KENYA – Competition Authority of Kenya (CAK) wants Coca-Cola Sabco East Africa, subsidiary of Coca-Cola Beverages Africa to open up its distribution channels to competitors as one of the conditions following the authority’s approval of Coca-Cola’s acquisition of Almasi Beverages.
According to CAK, the firm will be expected to allow its distributors to stock competitor products, including reserving space for other soft drinks in the Coca Cola branded fridges it has issued to retailers and its partners across the country.
“The merged entity shall reserve the lower deck, or not less than 20 per cent of the total storage space of the coolers lent to SMEs for (non-alcoholic ready-to-drink) products of competitors,” the CAK said in a statement.
It was previously unthinkable for retailers to stock other products in the Coca-Cola issued refrigerators, with the company having strict rules and known to repossess the fridges at the slightest provocation, reports the Standard News.
The firm will also be required to amend contracts with its distributors, who will now be able to stock competitors’ products as well as revise agreements that dictate prices and profit margins for the distributors.
Coca-Cola will only have a leeway to stipulate the maximum prices that distributors can sell its products.
“CCBA shall within nine months of completion of the transaction amend the agreements between the merged entity and its distributors to remove all clauses which stipulate the prices and profit margins for the sale of its products to the extent (if at all) the agreements contain such clauses.’’
“However, the merged entity should retain ability to set maximum recommended resale prices for its distributors,” the competition watchdog said .
The competition watchdog will also require the company to retain almost all of the permanent employees of Almasi Beverages.
“The merged entity shall for a three year period following the completion of the proposed transaction retain 1,749 employees of the total 1,760 permanent employees.’’
Coca-Cola Sabco East Africa, completed the acquisition of stakes in two Kenyan Coca-Cola franchise bottlers for Sh19.4 billion (US$194m) earlier this month.
CCSEA acquired 53.9% shareholding in Almasi Beverages Limited (ABL) and 27.6% shareholding in Nairobi Bottlers Limited (NBL) from a public East African investment company Centum Investment.
Almasi was the holding company of Kisii Bottlers, Mount Kenya Bottlers based in Nyeri and Rift Valley Bottlers in Uasin Gishu County.
Centum’s total value in the two firms stood at Sh16.8 billion (US$168m) as of March 31, 2019.
Coca-Cola Sabco East Africa paid Centum Sh19.4 billion (US$194m), meaning the investment firm made Sh2.6 billion (US$26m) return on investment.
The move mirrors a consolidation that Coca-Cola has been undertaking globally.