Ikem Okuhu
It was a few days to Christmas and I was at a popular hangout in Enugu when a stranger interrupted my conversation with the bar owner. The guy, well put-together, was in a rush but the few minutes he spent on our table were enough for him to reveal a piece of information that was important to my brands and marketing mind.
“Coca-cola had shut down its bottling plant at Ngwo”. He went on to inform his friend that operations had become unprofitable as sales from this plant could no longer support overheads and as a result, the core staff were going to move to Port Harcourt where the Enugu and the larger south-eastern market would thenceforth be serviced from.
It was an exclusive story for any journalist. As a marketing writer, it was even more important to me. But then, this man also whispered to my friend that it was not something the company wanted in the media and he offered the reasons. Because of these reasons, I told myself I was not going to write about it at the time.
But as a journalist, I knew I had no “exclusive” rights over exclusive news. Scoops missed by one could be another’s and although I respected the plea from my friend to keep the information close to my chest, a publication that generously graced the front page of The Oracle, a regional newspaper based in Anambra State, has compelled me to discuss this issue, especially given the deliberate attempt to give political colouration to an otherwise business decision of the multinational company.
It is political season in Nigeria and straws of this kind forms significant planks and tools in electioneering contests and that is why it has become important for those who understand the complicated world of Marketing to explain the reason for the shutdown.
Cocacola Nigeria and the erosion by value brands
It began like a joke for some people but it seems that a market that had Coke as a runaway dominant player is gradually slipping away, thanks to economic strains that has forced many in the value segment to alter their utility maximisation preferences. Coke was not alone in this challenge. The breweries were also affected. Gala, the “premium” sausage roll brand has also not had it easy. For the brewers, recourse had to be taken to their value brands for revenue, especially given that none of the premium brands were selling. Ask Nigerian Breweries how much Heineken, Star and Gulder had earned for them over the past five years and you will be good for this journey.
Back to the matter on hand, for over two years, Cocacola has not had it easy, no thanks to two carbonated drinks brands that emerged from nowhere and have been eating market share like voracious termites. They came with very annoying names: Big Cola and Bigi Cola. Such names as these can only have great appeal in the value-for-money segment where utility is interpreted and pursued differently.
Although the recession that hit Nigeria few years back has been said to have abated, its impact, especially in the alteration of consumption patterns will linger for much longer and when such a serious economic challenge occurs in any economy, the most affected are lifestyle products and premium brands as people adjust to utility maximisation within available resources.
When Big Cola and Bigi Cola arrived on the Nigerian scene, its strategy was to attack the low end of the market with such ferocity as to ensure the big players, Cocacola and 7Up Bottling Company bled. Of course their price-points strategy was quickly embraced by these vast segment whose consumption preferences are not driven by brands but by value and by association.
Bigi Cola and Big Cola attacked the market and before the big players knew what was happening, dealers, who were getting these products at significantly lower costs have been hooked. That it was happening at a time Coca-cola was adding price points to their line of products made a crisis situation even more challenging. From a retail point of view, it made sense for a dealer to stock these value brands than stock either Coke or any of the 7Up brands. The margin they get from the company is significantly higher than the one from Coca-cola and because it reaches the market at also slightly lower costs, consumers didn’t care what brand names these ones carried.
And so it was not a strange occurrence for someone to ask for Fanta or Coke only to be offered Bigi Cola. People at this segment either didn’t really know the difference or didn’t care. That these new brands tasted very close to Coke and Fanta and even Sprite made matters worse.
Coke, and of course, its hitherto major competition, Pepsi began to bleed. And they also began to devise their own response strategy to remain afloat. Those who followed the Pepsi “Long Throat” marketing campaign would, in hindsight draw a correlation between the onslaught of Bigi Cola on the market. Not prepared to drop its price points, Coca-cola responded by creating the smaller Coke, Fanta and Sprite PET bottles, called “Solo.” But the more they struggled to find answers, the more Bigi ate into the market.
There was yet another factor in the conspiracy. We are living in an era where people are not only watching their spend, but also are increasingly conscious of their health. The carbonated drinks industry has been losing grip on the A-B segment of the market for years, what with the soaring awareness on the implications of sugar on health. This has compelled many to drop their taste for their favourite carbonated drinks. What this means is that the effort by Coca-cola to concentrate marketing on the Premium segment was met with significant resistance by those who have been sold the rhetoric about carbonated drinks containing more sugar than good for their health.
Enugu and its additional headache
Coca-cola, as the report in The Oracle newspaper, stated, had been in Enugu State for 44 years. Such a shutdown should, normally worry everyone, especially when one assesses the implications it would have on direct and indirect employment. The Coca-cola plat was one of the key reasons 9th Mile Corner, Ngwo became a commercial hub. It was the localisation advantages of its presence that attracted the dead-and-buried Monarch Beer brand, then owned by the late Chief C.C. Onoh, a brewery that was later bought over Nigerian Breweries.
Speaking of Monarch Lager Beer, did anybody raise political issues and neglect by government when the late Chief Onoh, himself from Ngwo, decided to close down his family-owned bottling company?
In addition to the competition that has shaken Coca-cola nationally, Enugu presented its own challenges and that came with dozes of religion and faith, something the people take very seriously.
Those who understand the business of Coca-cola will know that they make the most money from their water brand, Eva Table Water. It sells like “hot cake” But Enugu demystified this soar-away brand and no other person was behind it but the fiery Catholic priest, Rev. Fr. Ejike Mbaka.
Fr. Mbaka and his Adoration Ministry, Enugu Nigeria (AMEN) some years ago launched a water brand, known as Aqua Rapha. In Enugu and Anambra axes, Aqua Rapha is taken like prescription drugs. You want to know why? Catholics believe in the efficacy of the Holy Water and its capability to miraculously cure diseases and drive away evil spirits. So when Fr. Mbaka, believed by many to have spiritual healing powers, eponymously named his water brand, Aqua Rapha (Aqua means water; Rapha means “God heals”), many Christians in and around Enugu believed this brand of bottled water has been “blessed” by the priest and that each bottle carried those healing powers.
It was no surprise that most other bottled water brands suffered in and around Enugu. Aqua Rapha, using it endless tentacles of the Catholic Church opened depots and distribution centres practically everywhere, including remote places ubiquitous Coca-cola could not reach.
To worsen the case for the multinational brand, Fr. Mbaka recently added carbonated drinks to his bottled water line. His own costs much cheaper; distributors get it at greater value and his faith is also conspiring with his religious reach to multiply the woes for American soft drinks giant.
Given these scenarios, the question becomes what would the government of Enugu State to do to ensure Coca-cola remained in the state? I know that the state government has been consistent in pushing for investments in the state. So what would be the reason same state governments would not do everything to ensure existing investments are retained?
The business environment in Enugu State has been made to become one of the friendliest in the country, with a tax regime that is as convenient as it also encourages businesses. I am aware that the prevailing political atmosphere in the state is such that everyone just has to hitch their coach on a wagon somehow, but there are certain editorial contents a newspaper should not allow on its pages, even if the end is partisan or commercial.
Okuhu, a Brands and Marketing analyst, is also a Media Aide to Governor Ifeanyi Ugwuanyi of Enugu State.
