Jul 10, 2008
Business - Index of Happiness
NAIROBI From The Economist print edition
A bottle of Coke tracks change in Africa
AFRICANS buy 36 billion bottles of Coke a year. Because the price is set so low—around 20-30 American cents, less than the price of the average newspaper—and because sales are so minutely analysed by Coca-Cola, the Coke bottle may be one of the continent’s best trackers of stability and prosperity.
“We see political instability first because we go down as far as we can into the market,” says Alexander Cummings, head of Coca-Cola’s Africa division. The ups and downs during Kenya’s post-election violence this year could be traced in sales of Coke in Nairobi’s slums and in western Kenya’s villages. Events in the Middle East, such as the 2006 war between Hizbullah and Israel, can dent sales in Muslim parts of Africa, though anti-American feeling usually wears off quite quickly.
Coca-Cola says it is the largest private-sector employer in Africa. Its system of distribution, which moves the sugary drink from bottling plants deep into slums and the bush a few crates at a time, may employ around 1m Africans. A study at the University of South Carolina suggested that 1% of South Africa’s economy was tied up, one way or another, in the distribution and sale of Coke. The company has been in Africa since 1928. Its outgoing global boss, Neville Isdell, grew up—barefoot, he says—in Zambia. Mr Cummings is from Liberia. In Africa, as elsewhere, the company has to defend itself from critics who accuse it of “mining water” for production, encouraging expensive and environmentally harmful refrigeration, and hurting local producers of juice and water.
At a macro-level, when Coke fails, the country whose market it is trying to penetrate usually fails too. Coca-Cola’s bottling plant in Eritrea hardly works because the country’s totalitarian government makes it impossible to import the needed syrup. The factory in Somalia sputtered on heroically during years of fighting but finally gave out when its sugar was pinched by pirates and its workers were held up by gunmen. Mr Cummings admits that Coca-Cola is “on life support” in Zimbabwe.
Still, if Coca-Cola’s predictions are anything to go by, Africa’s future is mostly bright. The company expects sales in Africa to grow by an annual 10-13% over the next few years, handily outstripping economic growth. The biggest markets will be in petro-economies such as Nigeria and Angola, and countries like Ghana and Kenya where a middle class is emerging. Kenya’s citizens may like to know that, despite their country’s many troubles earlier this year, Coca-Cola has invested $50m in a new bottling plant and $10m in new offices.
Posted by SZri at 7:15 PM