Why CocaCola Nigeria is losing out to Pepsi on pricing

0

CocaCola HBC AG, the parent company of CocaCola Nigeria trading as Nigerian Bottling Company said its volume for the half year fell by 1.6% as a result of volume drops in Nigeria as well as Ireland.

The company disclosed in its half year result that while Ireland was ‘adversely impacted by portfolio changes within the category, and Nigeria by the significant price increases we have taken’.

SevenUp Bottling Company, the local unit of Pepsico, Coca-Cola HBC AG’s rival in Nigeria has since started a price war by dropping its pricing on Pepsi and other flagship soft drinks in markets such as Lagos, Nigeria’s largest consumer market and commercial hub with over 25 million population.

CocaCola Nigeria is still bleeding from Nigeria’s worst recession in 20 years as well as ‘adverse impact of the Nigerian Naira devaluation’ which affected its margins and necessitated a price hike. The consequence of the hike has given room for Pepsi to stage a ‘price offensive’.

To know how devastating the price hike affected the company’s volume sales, the Coca-Cola said in its trading update that:

“Nigeria delivered low single-digit volume growth in the first half of the year despite a difficult second quarter, impacted by the third round of price increases in April”

The Fanta and Schweppes unit was in a loss position but helped by “The sparkling beverages category was broadly stable, with volume growth in Trademark Coke and Sprite”. In Stills, Juice declined by high teens, although the Pulpy 40cl PET pack continued its positive performance.

The company said its stills and juice unit “declined by high teens, although the Pulpy 40cl PET pack continued its positive performance. Water grew by low teens, supported by trade incentives and improved availability in the North”

One of its latest addition, Monster, an energy drink pushed to take on giants such as Power Horse, Red Bull was said to be witnessing continuous growth, there are no details provided on cases sold.

“With the latest pricing matrix, Coca-Cola seems to be behind in strategy. Pepsi dropped its 50 litres to NGN100 while Coca-Cola dropped its 35 cl to the same price. The company now retains its 60 cl pet bottle at NGN150, a far cry to Pepsi’s pricing. How long the company would retain the current approach remains to be seen.

This is a disadvantage given the coming dry season when consumption of liquid-based consumables are always on the rise.

Analysts who spoke to PageOne.ng Big Business Desk concluded that CocaCola Nigeria’s bottom line and debt ratio is responsible for its tough pricing stance. True to their inference, CocaCola HBC AG disclosed it has various debt outstanding with its trade partners in  Nigeria including Frigoglass and AG Leventis.

The reality is very much figured out by its parent company. As it stands, CocaCola HBC AG is less bullish on Nigeria’s prospects as a turf for significant growth going forward.

 

The company said “macroeconomic conditions in Nigeria remain volatile”, an admission that might concern its shareholders given the fact that Nigeria represents ” 10% of consolidated net sales revenue; as at 30 June 2017″.

Share this!

Leave a Reply

This site uses Akismet to reduce spam. Learn how your comment data is processed.

Show Buttons
Hide Buttons