Coca-cola Forced To Allow Rival Firms Use Its Branded Fridges

In a deal worth Sh10.7 billion, Coca-Cola has escaped penalties for breaching a regulatory condition that allowed rival firms to use its branded fridges. The Competition Authority of Kenya (CAK) had warned Coca-Cola Sabco East Africa, which is 66.5% owned by the US soda giant, to comply with the agreement by September 2021, or face punishment. Failure to comply with a regulatory condition can result in a fine of up to Sh10 million, revocation of the deal, or imprisonment.

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CAK approved Coca-Cola Sabco East Africa’s acquisition of a 53.95% stake in Almasi Beverages from Centum Investment in 2019, subject to six conditions. Among these conditions, Coca-Cola was required to reserve at least 20% of its cooling refrigerator space for small and medium-sized enterprises (SMEs) to stock brands from rival firms.

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According to the CAK, small retailers lack financial power and space limitations, and thus require protection. Small retailers account for 69% of traders with Coca-Cola-branded coolers. The other conditions were that Coca-Cola retains all employees under Almasi and continues operations of the plants in Nyeri, Eldoret, Nairobi, Molo, and Kisumu for at least three years after the deal’s conclusion.

Coca-Cola’s case was among the 17 mergers and acquisitions that CAK monitored to ensure compliance with conditions attached to the transactions. Coca-Cola complied with the order after the June 2022 reporting period, saving the firm from regulatory action.

Centum’s sale of a 53.9% stake in Almasi was concluded alongside two other deals as the firm sought to raise money to settle a dollar-denominated bank loan of Sh7.5 billion. The deals included the sale of a 27.6% shareholding in Nairobi Bottlers Limited to Coca-Cola Sabco at Sh8.8 billion and the sale of a 100% stake in King Beverage Limited for Sh100 million. The three deals saw Centum receive Sh19.4 billion, compared to the historical total cost of Sh3.6 billion.

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Centum intends to invest between Sh10 billion and Sh15 billion of the cash over five years, mainly in sectors with high returns. The eight sectors that Centum has been interested in are financial services, consumer, agriculture, education, healthcare, IT, power, and the automotive sector.