Coke moves away from AB InBev with Africa bottling deal

Wed Dec 21, 2016 6:56am EST
 
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By Philip Blenkinsop and Martinne Geller

BRUSSELS/LONDON (Reuters) - Coca-Cola Co (KO.N: Quote) has reached a deal to buy Anheuser-Busch InBev's (ABI.BR: Quote) majority stake in their African bottling venture for $3.15 billion and hold onto it until it finds a new owner, the companies said on Wednesday.

Coke said in October it would exercise a right to buy the stake formerly owned by SABMiller following SAB's takeover by AB InBev.

Coke has not said why it decided to buy back the stake, but it might be in its best interest to avoid partnering with AB InBev, which has no experience in Africa, and keep the beer giant at arm's length.

With little room left for AB InBev to grow meaningfully in beer, chatter among bankers has turned to whether the deal-hungry mega brewer will eventually move into soft drinks. That could put Coke at the top of its list, though Coke's $180 billion market value would be a huge hurdle.

AB InBev is already a large PepsiCo (PEP.N: Quote) bottler in Latin America, but up until now has had no business in Africa, where distribution can be particularly challenging due to poor infrastructure.

Coke and AB InBev, the world's largest makers of soft drinks and beer, respectively, said in a joint statement that they had agreed the transfer of AB InBev's 54.5 percent stake in Coca-Cola Beverages Africa (CCBA), the continent's largest soft drink bottler, with operations in a dozen markets including South Africa, Kenya, Uganda and Tanzania.

They also announced another deal for Coke to take other African territories not covered by CCBA, such as Zambia, Zimbabwe and Botswana, as well as bottling operations in El Salvador and Honduras. The price for those markets was not disclosed.

Coke said it planned to hold all operations temporarily until they can be refranchised to other partners. That is in keeping with its global business model, which sees it handling marketing and innovation, and selling beverage concentrate to a network of regional and local bottlers who bottle and distribute the drinks.   Continued...

 
Bottles of Coca-Cola are seen in a Casino supermarket in Mouans Sartoux, France, October 27, 2016.    REUTERS/Eric Gaillard