Friday, April 1, 2011

Pepsi and SAB Miller investments in Kenya as competition intensify.

The decision by Pepsi to  set up a  US$ 28.5 million plant in Nairobi  after four  decade of absence  is likely to  see  Coca -Cola and Kuguru Foods limited that have hitherto dominated the soft drink market face intense competition.

Pepsi optimism
According to SBC Kenya Limited General Manager Butch Moldenhauer, the local subsidiary through which Pepsi  has been importing its products in a move to test the Kenyan market. The response from the market has been positive, giving all indications that the products can do well ,although sales of soft drink has been sluggish due to domestic inflation and partly global recession.

Decreased purchasing power inevitably leads to a reduction in consumption  forcing manufacturers to put the brakes on output levels as seen when volumes stood 361 million litres for the second year in a row.Prior to 2009, the volumes had made a 20 million litre leap to reach this mark.The soft drinks industry has more than doubled in less than 10 years with the total volume produced in 2004 being 176 million litres.Pepsi is, however, convinced that there is room for growth.

Pepsi  has been importing its products such as Pepsi Cola, Pepsi Diet, Mirinda, Seven Up and Evervess soda water into  Kenya since 2010 . Other countries that Pepsi  has been operating in are Nigeria, South Africa, Egypt  and it is also planning to set up two  plants in Zambia to supply the neighboring countries market.

SAB miller invest too
At the same time of Pepsi's re-entry into Kenya market , SAB Miller ,the Johannesburg and London listed South African alcoholic beverage marker too has  entered the Kenya market  through acquisition of Crown foods limited that used to make Keringet  bottled water.

SAB Miller quit the Kenyan market in 2002 after it lost the alcohol market to East Africa Breweries.Its  flagship brand Castle brewing was decimated by Tusker. 

Following the entry by SABMiller, PepsiCo and the continued presence of Coca Cola  in Kenya,there is bound to be an  intensify soft drink market wars similar to the one currently ongoing in the mobile phone sectors in which Safaricom ,Bharti Airtel ,Essar and France Orange have made call charges to significantly drop.
SABMiller has franchising deals with Coca-Cola allowing it to bottle and distribute their brands like Fanta, Sprite, Coke and the Minute Maid range of juices.The company also produces its own brands of Appletiser juices, sparkling mineral water, sport and energy drinks.
However in Kenya, the faceoff between Coca -Cola , Pepsi and SAB Miller is anxiously awaited  for  by the consumers and the unemployed citizens since  SAB Miller has already indicated its plans to employ more than  400 staff of which 120  have already been employed as engineers, architects and technicians. 
EAC Common Market
It can also be asserted  that  this two multinationals decision to set up plants in Kenya could be part of the long term plan to have tariff factories within the 5 East Africa Community member states to supply the  wider regional market. 


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