Coca-Cola sells several popular brands in Nigeria to a local player

In a press release, Coca-Cola says its strategy to “operate a flexible and asset-light model and focus on brands that have the greatest potential to scale”.  

It adds that Coca-Cola recently announced it will invest US$1-billion in Nigeria over five years and remains committed to these investments – provided a “predictable and enabling environment” is in place. “This investment underscores the importance of Africa as a long-term growth opportunity for the Coca-Cola system,” the press release states. 

UAC is a holding company focused on the domestic manufacturing, marketing and distribution of various consumer brands in Africa. The company operates nine manufacturing facilities and several logistics and distribution hubs in Nigeria. 

Interpreting the ‘corporate-speak’ 

Commenting on the transaction in a social media post on LinkedIn, Ben Longman, CEO of emerging markets consultancy Trendtype, says the consultancy interprets Coca-Cola’s statement as ‘corporate speak’ for “we’ve tried and it hasn’t worked out as we wanted”. 

According to Longman, Coca-Cola had originally planned to take the Chivita brand across West Africa and to accelerate its expansion into new categories. 

He believes there is no question that the Chi sale represents a change in strategy for Coca-Cola, and is reflective of the challenges that FMCG companies in Nigeria have faced with the devaluation of the Naira, the erosion of consumer buying power and ongoing problems with access to foreign exchange. 

“I think it’s easy to read into this an indictment of doing business in Nigeria,” writes Longman. “That’s fair to some extent: the devaluation of the Naira means that even though Nigeria’s economy over the next five years will be one of the three fastest-growing in Africa in dollar terms, by 2030 the economy will just be back to where it was in 2022, pre-devaluation. 

“But these exits also reflect a desire for simplicity that multinationals (and their investors) aren’t going to get in the foreseeable future in high-growth, high-risk markets like Nigeria or Ethiopia. It reflects a degree of short-termism that hands the advantage to businesses like Tolaram, or big local manufacturers like UAC or Mamouda that have more boots on the ground locally and a different appetite for risk and complexity.” 

Longman continues: “By 2030, we think the mood among multinational CEOs will have changed again. Large African markets can deliver the volume growth big FMCGs can’t get from saturated markets like Europe and the US.” 

Commenting on Longman’s post, Steven Kabuito, Managing Director Africa at Finwerd Flavours & Fragrances, notes: 

“I’m sure Coca-Cola, and other multinationals like Diageo, will be back in Nigeria in the coming years, likely buying back assets for multiples of what they sold them for. 

“The fundamentals of the market remain the same: Despite short-term challenges with FX, inflation and consumer spending, Nigeria offers scale that simply cannot be matched in many other parts of the world. Those who stay invested, build local capabilities, and take a long-term view will be the ones best positioned to win when the pendulum inevitably swings back.”