Coca-Cola halts plans to refranchise African bottling unit, retains majority stake

SOUTH AFRICA – Multinational beverage giant, The Coca-Cola Company, has unveiled that it would retain its majority stake in South African-based Coca-Cola Beverages Africa (CCBA) as talks to find a bottling partner(s) could not be concluded.

Coca-Cola previously announced its intention to refranchise CCBA, the largest bottler of Coca-Cola beverages in Africa serving 12 countries as part of its global plan to divest its manufacturing and distribution assets to focus on main beverage business and boost margins.

 “Coca-Cola Beverages Africa is a very important part of the Coca-Cola system, and we see great opportunities to create even more value,” said Brian Smith, Coca-Cola President and Chief Operating Officer.

“While we remain committed to the refranchising process, we believe it’s in the best interests of all involved for Coca-Cola to continue to hold and operate CCBA,” he added in a statement issued by the firm.

The U.S. headquartered beverage giant said that despite engaging various potential bottling partners for disposal of the stake, it could not reach a deal.

The company is said to have been in talks with; Coca-Cola HBC, Cola-Cola European Partners, Coca-Cola SABCO and Heineken N.V.

Coca-Cola said it would reclassify CCBA holding in its financial statement from the second quarter of 2019 to ‘Continued Operations’, from ‘Discontinued Operations’.

CCBA’s results will therefore be reported as part of the Bottling Investments Group segment.

The company said that by reclassifying CCBA’s results into continuing operations, it “does not expect an impact to its 2019 organic revenue and comparable EPS growth guidance.” 

The soft beverage manufacturer estimates depreciation and amortization expense for 2018 of approximately US$400 million on a comparable basis.

The company also expects an increase in its 2019 guidance for cash from operations of approximately US$400 million and an increase in capital expenditures of approximately US$400 million.

CCBA was formed in 2016 through the combination of the African non-alcoholic ready-to-drink bottling interests of SABMiller plc, The Coca-Cola Company and Gutsche Family Investments.

In 2017, Coca-Cola became the controlling shareholder in CCBA after acquiring a 54.5% stake from Anheuser-Busch InBev (AB InBev) formerly controlled by SABMiller.

At the time, Coca-Cola said it would hold onto the stake until it finds a bottling partner in CCBA which has operations in African countries such as South Africa, Kenya, Uganda and Tanzania amongst others.