Bogdanovic: Coca-Cola HBC Eying More Growth in Nigeria

Group Chief Executive Officer, Coca-Cola Hellenic Bottling Company, Mr. Zoran Bogdanovic, recently had a working visit to Nigeria. He spoke on the company’s operations and sundry issues. Goddy Egene and Dike Onwuamaeze present the excerpts:

Let us begin by you telling us about yourself and your role at the Coca-Cola Hellenic Bottling Company.

I was born, brought up, and schooled in Croatia. After I finished school, I started my career at Arthur Andersen for a few years before joining Coca-Cola HBC where I have spent 25 years. At Coca-Cola HBC, I have had the privilege of working in cross-functional roles. I started with Finance, then I moved to Sales before taking over as the General Manager in Croatia. Afterwards, I moved to Switzerland and Greece. I became a Regional Director, with Nigeria as one of the countries in my region, this allowed me to visit the country regularly. I have been in the role as CEO of Coca-Cola HBC for four and a half years and it is an honour and a great privilege for me. I am currently based in Switzerland where our head office is situated. In my role, I’m privileged to work with a very strong team, with several members who have joined me on this visit. Nigeria is one of the most important markets we have in our 29 market Group. We used to operate in 28 markets, but we recently acquired Egypt. Nigeria is one of the largest markets in Coca-Cola HBC. Due to its importance, it is part of our support for our Nigerian market to come here in person. Several of us are here to engage with our team, customers, and stakeholders over the course of three days. The purpose of our visit is to recognise the strong progress of our operations and the team here over the last several years. How they have been able to navigate through COVID-19, how they are developing the business with all the investments we are making here and to read the market to see the current trends and how we can set priorities for our plans going forward. This visit comprises a mix of market visits, factory visits, meetings with customers and our talents.

You have been in this role for over four years. What is your leadership style and what legacy do you intend to leave behind?

I like to believe I am very passionate and professional about my job. My purpose is to help people grow. I think that one of the most important things a leader should do is to help people realize their potential. Through this, the organisation grows and realises its objectives. When I hand over to the next leader, these are the things I would like to be remembered for. I’m also committed to ensuring our high performance. For us it is not only important what we want to achieve, but equally how we achieve it. We want to grow while positively impacting our people, customers, partners, and communities. With regards to achieving sustainable performance, there are three things I would like to share with you. We at Coca-Cola HBC are passionate about our 24/7 portfolio. This means we make sure our beverages are available throughout the day. I also want to ensure that the company is recognised as best-in-class in the market in terms of customer relationships, digital commerce, revenue growth management, and market analytics, just to name a few. The second priority I have is to embed a culture that is a true catalyst for this organisation. This means that all our people embrace a growth mindset, can realize their potential, and be their best selves. This will mean that our current talent wants to stay and that new top talent want to join the team. Finally, I want to ensure that sustainability is strongly embedded in every aspect of this business and the decisions we make. Sustainability is not an initiative that is new at Coca-Cola HBC, we have been recognised for 11 consecutive years, with a top three global beverage company ranking by the Dow Jones Sustainability Index, which demonstrates that we take sustainability seriously. It is evident in every aspect of our lives. To sum it up, my legacy would be high performance done in a good way, a 24/7 portfolio supported by top capabilities, culture as its catalyst, and sustainability embedded in every aspect of our business.

Coca-Cola HBC’s revenue for the first quarter (Q1) increased by 25.9 per cent excluding Russia and Ukraine. What was the major driver for this growth?

We were quite pleased to announce such results in the Q1, which beat market expectations. However, I need to emphasize the context of our Q1 results. It was something we never imagined would happen, and that is the humanitarian crisis and conflict in Ukraine, which has deeply affected all our people. Our Ukrainian colleagues, as well as their families, have been distressed and displaced. So, before any results, I need to emphasize that our focus from the 24th of February has been to support every single one of our colleagues whenever we can, whether they are in Ukraine or those who had to leave the country. We have also collaborated with the Coca-Cola Company to help people that are affected. Globally, the Coca-Cola System has committed $15 million to various humanitarian relief organisations and we will work with our partners to ensure that this financial support is deployed where it’s needed most. Turning to the results, I would say the thing that drove our success in Q1 is a continuation of what also drove our success in previous years. We have been consistently focused on prioritizing opportunities and putting resources into them. There is a portfolio prioritization on sparkling drinks that continues to perform very strongly. This portfolio is targeted at zero-sugar products and adults. In Nigeria, it is Schweppes and in other countries it’s Kinley. The products function as both a standalone product and one that can be mixed with other drinks – with or without alcohol. We have been intentional about developing marketing initiatives and programmes and putting marketing investments in those, which drive significant output. The second thing in our portfolio is our energy products. Here it’s Monster and Predator, which have been yielding strong double-digit growth for the entire Hellenic Group for the past five years. At the Group level, we started with coffee two years ago and we are very ambitious about our coffee plans. As I earlier mentioned, we are investing behind capabilities, and I firmly believe that this makes a difference and achieves strong results. Revenue growth management is a critical capability we have. Three years ago, we didn’t have a data insight and analytics team. Today, we have a sizeable team on the Group level and in the countries. So, portfolio priority and selective capabilities are majorly driving our growth. We are employing people and investing in technology to support that growth. Also, we are very mindful that we put more investments into priority markets. Our investments in Nigeria are very strong and we prioritize markets where we feel we can stimulate faster growth. This worked last year and in the first quarter of this year. We are super pleased that Nigeria was a strong performer in the Q1 results for 2022. We are very proud of the team’s performance. This comes as a result of a number of things including our investments, our team, and their relationship with customers.

For a long time, Nigeria was the only market you had in the African region. Following your acquisition of Egypt in the fourth quarter of 2021, what are your plans, and are we to expect the acquisition of more countries on the continent?

Well, I hope so. Let me start with the fact that we would want to have more business in Africa if the right opportunities come. Having Egypt as the second country on the African continent is tremendously important. It reflects our commitment to and belief in the continent. Our learnings and successes in the Nigerian market encouraged us to go into another country like Egypt. This acquisition is about nurturing and fueling more growth for Coca-Cola HBC. The population of Egypt is half of that of Nigeria, and they are a very youthful country. We are starting from the position of the challenger, so there is  a lot of share to be gained. Our integration is going above expectations, and we started embedding it in our financial reporting in January. I am really pleased with how things are going even though we faced a challenge with the depreciation in the currency. We are primarily doing in Egypt what we are doing in other countries, which is prioritizing capabilities to strengthen it and increase capital investments, so the team is equipped for the competitive market. Given the current analysis, Coca-Cola HBC has significant firepower and has a strong balance sheet, so we will do more. We are not in a race to take on more countries. We have to recognize growth potential and ensure we will get some type of returns before we expand to a country. These types of opportunities come up in conversations with The Coca-Cola Company. This is how Egypt also came to us because we were asked to consider the opportunity. If they present the opportunity for us to expand into other countries, we will gladly consider it. Nigeria and Egypt, having 25 per cent of the population of Africa, gives us an avenue to understand the market and we believe that with our capabilities, we can do more, but time and strategic analysis in the future will determine if we expand.

Do you think you can still expand more here in Nigeria and Egypt?

Absolutely. We are adding several lines every year. Even with the challenges of this year, our Board recommendation demonstrates the confidence we have in the Nigerian market. So, we’ll continue expanding. In the last 10 years, we have invested over 1 billion Euros in Nigeria and especially seeing the results of the last three years, I will say that the business here would even accelerate more. We also hope that the regulatory framework will also help us to do more and, as we invest more to the Nigerian market and our supply chain here, there is scope for Nigeria to also contribute to our other markets.

How important has the Nigerian market been to the company and its growth?

Last year was a very special year for us. It marked 70 years of Nigerian Bottling Company in Nigeria and 70 years of the Coca-Cola HBC as a business. We are extremely proud that our origins are in Nigeria and on this continent. As Nigeria is the root and cradle of the company, that drives our commitment towards Nigeria. Even though there have been challenging years in the 70 years of our existence in Nigeria, we see ourselves staying long-term in Nigeria. Coca-Cola HBC without Nigeria would not be what it is. Nigeria is deeply rooted in our DNA and identity. We hope to see more Nigerian talent taking dominant roles in the Group leadership across the globe. The best thing we can do is to build on a strong legacy in Nigeria through investments and market strategies in terms of capacity, machinery, and technology. More importantly, nurturing people and talents here, that’s what makes the business valuable and precious. We’ve met with a lot of great talents here and we are looking forward to meeting more. We are fully committed and we want to do more.

How are you able to manage your markets in Russia and Ukraine with the ongoing war? How does this influence your mid to long-term plans?

As I earlier mentioned, our top priority is making sure our people in Ukraine are as safe and protected as possible. As a reminder, on 8th March, The Coca-Cola Company suspended its business in Russia. As a consequence of that, we immediately stopped placing orders for concentrate. We have been working with The Coca-Cola Company team on how to implement that decision ever since. As we speak, we are in the process of depleting stocks of the brands of The Coca-Cola Company, and we are evaluating all options for the much smaller presence focused on local brands. We intend to overcome the setbacks through the performance of the remaining countries. This is where Nigeria comes into play, as well as Egypt. I’m really pleased that the other countries in our Group are performing well, and that’s the best testament to the strength of Coca-Cola HBC’s prioritisation of its investment. I just want to emphasize that in Ukraine and Russia we are not concerned about talks of driving profit and performance at this time as we put all our focus on our people. Our main focus is on other countries. The underlying results from other countries are what give me huge confidence that Coca-Cola HBC is going to emerge stronger from this crisis in the years to come.

Your company is committed to achieving Net-Zero by 2040. How are the operations in Nigeria contributing to the attainment of this target?

We are all very proud of the strong commitment we made in October last year to be Net Zero by 2040. This journey did not start last year. For the last decade, we have achieved and overachieved the targets that were science-based. We felt that it’s in line with how we see our business and the impacts we need to make to the planet and society. This type of carbon-neutral net-zero commitment suits our company. Every single country needs to contribute to this commitment, and this includes Nigeria.

Nigeria, being such a sizeable country, plays a critical role in what we want to achieve and that’s why I’m very pleased that NBC has recently unveiled its energy transition roadmap. This means adopting more renewable energy sources for plant operations. From 2020, we started migrating our manufacturing plants to solar energy sources. As of now, solar energy partly powers 50 per cent of our manufacturing plants, and that journey continues to the remaining locations. So, we really want to have solar energy and renewable energy in Nigeria as we have in our other countries. We have also invested in Combined Heat and Power (CHP) plants, which is energy-saving technology that significantly reduces the carbon footprint of operations. We call it the CHP plant and it is in operation across many countries. This shows how committed we are to energy saving. I was super excited to see the fleet conversion trial that is going on where instead of diesel, we started using compressed natural gas (CNG gas). We are looking to have CNG stations within our facilities so trucks can be refueled with CNG there. So, that’s on the energy side. NBC has started transitioning diesel-powered forklifts to electricity powered models, contributing further to its CO2 emissions savings. 109 forklifts have transitioned, with a plan for all 200 forklifts used in the business to transition by the end of the year. Packaging plays an important role in our net-zero goals. We have a strong commitment for 2025 as well as 2030 as a Group where for every single container that would be put on the market, an equal number would be returned back. Now, that’s a serious undertaking in terms of collections and collection systems. We ask ourselves these questions: how do we pick it from the market? How do we collect it? How do they get to recyclers? There is an ecosystem that needs to be built and we see that, in Nigeria, that is very important and that’s why we are having discussions and collaborations with other parts of the value chain. I’m very proud of Matthieu, the MD of Nigerian Bottling Company and his team here, who are pioneer members of the Food-Beverage Recycling Alliance. The Net-Zero Goal is important to us. In fact, when we were on tour at the Ikeja Plant as part of this visit, we discussed sustainability, packaging, and recovery. We have reviewed the plans here and I am very proud that they follow a similar structure to the way we operate in other parts of the world. Also, in terms of packaging in Nigeria, for Sprite, we’ve moved away from the green bottle to the clear bottle which is 100 per cent recyclable. Together with the Coca-Cola Company, we have built 22 recycling banks in Lagos and Abuja. Those are various examples of our efforts toward recycling. Water is another precious resource for us at Coca-Cola HBC. Our supply chain is working on how the quantity of water expended in production is greatly reduced so we can become water neutral. Also, the water we are returning must be of good quality to sustain aquatic life. We are also supporting water distressed areas through projects and investments. A few years ago, we had the Kano State water project that enabled about one million people to have access to water. These are examples of promoting sustainability and also conducting business in a good way that assists the communities. This is because without these strong communities, there is no future for our business or anyone else.

You said earlier that Coca-Cola HBC has invested over 1 billion Euros in Nigeria over the past 10 years. Can you tell us about future investment plans?

As of today, we operate eight factories and 14 distribution centres. Through the whole value chain together with The Coca-Cola Company, we are directly and indirectly supporting about 58,000 jobs annually in Nigeria. We are positively impacting the lives of many families and I’m proud of that. We will continue investing in equipment, technology, machinery, and digital systems. When we start developing several capabilities like Revenue Growth Management and Data Insights & Analytics, we take Nigeria as the lead market and we have important investments to accelerate growth in these areas in Nigeria.

You announced a donation of 1 million Euros to support communities in Nigeria. What is driving the donation and what is the expected impact?

Thank you for that question. After 70 years of operations in Nigeria, we felt the need to accelerate our support for partners across priority areas to help the Nigerian society. Not only does the donation mark the 70th anniversary of Coca-Cola HBC and its start in Nigeria; it is also our way of reiterating our commitment to improving the lives of the communities, which we operate.  Specifically, the donation will be focused on four thematic pillars including a Water Sanitation and Hygiene (WASH) programme aimed at supporting the Federal Government of Nigeria’s journey towards becoming Open Defecation Free (ODF) by 2025 under the OPS-WASH (Organised Private Sector in Water, Sanitation and Hygiene) umbrella. The grant will also go towards advancing a Women Empowerment programme to address poverty & inequality among women by promoting skills development. A third programme will focus on Youth Development & Employment, with a programme to upskill underserved Nigerian youths in high demand skills. Finally, the grant will also be used to drive a Packaging Waste Recycling programme to accelerate the collection of post-consumer waste in communities.