You Cannot

You Cannot Afford Not to Invest in Ethiopia

Amanyehun R. SisayFebruary 17, 2013241052

When the Ethiopian economy was hit by a foreign currency crunch in 2009, the East African Bottling Share Company, which bottles Coca Cola in Ethiopia, was forced to stop production. The Company was unable to import raw materials because opening a letter of credit (LC) was a challenge at the time. This led to the closure of its plant in March 2009. Production resumed when the Commercial Bank of Ethiopia allowed the bottler to open a 1.8 million dollar LC. Four years later, the Ethiopian Economy is experiencing the same bottleneck. However, this time around, the Company seems prepared for the storm. It has received a 25 million dollar transfer from its shareholders abroad so that history will not repeat itself. Mr. Greig Jansen, Managing Director of the Company talks with Amanyehun R. Sisay, Executive Editor of Ethiopian Business Review about the situation and what is in store for Coca Cola, Excerpts:

EBR: In March 2009, you closed the Coca Cola Plant citing foreign currency shortage as a problem; four years later, the Ethiopian economy is experiencing the same problem. Are you going to shut down this time?
Mr. Greig: Hopefully not; shareholders are injecting lots of money into our company. We are currently funding our operations through shareholders’ funds. So we don’t foresee closing at this time, but foreign currency is critical to our operation.
You have recently received a 25 million dollar transfer from abroad through Zemen Bank; what is it for?
It is predominantly for expansion; we are doing this to make sure that our expansion projects are completed on their schedule so that we can come up with new products on time.

Is the East African Bottling Share Company increasing its capital or in what form is the money coming? 

Our shareholders are loaning to the company.

You are brining this much amount of money to the country; how much is going out to shareholders in the form of dividend? 

If I tell you how much it is, you will probably laugh; this year, it was just two million dollars and we are bringing in half a billion dollar into the country. Our shareholders believe in Ethiopia. We believe this is really a country to invest in.

Your expansion projects in this campus [Lideta District] that had been planned to be finalized in October 2012, have not been finished yet; what happened?

We are currently five months behind schedule; that is basically due to the foreign currency constraints in the country. This is the reason why we brought our money in from our sister companies.

In your plan 2020, which you launched a year ago, you have indicated that you would inject half a billion dollar into the Ethiopian Economy; how much of that has been injected so far?

In 2012, we have brought in 60 million dollar. We will continue to bring more finance to keep our expansion projects going. At the moment, we are 100 pct on track with our projects, except the five month delay on the expansion in this campus. So, as long as the economy continues to grow, we will continue to invest more and more from the allocated budget.

When you reach your goals how will Ethiopia benefit? 

Lastyear, we paid 700 million birr in tax; when our expanssion projects are finalized, production will increase five times and that means the tax will go up at the same rate. We have commissioned a study that says close to one million people make a living by distributing and selling Coca Cola. So if we increase production five times, then that number will also increase from 250 to 500 pct.

Coca Cola is a symbol of free market economy; so a lot of companies are coming to Ethiopia taking Coca Cola as an index. They say, if Coca Cola is this much keen on Ethiopia, then we should be there too. They say there must be something happening in Ethiopia that we need to go and see. Where we intend to invest, there are other international companies coming in.

Can you mention some companies that come to you for consultation?

Most international companies come and talk to us to understand the business climate in Ethiopia.

Coca Cola Sabco has plants in 10 African countries. Ethiopia is the biggest in terms of population, which is indicative of its market size. But you have only two plants in Ethiopia while, for instance, you have five plants in South Africa. The human resources you have there is also close to 4,000 but you have only 1500 in Ethiopia. How will this change with your investment at the moment? 

In the plan 2020, Ethiopia is the biggest company in our portfolio. We are building three production facilities, in North, South and West. The North is definitely Bahirdar. Hawassa is also a strong consideration for the plant in the South. We will also have another plant in the West. We are increasing production by five times. So when the expansion is completed, it will make Ethiopia Coca Cola Sabco’s biggest market in the continent.

Why are you so much interested in Ethiopia?

Whichever statistic you take, there are between 80-90 million people in Ethiopia and it is still growing fast. If you look at the growth of the economy, it is one of the fastest growing economies in the world. If you look at the money the government is spending on infrastructure, it is fantastic; more than any other country in the world and certainly the leader in Africa. If you look at the road networks, if you look at electricity, if you look at the banking sector, if you just look across all segments of government spending in the economy, there is improvement which is far more aggressive than what is happening in the rest of Africa.

So if you are going to be investing in Africa you cannot afford to not be investing in Ethiopia, because this is the country that is going to absolutely lead the growth of Africa. It is already the third fastest growing economy in the world. It is a very safe and stable country. Its location is ideal and the government is very interested in export. So Ethiopia is a great country to invest in.

So you have millions of reason to believe in Ethiopia.

Actually one billion reasons to believe in Africa; look at the rest of the world! Look at Europe, what’s happening to their economy? If you look at America, the Country is just doing a bit better but not great. However, look to Africa! you have a different story. Africa is vibrant, Africa is alive, Africa is happening, Africa is a place to be, and we believe that Ethiopia is the center of Africa, so we need to be here.

The human resources manager at your company is Ethiopian but all other managers are foreigners; do you plan to Ethiopianize the management anytime soon?

All experts at our company have written in their contract that they need a successor. The challenge we have is, we train successors and when that happens they are often recruited by other companies. Our intention is to localize in every country we are in.

Why are they leaving? Is it because you don’t pay a competitive salary? 

When they get the chance to work abroad they take that opportunity. I would say 80 pct of the people whom we train leave the company to go abroad and the rest because they are approached by other international companies coming into the country. So this is a challenge for us. It is a challenge when the country’s trained people prefer to live abroad. But we cannot stop that; we believe in developing Ethiopia. We believe in building a talent in this country. That is why we are building a technical training center at the moment. We are also planning to open the Coca Cola University. We also work with all local universities to train their students in skills that would be beneficial to our company.

A Coca Cola University? Tell more me about it.

Yes, we are at the moment working with the top universities in the country, to understand what curriculum they offer. So we want to make sure the training will lead to a qualification that will be recognized and certified by the government. The training will be in the areas of marketing, logistics management, and other disciplines that are relevant to our company.

The Coca Cola University is not unique to Ethiopia; we have already opened one in Atlanta. This is a companywide initiative. The location of the University will be in Addis Ababa, behind our Plant. The University will take top students from high schools. The construction of the University will start next year.

The CEO leading this company before you, had won the best CEO award of the year among the 10 countries that Coca Cola Sabco ran in Africa in 2008; what have you achieved since you took the leadership in 2009?

Since I have been here, Ethiopia has become the most improved country in 2009 and 2011. That is far more than the CEO’s award. It is not only me; it is the team in Ethiopia which made this happen. We do it as a family.

Before coming to Coca Cola, you were in the horticulture industry, then in the food industry; how challenging has the experience been here at Coca Cola?

Business is business. Business principles apply all around the globe. But the environment differs. I have been working in the East, Far East and in the United States. In Ethiopia, the dynamics are different. The key is to stick to solid principles. You need to make sure that you have the right connections. You need to make sure that you look after your people [employees]; because at the end of the day you can’t do anything on your own. You will only be successful when the people around you are successful.

In 2008 the production capacity of Coca Cola was about 10 million cases; how has that increased today and where will it be in the future?

It used to be four million in 2004; then 10 million in 2008. Now we are at 30 million and in April 2013 we will reach 50 million cases per annum.

Is the demand growing this much?

Yeah, the market is there; but there are big players coming in, the market is for sure changing.

The market is already there, the demand is there, but Coca Cola still promotes aggressively, any reason?

It is quite a simple philosophy; everyone argues that Coca Cola doesn’t need to advertise because it’s already the number one brand on the globe. I disagree with that. To continuously be on top of your game, you need to promote. When you are on top of the game, you need to be very careful. You really need to make sure that you solidify your position. It is the same as the saying that the tallest tree needs the most water. So, as the tallest tree, you really have to make sure that your roots are the deepest ones all the time.

The worst thing that can happen to a company, especially to a marketing company which we are, is that you get comfortable with your position. The only way to stay on top is to never be satisfied and continue to be number one.

You have recently started Fanta Strawberry; how is it going?

It is going well. We will launch it in the next two months. There are over 300 Fanta flavors in the Globe and what we are brining is the original orange taste. We will continue to bring new tastes.

Ambo Mineral Water has recently started producing soft drinks; so how is the competition?

Competition is always good for everyone, and who benefits most out of this competition is always the customers. So with our new facilities to be finalized in the near future, we are going to produce water, sparkling water, juices and many more. Competition is healthy, because it always reminds you to be cost conscious.

What kind of Juices are you going to produce?

We will produce juices already in the market; remember that Rani Juice is owned globally by Coca Cola; so we may start to produce that here.

When are you going to release the new products?

The plastic bottle will start in April 2013; Coke will be in plastic bottles. We will be launching juices, water, and sparkling water by then.

A year ago, a local newspaper reported that your market share is 48pct; has that changed?

An independent study we commissioned says, we have above 54pct market share. Coca Cola is, at the moment, the market leader.

Some local chemical suppliers claim that they have not been allowed to supply raw materials to your company; can you elaborate on the issue?

That is not the case; we are a company that generates most of our revenue in local currencies. So we prefer as much as possible to pay in birr not in dollars. The issue we face is, many companies don’t have the capacity to continuously supply the products we need. We can’t have interruptions in our supplies of raw materials. We need constant supplies. But we always look for local suppliers that can guarantee us consistency. We only go abroad for quality and consistent supplies. However, that doesn’t suit us because that requires us to pay in dollars.

Let’s talk about corporate social responsibilities that Coca Cola has been undertaking; are we going to see changes?

Actually not, our past trend is absolutely fantastic; I just don’t think we have spoken enough about it. But corporate social responsibilities are something that we believe goes hand in hand with doing business. The one cannot exist without the other.

Do you have particular projects along the line?

We are building two schools, one in Addis Ababa and one in Dire Dawa. We have also a massive project called “far by twenty”, which is about empowering woman. Currently there are 5 million women in the system globally. By the year 2020, we plan to empower 5 million more women in the system.

How much is the share for Ethiopia in these initiatives?

Next year we will empower 20,000 Ethiopians, through job creation or training.

Is Coca Cola working to be greener?

Yeah, by 2020 we will be water neutral. This means, for every liter of water we take out from the earth, we will put one liter back. We have a best practice in waste water treatment in Ethiopia. We have spent 2.2 million dollars for the plant in Addis Ababa and 3.3 million for Dire Dawa.

By 2020, we will also be energy neutral, by then we will not be pulling power off the grid. We will be totally self sufficient on power. We are also involved in cleaning up rivers, recycling products, replanting river banks with grass to make sure erosion stops, so it’s an all-round effort of looking after the environment.

Is there anything else you would like to add? 

From my side, I would just like to say that we are extremely grateful to our customers and our consumers for drinking our product. We will continue to bring new exciting flavors and initiatives into this market. As you know we are the sponsor for the World Cup, and the Olympics, so be on the lookout for those fantastic competitions that will be out there.

We will be sending people to Brazil for the World Cup and to the Olympic Games from Ethiopia. We believe in this country.  We believe that this country is the growth vector for our business, and we are certainly backing it up by investing strongly in Ethiopia.

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