Coca-Cola HBC expands in Africa with bottling M&A

Coca-Cola HBC is to buy a majority stake in Coca-Cola Beverages Africa, a deal set to create the world’s second-largest Coke bottler.

The UK-listed group has struck a deal to buy a combined 75% of Coca-Cola Beverages Africa (CCBA) from The Coca-Cola Company and Gutsche Family Investments for $2.6bn.

Coca-Cola HBC said the acquisition would “materially expand” its presence in Africa. The company has operations in Egypt and Nigeria. The deal will see Coca-Cola HBC enter 14 more markets in Africa, including Ethiopia, Kenya and South Africa, Just Drinks reports.

Coca-Cola HBC plans to pursue a secondary listing on the Johannesburg Stock Exchange.

“We have a deep understanding of the compelling proposition Africa presents. It has a sizable and growing consumer base and there are significant opportunities to increase per capita consumption,” Coca-Cola HBC chief executive Zoran Bogdanovic said.

Combined, the companies would have generated pro-forma revenues of €14.1bn ($16.39bn) and EBIT of €1.4bn in 2024. The businesses together would account for two-thirds of the volumes put through the Coca-Cola system in Africa.

Coca-Cola HBC said the businesses are “targeting” the transaction being finalised “by the end of 2026, subject to approvals”.

The transaction is “expected to be low-single digit EPS accretive” from the first full year after the deal is completed, the company added.

The remaining 25% of CCBA is subject to an option agreement between Coca-Cola HBC and The Coca-Cola Company.

Under the terms of the deal, Coca-Cola HBC can purchase, or The Coca-Cola Company can sell, the stake within six years of the transaction being finalised.

“Like Coca-Cola HBC, we see tremendous opportunity for growth and value creation in Africa,” The Coca-Cola Company COO Henrique Braun said.

Bernstein analyst Nadine Sarwat said there is a “meaningful total addressable market” for non-alcoholic RTDs in CCBA’s group of African markets. She pointed to the circa 493 million people living in the 14 countries and added: “In 2023, CCBA markets consumed 11bn litres of carbonates versus 27bn litres for CCH’s current markets. This shows the relatively low per-capita consumption of carbonates in these countries today.”

Alongside the deal, Coca-Cola HBC issued a trading update for the third quarter of the year. Revenues rose 5% on an organic basis, with volumes 1.1% higher.

Bogdanovic said: “Our continued progress is reflected in another solid quarter, leading to organic revenue growth of 8.1% over the first nine months of the year. This performance highlights the strength of our portfolio and our ability to drive growth in volume, revenue-per-case and market share, even in mixed markets.”

Volumes and net sales missed analyst expectations, Sarwat added: “This was largely driven by established and emerging markets, with management calling out a mixed market environment and less favourable weather.”