HomeBusiness DigestVarun dares to capture Zim market

Varun dares to capture Zim market

Varun Beverages (Zimbabwe) (Pvt) Ltd Africa director and CE Shankar Krishnan is a man on a mission.

By Chris Muronzi

“It’s not a mission impossible,” he says at his Highlands office in the northern part of Harare.

He says he has been in and out of the country for the better part of the year as Varun readies itself for the launch of its US$30 million Pepsi bottling plant in Q2 2017.

It’s sweltering hot and, as a beverages man, Shankar is upbeat.

He says Varun wants to target a 30-35% market share in five to six years and then compete for 50-50 market share in 10 years.

“In 10 years, we want a 50-50 share of the market,” he says. “We have strong globally recognised brands and this is an achievable target.”

“We are doing quite well. As you may be aware, we are presently importing Pepsi brands from Zambia. This is mainly done to build brand equity as well as to understand and study the flavour preferences of the consumers in the market place prior to our launch in Zimbabwe.”

He concedes a new player’s entry generally triggers some sort of Cola war, but discounts it as a constant feature in their industry.

“Cola war is a permanent feature in this industry. But the war only helps the industry to grow as it happened in Zambia. It creates more employment and increases the revenue to the government and brings in more business for dependent industry like the sugar, packaging, etc. I can see the future is bright in setting up a bottling plant to grow the market,” he said.

He says he is not really worried about the launch. As Varun’s Africa boss, he has presided over three product launches in various markets in Africa.

At Varun’s Zimbabwe office, Shankar leads what he describes as a “dynamic team” of locals.

“Zimbabwe has a rich human resource capital and that helps us a lot to do business here. We do not have to rely on expat resources to come and set up the business as the local resources are qualified and experienced enough to run the operation.”

He says he is clear on his decision to employ local manpower for the plant , thereby creating employment opportunities.
Shankar says his company is planning a grand entry into Zimbabwe, a market dominated by Coca Cola’s United Bottlers.

“We will always try and use all the positive lessons from Zambia and try and replicate the same as the two markets are almost similar. When Varun Beverages entered the Zambian market in 2010, the southern African nation was at 13 million cases per annum carbonated soft drinks beverages market. In a span of 5-6 years the industry size of Zambia grew substantially, thereby adding revenues to the government coffers,” Shankar says.

He says when the world was going through a tough time economically, owing to the global financial crisis in 2008-2009, Varun seized the Zambian opportunity when the chips were down.

“We saw opportunities in the future and not the current crisis,” he says. “The results of our Zambia investments are in front for all to see how it has become one of our flagship plants of Africa.”

Going by the Zambian experience, Shankar feels Zimbabwe has huge upside for the beverage market, adding that is why Varun decided to invest in the country.

“Yes there are challenges to date, but we are confident these are short-term,” he said.

In many respects, Shankar is hoping the Zimbabwe operation will also grow outside beverages.

This resonates with his principal’s dream.

Shankar’s boss, Ravi Jaipuria, an Indian billionaire, sees huge untapped opportunities in the country’s dairy sector given Zimbabwe is importing milk from South Africa.

Jaipuria told the Zimbabwe Independent in August that the bottling plant was a precursor to great things to come.

“I think there is huge scope and huge potential in this country which is still untapped. Looking at the potential, I think it’s risk I am willing to take. The few Zimbabwean people we have hired, we have found them to be very smart and hardworking,” he said then.

Back home, it seems United Bottlers and Varun have new competitors to worry about — illegal smugglers of their products — whose only major overhead is transportation.

The smugglers are discounting the United Bottlers products — Coke, Fanta and many other popular brands — by as much as 33%.

A two-litre Coke manufactured in Mozambique is selling at US$1,50 on the street.

Varun has not been spared as well. The same product retails at around US$2,25 official.

Some of its products are selling at heavily discounted prices in some retail outlets.

For instance, a two-litre 7Up is going for US$1,60. The same product retails at US$2,25.

“These are stocks from the neighbouring country brought illegally into Zimbabwe by unscrupulous traders. It’s mostly a problem around border towns,” Shankar said. “I wouldn’t say they are big competition, but if it’s not dealt with it can be problematic.”

Asked if consumers expected more promotions and better value for money, Shankar said: “As a company, we have yearly calendars to run consumer promotions. This is kept under wraps as it is generally announced on the day of the launch of the promotions.”

Varun’s competitors, Delta Beverages, the parent company of United Bottlers, last week announced The Coca-Cola Company (TCCC) had notified the company of its intention to terminate the Bottlers’ Agreements with the company and its associate Schweppes Holdings Africa Limited.

The planned termination will hit Zimbabwe’s largest listed firm quite hard, given a third of its income is derived from the operation.

TCCC is the world’s largest beverage company, with more than 450 sparkling and still brands. The global company, which has market capitalisation upwards US$180 billion, has a Bottlers’ Agreement with Delta for 12 brands, which include popular products such as Coke, Diet Coke, Fanta, Sprite, Coke Zero, Powerade, among others.

“Further to the statement issued to stakeholders on 6th October 2016 relating to the combination of Anheuser-Busch InBev NV/SA (AB InBev) and SABMiller Plc, the Company has since been notified by The Coca-Cola Company of its intention to terminate the Bottlers’ Agreements with Delta Beverages and its associate Schweppes Holdings Africa Limited (Notifed Intention),” the company said in a cautionary.

The intention to terminate the agreement has been given on account of AB InBev becoming an indirect shareholder in Delta Corporation Limited following the combination of AB InBev and SABMiller Plc.

But people in the know say TCCC will not risk losing market share in Zimbabwe especially now when its competitor is going ahead with plans to set up a US$30 million bottling plant.

Varun has operations in Zambia, Kenya, Uganda, Mozambique, Morocco and Nigeria. Jaipuria, India’s cola king and PepsiCo’s second-biggest bottler, said he is also looking at investing in sectors he is already invested such as hotels and health, but said this was not going to be an immediate move.

Jaipuria was ranked 1 121 on the list of world billionaires and 50 in India by Forbes magazine in 2016. He diversified to ice cream (Cream Bell) in 1988-89, brought PepsiCo’s fast food chain, Pizza Hut, and KFC, into India in 1996, entered education in 2001, real estate in 2002-03, Costa Coffee in 2005.

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