Coca-Cola audit poser for soda drink bottlers

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Delta, the largest company on the ZSE by market capitalisation, last month recorded a 12% decline in annual profit.

BOTTLING firms of the Coca-Cola Company (TCCC) range of soda drinks have suspended a vital marketing audit process in Zimbabwe owing to scarce foreign currency required to import key commodities needed for manufacturing the beverages, businessdigest can reveal.

By Tinashe Kairiza

The direct implication is that the TCCC may now review its business relationship with local bottlers.

The global beverages manufacturer conceptualised the marketing audit exercise, known as the Right Execution Daily (RED) audit, to track and monitor how its flagship products, particularly Coke, are performing in the over 200 markets the firm has established presence across the world.

In Zimbabwe, Coke and its other range of soda drinks manufactured by TCCC are bottled by Delta Corporation, Mutare Bottling Company and Schweppes Zimbabwe through a franchise arrangement with the conglomerate. Delta is the largest Coke bottling firm in the country by volume and market share.

However, owing to the acute shortage of foreign currency the southern African country is experiencing, local bottling firms, particularly Delta, have been struggling to import key ingredients such as carbon dioxide, preservatives and probiotic bacteria needed to manufacture soda drinks under TCCC’s stable.

In January, Delta told the Zimbabwe Independent that the brewer faced the gloomy prospect of shutting down its operations in the country, owing to an unrelenting foreign currency shortage which became more pronounced at the start of this year. The company contemplated closing its soft drinks business unit in December last year, amid widespread shortages of the product on the market.
“The engagements with the stakeholders resulted in sharing the perspectives of the impact of selling exclusively in one of the currencies in the basket of currencies in the multi-currency framework. The company did not arrive at this decision lightly,” company secretary Alex Makamure said in January. “To illustrate this, the soft drinks business was virtually closed in December, the other businesses were expected to stop trading by mid to end of January as we were fast running out of certain ingredients. There were two clear alternatives: to run down the remaining stocks and shutdown …”

A source told businessdigest this week that external audit firms contracted by the local bottling firms to monitor and assess the performance of the company’s soda drinks on the Zimbabwean market had called off the auditing exercise because the bottlers “had either stopped producing the products or were insignificantly producing”.

“Coca-Cola Company has a programme which they call Right Execution Daily (RED). Basically, the programme is tailored to track how the bottlers of Coke are performing in terms of distributing the product in the market. This entails ensuring that there are posters and adverts in various outlets that sell those soda drinks, among other reasons.

“So we have Delta Harare and Bulawayo, Mutare Bottling and Schweppes Zimbabwe who are not adequately producing to meet demand as a result of foreign currency challenges. This explains the suspension of the RED audit in Zimbabwe,” a source privy to the audit process said.
Makamure said the RED audit process was a sensitive internal process that could not be discussed.

“These are internal evaluation processes that honestly one cannot discuss. Who in the market knows what RED is? With respect to production, our factories are now running. This is supported by sales in US dollars as the forex from inter-bank market is very limited .We only got a bit in the first week,” Makamure said.

Delta requires at least US$5 million monthly to sustain its operations, with US$2 million being channelled towards keeping the soda drinks business unit afloat. However, hard currency allocations from the Reserve Bank of Zimbabwe (RBZ) have been limited to meet the company’s requirements.

At the time of going to print, TCCC had not yet responded to an e-mail sent to the firm’s board of directors.
Coca-Cola Central Africa country manager Noma Halimani would neither confirm nor deny that local bottling firms were not undertaking the RED audit routine.

“Please be advised that RED audit is done by our respective bottling partners. I have looped in the commercial leads from Delta and Schweppes Zimbabwe to assist with the questions you have requested below,” Halimani said.

Sources in the beverages manufacturing industry said Delta suspended the RED audit last year in September while Mutare Bottling stopped in January this year, as hard currency shortages became more pronounced.

The three bottling firms have injected millions of dollars in the business, with Mutare Bottling and Delta having commissioned new returnable glass bottle lines in recent years. Delta has also launched two PET (polyethylene terephthalate) lines. In addition, Schweppes Zimbabwe has invested in a new hot fill line and a Minute Maid Pulpy Orange production line.

However, production of the Coca-Cola range of products has slumped in recent years, as the bottling firms struggle to mobilise the hard currency needed to import core raw materials.

In 2017, TCCC issued a notice of intention to terminate the bottler agreements with Delta and its associate, Schweppes Zimbabwe Limited, after global beverages giant Anheusur-Busch-Inbev snapped a key stake in the local company.

Anheusur-Busch InBev SA/NV is the major bottling firm of Pepsi soda drink, a direct rival of Coke.

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