Coca Cola extends AB InBev sparkling beverages’ businesses lifeline

HARARE- Beverages behemoth Coca Cola, which has presence in over 200 countries, earning most of its income from selling bottler’s rights, has agreed to extend by another 3 years, a bottler’s agreement with some operating units under AB InBev.

In a trading update, Delta Beverages, a unit of AB InBev said the parties (parent and TCCC) are finalising the renewal of the Bottlers Agreement for a 3 year term to September 2022.

AB Inbev is the world’s largest brewer of alcoholic beverages having consolidated its position through a 2016 purchase of SABMiller, Africa domiciled and then second largest brewer globally.

Spooked by potential conflict of interest, given that AB InBev has long been in bed with eternal rival Pepsi, Coca Cola, decided in 2016 to terminate bottler agreements previously held with units of SABMiller before its acquisition by AB InBev and these included Delta Corporation of Zimbabwe.

Delta manufacturers a range of Coca Coca brands under its sparkling beverages segments including Coca Cola, Fanta, Sprite and Schweppes and accounts for at least 50% of the beverages market share. Had it been effected the move would have seen Delta either forgoing the sparkling beverages unit, spinning it off or some similar kind of arrangement.

Data shows that sales volumes for Delta’s sparkling beverages is at a 10 year low. in 2019 Delta sold shy of 1 million hecto litres and the performance for the current year is likely to come in below 700 thousand hecto litres.

In 2017, the Coca Cola Company bought a 54% stake held by AB Inbev in Coca Coca Bottler Africa as part of a move to regain control of its brands. It was then reported that the companies have agreed in principle to transact on the remaining units held by AB Inbev, including Zimbabwe.

On acquiring SABmiller, AB Inbev’s interest was in the beer segment and therefore could forgo non alcoholic business units at ease. Delta has maintained a cautionary statement since 2016 which reminds shareholders that the company is under caution issued with respect to the notice received from TCCC advising of its intention to terminate the Bottler’s agreements with the Group entities.

The cautionary statement further highlights that the move is pursuant to the merger of AB InBev and SABMiller and the subsequent agreement in principle between TCCC and AB InBev to explore options to restructure the bottling operations in a number of countries.

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Respect Gwenzi

Respect is the Lead Analyst and Managing Director at Equity Axis. He has 8 years experience in respective fields of finance and media. Particular areas of expertise include Asset Management, Stockbroking and Financial Media. Respect is on a mission to change the course of Financial Media in Africa through digitalization

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