Coca-Cola and Aujan – the Day after the Day Before…

After yesterday’s excitement I thought I would provide my take on the impending Aujan/Coca-Cola marriage. The big question in the industry of course is – so what does this mean for us? So, let me give you my view on the matter.

Firstly and foremostly I strongly believe that Aujan will continue to be run as a separate enterprise for the foreseeable future. It will after all be an acquisition of a 50% stake, not a full take-over. Not only will Coca-Cola acquire a stake in the brands, but in the bottling and distribution facilities. What Coca-Cola will buy is success – excellence in branding, product development, technical expertise and, last but certainly not least, a unique approach to keeping distribution in-house that provided huge growth rates to Aujan brands over the last few years. There will be a few countries where a tie-up may be looked at, but by and large I expect that Coca-Cola will sit back and watch success to continue rather than change things for change’s sake. But of course there is a great opportunity for Aujan to tap into distribution structures that Coca-Cola has in markets in the wider region where Aujan may not be particularly present – Africa of course comes to mind. And do not forget VIMTO that Aujan fills under licence of Nichols – it is the affiliation with VIMTO early in the 20th Century that gave birth to the Aujan family’s aspirations in the beverage field, and strong traditions always achieve high esteem in a Saudi company. There is little chance in my opinion that Aujan will break its association with this highly emotive, Ramadan-centred brand.

Part of the proceeds of the acquisition will no doubt be ploughed back into further investment in Aujan’s filling capacities. Aujan’s chairman Adel Aujan has already gone on record to confirm that two additional facilities are being planned – one in Iraq, and one in North Africa (with Egypt probably being the most obvious country to place that in). So this will widen Aujan’s factory network to five, together with the existing facilities in Dammam, Dubai and the one in Iran that was excluded from the deal.  And Iraq is an obvious choice – it is already among Aujan’s top three markets, just through exports. Egypt and Libya have been growth areas for Aujan fairly recently. Just imagine what they can do with structures on the ground, especially given Aujan’s successful penchant for taking charge of distribution themselves…. Aujan have long stated that their development was not inhibited by markets, but by their own plants’ capacities. So, might there even be a chance for Aujan’s products in the future to be filled at existing Coca-Cola plants? Well, you never know….

An area where obvious opportunities lie is of course economies of scale in purchasing – raw material (especially concentrate and sugar, bought on the global market,  and perhaps even packaging material which is more regional), distribution vehicles or advertising space are just some examples where the tie-up should have huge benefits in terms of sheer purchasing power. So suppliers, watch out – there will be strong arguments coming your way no doubt….

Will they re-brand? Hm – it would be foolish, frankly, to migrate success stories such as RANI and BARBICAN to different brands in the drive for globalisation. Attaching a small Coca-Cola logo to the RANI can of course work in their favour – but do not forget that political incidents in the past have had an impact on Coca-Cola in the region so perhaps the two compaines will pick-and-choose for which markets they will make the alliance more or less obvious. Will global Coca-Cola brands be produced at Aujan, in addition to Aujan brands? Well, perhaps – after all, between the two plants that are part of the deal the company already has aseptic carton, glass bottling, ambient PET bottling and of course canning capabilities so there is little to stop Coca-Cola from developing brands that have started to appear elsewhere in the region – MINUTE MAID and CAPPY come to mind.

Across the region Pepsi still dominates in total beverage sales, and there are only few countries where Coca-Cola dominates in carbonated soft drinks. But with this deal a new reality will emerge – Coca-Cola all of a sudden will be in the Top 3 in most countries in JNSD products and malt beverages, certainly well ahead of Pepsi in those sectors. So the heat is on….

I  have neglected this blog a little in recent months, and this will be the last posting for this year. So let me please send you Season’s Greetings, and my very best to all of you for what will undoubtedly prove to be another unpredictable, challenging, difficult but never boring year. Best of success to all of you for 2012.

Thorsten

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