we can build. The only category we overlap today is in juices but as you know the beverage category that we can access are far more than that.

What is the shareholding structure like in Chi?

Chi has two shareholders now after the transaction. 60 percent of Chi is owned by TGI Group and 40 percent is owned by The Coca-Cola Company. And when you look at that relative equity position in Chi you realize we (Coca-Cola) are the minority

Going forward, what are the operational terms and conditions?

What we have done by this transaction is to take an equity position along with TGI Chi Limited. But essentially the operation still continues unimpeded. It just gives us an opportunity to leverage the strength of this organization and for us to avail to them some of the strengths of our organization.

According to you, in 3 years you are going to acquire 100 per cent, what are you looking at when it is 100 per cent? Would there still be Chi? Or we are going to have Coca-Cola Chi?

We have a journey to follow and it is a journey that has really been formed on the back of the opportunity we see. There is a mutual desire for both organisations to go into the future, learn from the market, work together to explore that opportunity. There is still a lot out there that we can assess, it’s too early to speculate about what that journey is going to look like or how it is going to evolve.

You talked about Coca-Cola investing $17 billion in Africa within 10 years (2010 – 2020). What portion of this investment will be in Nigeria and in what area?

We’ve been investing strongly in Nigeria over the years. We have over 13 plants across the country. Virtually in all geo-political regions, we have very extensive distribution network nationwide and in the last 5 years, we have made significant investments to upgrade the capability of our operations in the different plants and distribution centers.

So we have invested significantly, but the figure you’ve raised relates to all of Africa between 2010 and 2010. I cannot right now tell you what the exact percentage of what will come to Nigeria, but as you know Nigeria represents one of our largest markets and fastest growing markets on the continent and one of our most exciting, so without giving your specific numbers, you can imagine that a significant proportion of that is going to come to Nigeria.

How is the foreign exchange policy of the federal government affecting your business?

The key is to look beyond the cycle. I have worked in many African countries and you will see the economic ups and downs, but what has always been the character of The Coca-Cola Company is to look beyond those cycles. That is why we have been here in Africa for over 80 years, and in Nigeria for over 65 years and have invested significantly in leaving a footprint across the continent without exception. That mindset is what propels us to look beyond the forex and commodity issues that may emerge. We look forward into the future to see the opportunities ahead.

Recently NBC was delisted from the Stock Exchange. Are you looking at going back to the Stock Exchange?

It won’t be fair to comment on behalf of NBC as you know. The current position is that they are not listed on the stock exchange. The board of NBC has made a strategic decision to run their operation as a private company and I wouldn’t want to speculate on what they would want to do.

How do you see the Nigerian regulatory environment?

Nigeria has always been a very exciting environment, not without challenges. But over the last 65 years that we have operated here, we have formed great partnership with the government, the regulators, our suppliers and our retail partners in building a very successful business. We believe that we can continue to do so going into the future.

Now, the regulatory environment like every part of Nigerian environment is evolving. I wouldn’t say it’s perfect. But they have been supportive of the business we have built so far. And I believe that in partnership they can be supportive of the business aspirations we have going into the future.

What is The Coca-Cola Company CSR like?

We focus on water, women and wellbeing. That’s our sustainability agenda and we revolve our efforts around a number of flagship programmes. In Africa we have the Replenish Africa Initiative (RAIN), which is our commitment to bring portable water to 6 million Africans by 2020. For women, we have our 5by20 initiative, which is a global commitment to enable the economic empowerment of 5 million women through our value chain by 2020. We are also investing in the environment, education and youth development. All of these programmes are applicable in Nigeria as well.