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Beerworkers Archive


Post date: 11/26/2014 - 18:31

Can Coca-Cola fuel SABMiller's soft drinks story?

In a meeting with journalists earlier this month, SABMiller CEO Alan Clark happily chatted about his soft drinks plans.

The company may be better known for its brewing footprint, but non-alcoholic beverages are playing an increasingly important part in its portfolio, and Clark was quick to highlight opportunities in Africa and South America.

Today, analysts at Bernstein have marked out a few areas where Clark could further expand SABMiller's soft drinks empire, if the firm was willing to whip out the cheque book.

In a meeting with journalists earlier this month, SABMiller CEO Alan Clark happily chatted about his soft drinks plans.

The company may be better known for its brewing footprint, but non-alcoholic beverages are playing an increasingly important part in its portfolio, and Clark was quick to highlight opportunities in Africa and South America.

Today, analysts at Bernstein have marked out a few areas where Clark could further expand SABMiller's soft drinks empire, if the firm was willing to whip out the cheque book.

According to Bernstein, Clark's first port of call should be Africa. SABCO is South Africa's second-largest bottler, but it has a footprint in a number of countries where SABMiller already operates. Mozambique, Namibia, Tanzania and Uganda are all part of SABCO's operations and “would offer significant synergies if integrated with SABMiller's existing beer businesses”, Bernstein says. The analysts estimate a price tag of about US$3bn, a number SABMiller could absorb four to five years after any deal.

Another name on the list is The Equatorial Coca-Cola Bottling Co, which operates across west and north Africa. According to Bernstein, the company is a leader in many of its markets, though admits that some, such as Sierra Leone and Liberia, make for challenging environments.

The analysts run through a couple of other permeations, including Coca-Cola HBC's Nigeria operations (unlikely to be hived off, is the conclusion) but, in summary, all potential targets are just speculation at this point in time.

What is interesting, however, is the reason that this speculation is bubbling now. Alongside Clark's new embrace of SABMiller's soft drinks portfolio (which now accounts for 20% of the company's volumes) is, according to Bernstein, a thawing in the Coca-Cola Co's attitude to beer.

SABMiller has worked alongside Coca-Cola for a number of years now, but for several of them it was an “uneasy” relationship, Bernstein says. Recently, however, Coca-Cola CEO Muhtar Kent has become more “pragmatic” about mixing beer and soft drinks, which could presage an even closer relationship between the two firms.

And, with Coca-Cola under pressure from investors over diminishing sales and profits, could further tie-ups with beer companies offer management a better return? If so, SABMiller is well placed to take advantage of the Atlanta-headquartered company's new direction.