Recent events in Mozambique have taken some of the fizz out of Coca-Cola Sabco’s biggest-ever US$130m greenfield investment across its seven-country regional market in Africa — a “world-class bottling facility” in Matola Gare, near Mozambique’s capital, Maputo.
The launch of the plant in June was a milestone in the company’s ongoing investment in manufacturing capabilities in Africa. It is one of three Coke plants in the country of 27m people, built over three years.
But despite Coca-Cola Sabco having previously run out of bottling capacity in Mozambique, the new facility has installed only two of three bottling lines – for both glass and polyethylene terephthalate (PET) bottles — in various sizes and drinks categories. These include sparkling water, juices and energy drinks.
There are various reasons for the restraint.
First, there has been an economic slowdown in the country caused by faltering global oil and gas markets.
Second, there has been resurgent conflict between Frelimo, the governing party, and Renamo, which is both an armed insurgent group and an elected opposition party.
And third, the recent sovereign credit downgrading of Mozambique to junk status by global ratings agencies has accelerated the decline of the economy. This comes after the government hid from creditors a guarantee of as much as $1.4bn in loans to state-owned companies.
“It has had a profound effect,” says Simon Everest, MD of Coca-Cola Sabco Mozambique. “It has resulted in the IMF [International Monetary Fund] losing confidence in the country.”
Everest says that as a result of the hidden funds debacle, the World Bank and European and US aid donors have pulled out of Mozambique. This has led to food price inflation of about 30%.
“There are no [capital and aid] inflows at the moment — the country is rapidly running out of [foreign exchange] reserves. I think we are in for a torrid 18 months, to be honest,” he says. “Nobody will react until the IMF reacts.”
This is not good news for a nation whose debt to gross domestic product ratio stands at 83%. It has also meant that the value of Coca-Cola Sabco’s almost 50% hold on the soft drinks market in Mozambique has plunged from about $150m a year to about $100m, on the tumbling metical currency.
“It is unfortunate that it happened. It has caused a lot of noise and distraction for us,” says Coca-Cola Sabco CEO Jacques Vermeulen.
The sharp decline in global minerals commodities prices — especially oil, gas and coal — has undermined the basis of Mozambique’s economy. Everest says the country’s plans for liquid natural gas facilities are also “a long way behind” schedule.
But that has not stopped Coca-Cola Sabco from investing a further $30m in its plants in the provinces of Chimoio and Nampula in the centre and north of the country. Everest says the company has invested a total of $200m in Mozambique in the past four years.
Vermeulen says the group made the decision to invest in the new Maputo plant in 2012. “It’s all about growth,” he says. While he acknowledges the world has changed since then, Coca-Cola Sabco “believes the future in Mozambique is prosperous and good ”.
This comes after Coca-Cola Sabco, which is 80% owned by Gutsche Family Investments and has its headquarters in Port Elizabeth, merged with the soft drinks bottling interests of SABMiller Plc and the Coca-Cola Company to form Coca-Cola Beverages Africa.
The new Maputo plant can include different beverage lines and also brings an older bottling plant and distributorship under one roof on 21ha of land near the capital. “We are the anchor tenant in what is now becoming an industrial area,” Vermeulen says. “Capacity will take us beyond 2022.”
He says the new plant has doubled the number of litres of products bottled per hour across 300ml returnable glass bottles, and 2l, 1l, 500ml and 350ml PET bottles. This includes output of Coke, Sprite, Fanta, Sparletta as well as Coke Zero and Coca-Cola Light drinks. The glass line is capable of filling 48,000 bottles an hour.
SA packaging groups such as Boxmore Packaging, Consol Glass and Nampak provide inputs for Coca-Cola Sabco operations in SA and other parts of Africa.
It was a pretty basic beginning for the group in Maputo back in 1994 when Jose Neves, the first MD of Coca-Cola Sabco Mozambique, lived in a caravan on site for a year at the start-up of the plant. He used to take money to the bank in sugar bags, and had no access to telephone lines.
After that, the group established a second plant in Chimoio in mid-1997, and a third facility in Nampula in June 2001. It now directly employs about 900 people in total.
Vermeulen says that with oil and gas markets in the doldrums, the company had to do some tweaking when it installed only two of the three proposed beverage lines at the new Maputo plant.
It makes 62,400l of drinks an hour, up from 25,850l previously. Coca-Cola Sabco’s total drinks output for Mozambique is now more than 100,000l an hour.
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