In order to cater to a broader customer base, Coca-Cola Nigeria has announced plans to diversify its product offerings, which will see it investing about $600 million by 2020, according to reports by Bloomberg.
The $600 million investment is intended to equally boost sales in line with a global strategy to extend the product range beyond its soft drinks, just as it plans to reduce its foreign-exchange exposure by raising to 75 percent the share of raw materials produced in Nigeria by 2020, from 70 percent currently.
According to Peter Njonjo, president of Coca-Cola West African operations, the beverage maker plans to expand its offering of drinks to include flavored and condensed milk, iced tea and bottled water, all to meet demand in Africa’s most populous country.
He said the $600 million is part of a pledge by Coca-Cola to invest $17 billion in Africa by 2020.
James Quincey, global chief executive officer of Coca-Cola, is reported to have said the company needs to grow beyond its biggest brand and has called for the soda giant to become a ‘total beverage company,’ being less reliant on carbonated soft drinks.
Last year, Coca-Cola bought a 40 percent stake in Nigerian juice and dairy company Chi Ltd. for $240 million and said at the time it intended to take total control within three years.
Coca-Cola has felt the pinch of an economic slump in Nigeria caused by a decline in output and prices of oil, the nation’s main foreign-exchange earner, and dollar shortages.
The Nigerian economy only came out of recession in the quarter ending June 2016 after about five quarters of negative growth that saw gross domestic product shrink 1.6 percent in 2016, the first time since 1991.
High inflation increased production costs, while the price of imported goods rose due to the dollar scarcity, just as consumers had less money to spend, Njonjo recounted.
The company, which has 3,600 direct employees, 11 bottling plants and 30 distribution depots across Nigeria, is not listed in the Nigerian Stock Exchange, and does not readily disclose details on production capacity or earnings.
After peaking at 18.7 percent in January, the inflation rate fell to 16 percent in August, while food prices have continued to surge.
According to Njonjo food inflation is “a big issue,” for Coca-Cola, which has been in Nigeria since 1951.
“As disposable incomes start getting under pressure, expenditure in products like ours start becoming inaccessible to most consumers,” he said.
In response to the challenges, Coca-Cola increased prices, introduced new product-sizes and sought more inputs locally.
“The only way that you can ensure that the business is sustainable is by taking prices up. Some of it we have passed to the consumers,” he said.
The soda maker has also increased investment in distribution and innovation, the regional head said. “It is all about looking at how much money consumers have and how do I become relevant to consumers,” Njonjo said.