ZIMBABWE – Indian soft drinks manufacturer, Varun Beverages, has started manufacturing operations in the country, but says the cost of setting up its plant might spiral from the initial budget of $30 million to about $40 million due to foreign currency shortages.
Most companies in Zimbabwe are struggling to procure to foreign currency to import equipment and critical raw materials.
This has seen some firms increasing prices of the products due to cost from premiums on foreign currency bought on the parallel market.
Companies that cannot secure foreign currency under the central banks priority framework of allocation resort to the black market.
PepsiCo has already seen spent $22 million on phase one of the plant, with more capital expected to be invested as the project progresses.
The plant will be built in phases, totalling four on completion. This will see an increase of Pepsi branded soft drinks and other brands.
PepsiCo started operations last month and its products are already making a mark on the local market driven by their affordability.
Varun Beverages corporate affairs manager, Fungai Murahwa, said cost cutting measures and affordability will give his company an edge
“We expect the project to cost around $40 million from the initial budget of $30 million due to an increase in the prices of raw materials triggered by foreign currency shortages.
“As we speak phase 1 has been completed and it cost the company around $22 million and there are three phases to follow.
Phase two is expected to be completed by September this year,” he said. He said the beverages manufacturer had so far employed 150 people.
On completion, the PepsiCo plant is projected to create at least 400 jobs and another 2 600 downstream.
The company imported world-class manufacturing equipment including a linker automatic filling and crowning machine from Poland.
It has also imported an automatic sugar conveying machine, shrink wrapper machine and automatic cleaner among others.
In the launch phase, the plant will have high-speed 600-bottles-per-minute production line and ultra-modern 400-cans-per-minute filling line.
Foreign currency shortages have seen retailers adopt a multi-tier pricing system, citing high premiums placed on black market currency.
This has resultantly caused the price of a number of products to go up.
However, Pepsi said it will not increase prices of its products, and plans cost cutting measures to avoid the need to hike its prices.
Murahwa said: “I don’t think that the company will increase prices anytime soon as we are doing backward integrations in order to manage costs of production.
“We are producing all the things we need here, we produce our own containers whereas most beverages in the country buy bottle drinks from other manufacturers hence their products will be a bit expensive.
“Future investments will depend on how well the current investment is performing, as well as new opportunities that may arise. Competition is good for the economy in general and for the beverage industry in particular.”
PepsiCo said it will launch its new water product called Aquaclear in the next 9 days. The products will retail for $0,25 per 500ml.
Group chairman Ravi Jaipuria was recently in the country for official opening of the plant. Mr Jaipuriya is one of India’s wealthiest individuals with a net worth estimated by Forbes Magazine at $1,67 billion.