Coca-Cola Makes Big Bets On Africa’s Future

by Trefis Team
-1.41%
Downside
42.14
Market
41.55
Trefis
KO
Coca Cola
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Coca-Cola Co (NYSE:KO) plans to invest heavily in Africa in the coming years as it hopes to leverage its strong brand name to gain more customers for its well known brands. Tanzania and Kenya, in particular, have received a major chunk of the planned investment so far with the company announcing its decision to invest $187 billion in Tanzania in the next three years. Recently, the company also opened a new bottling plant in Somaliland at an investment of $15 million. [1]

We estimate a $76 price for Coca-Cola, which is in line with the market price.

See our full analysis for Coca-Cola

Continent of a Billion People

Coca-Cola has so far invested more than $350 million in Tanzania in the past three years. Moreover, the country’s economy is witnessing a healthy boom and grew by more than 6.5% in 2011. [2] Last year, Coca-Cola even introduced Minute Maid in Tanzania, Kenya and Uganda. These investments are part of the company’s broader plans of spending $12 billion in the continent in 10 years starting 2010.

Coca-Cola’s investments in Somaliland will also result in the creation of 135 direct jobs and 2,500 indirect jobs. The international carbonated soft drink market (CSD) was pegged at 27.7 billion cases in 2011. We expect it to gradually increase to around 30 billion cases as people in developing countries consume more soft drinks.

The company is also launching a pan-Africa marketing campaign called 1 Billion Reasons to Believe in Africa in order to emotionally connect with the consumers. [3] The company benefits from its high brand recognition with the red and white Coca-Cola logo recognized by a whopping 94% of the world’s population. [4] That certainly gives the company a head-start in its debut in a new market.

Besides Coca-Cola, other global food & beverage (F&B) giants such as Nestle and Guinness are attracted by the growth opportunity offered by the continent and are investing heavily in the region.

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Notes:
  1. Somalia: Coca-Cola Bottling Plant Opens in Somaliland, allafrica.com, May 23, 2012 []
  2. Tanzania: Coca-Cola Plans to Pump in Billions, allafrica.com, May 14, 2012 []
  3. Coca-Cola launches new pan-African campaign, ukzambians.co.uk, May 24, 2012 []
  4. 15 Facts About Coca-Cola That Will Blow Your Mind, businessinsider.com, June 9,2011 []
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