Issue of fridge space holds up Coke’s bottler merger deal

SOUTH AFRICA – Last-minute talks on how much space in fridges (coolers) carrying the Coca-Cola brand should be made available to competing products delayed on Monday the start of a Competition Tribunal hearing into a merger that would create Africa’s largest soft drinks bottler.

The Competition Tribunal is finally expected to rule on Tuesday on whether the merger can go ahead, after the Competition Commission and the merging parties reached agreement on Monday.

This comes after Economic Development Minister Ebrahim Patel and the Food and Allied Workers Union reached separate agreements last week with the merging parties.

They committed that the new merged entity, Coca-Cola Beverages Africa (CCBA), would maintain employment levels for three years and invest R800m in the development of small businesses and small farmers, as well as permit small retailers to give 10% of cooler space to rival products.

But the commission still had concerns, particularly about the cooler (fridge) issue, which were finally resolved only on Monday morning, when the parties agreed that the 10% would apply to all small and micro retailers, not just the new retailers that CCBA would help to develop.

The agreement, similar to ones Coca-Cola has struck in the European Union and Chile, also opens access to all small producers, but not to big brands such as Pepsi.

The commission had been concerned that the lack of access to refrigeration in small retail stores, where there is space for only one cooler, could prevent smaller rivals from competing with CCBA.

The deal will also see SABMiller’s Appletiser and Lecol brands transferred to Coca-Cola globally, but it’s been agreed that Appletiser will continue to be produced in SA for the domestic and African markets.

The merging parties have committed to sell at least 20% of Appletiser to a new black shareholder and to boost the size of the empowerment holding in CCBA from 11% to 20% over five years.

The merger brings together the nonalcoholic beverage operations of SABMiller subsidiary Amalgamated Beverage Industries, with those of the Gutsche family’s Sabco and Coca-Cola Shanduka, to form the new entity, CCBA.

The new company will be controlled by SABMiller, with 57%, and has committed to keep its headquarters and tax residency in SA.

May 10, 2016; http://www.bdlive.co.za/business/retail/2016/05/10/issue-of-fridge-space-holds-up-bottler-merger-deal

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