Coca-Cola HBC’s proposed $2.6bn (R45bn) acquisition of Coca-Cola Beverages Africa (CCBA) once again shows the great store major international consumer brands set by the longer-term prospects of sprawling African markets.
Coca-Cola HBC’s move follows similar deals in recent years, including US snack conglomerate PepsiCo’s takeover of Pioneer Foods and beer giant Heineken acquiring control of Distell and Namibian Breweries. Snacks giant Mondelez also had a peek at AVI’s Snackworks division about four years ago, but opted to step away before negotiations reached an advanced stage.
The move on CCBA could well make investors reflect on which other local brand powerhouses might be in the sights of global consumer conglomerates. Certainly counters such as Tiger Brands and AVI have best-selling brand ranges with market-leading positions, as well as defendable (and dependable) margins. This week the food brands sector saw its own local shakeup when Premier, with its leading position in the bread market, advanced on smaller food brands group RFG Holdings, which competes across canned foods, juices, pies and spices.
The enlarged Coca-Cola conglomeration, which has pencilled in a secondary listing on the JSE, will be compelling in scale, with strong market positions across Central and Eastern Europe as well as a slew of African markets. The deal is expected to provide low single-digit earnings accretion from the first full year after its completion.
Recently formed Heineken Beverages showed that integrated operations often experience unexpected snags and expose strategic vulnerabilities. The new Coca-Cola entity, however, is the big dog in the market share fight; it is unlikely to face the same type of competitive pressures Heineken did in its African business bulk-up.
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