Coca-Cola Company has purchased 40% stake in Nigeria-based juice maker Chi, a subsidiary of Tropical General Investments Group (TGI Group), for $240m cash.
Through this agreement, the companies intend to create a strategic partnership in the African country to offer sparkling soft drinks, value-added dairy, juices, and water beverage brands in the region.
Coca-Cola intends to take complete ownership of Chi over the next three years, subject to regulatory approvals.
Meanwhile, the US-based drinks giant will also work out long-term commercial aspects.
The companies have also agreed to seek other opportunities to strengthen their association further.
The 40% stake in Nigeria's value-added dairy and juice beverage brands such as Hollandia and Chivita has been made to build Coca-Cola's West African portfolio of still beverages. The move will strengthen Coca-Cola's presence in African fast growing value-added dairy segment.
With the deal, both the companies will leverage their respective investments, technical know-how to achieve operational efficiency and bolster route-to-market in order to quicken growth process and expand consumer choice and reach.
Through this strategic alliance, Chi will also gain access to Coca-Cola's production, distribution and brand-building activities.
TGI owner and chairman Cornelis Vink said that the company would continue to invest in new production facilities and manufacture of new products, reported The Financial Times.
Coca-Cola Eurasia and Africa president Nathan Kalumbu said: "For more than 30 years Chi's leadership has built a greatly admired business that has quickly grown to become Nigeria's leading producer and distributor of value-added dairy and juice products and we are delighted to enter the next phase of our growth journey together.
"Coca-Cola and Chi share the same commitment to Africa, to investing in our operations and to continuous innovation, and our relationship will allow us to continue to provide Nigerian consumers the No. 1 beverage in each of the categories we serve."
Coca-Cola Central, East and West Africa president Kelvin Balogun said: "Coca-Cola has been investing in Nigeria for more than 60 years and today's announcement represents the latest significant step in our commitment to growing our business and providing trusted beverage brands for Nigerian consumers and communities.
"We are extremely optimistic about Africa's continued economic and social growth and recognize the importance of ensuring we stay one step ahead of evolving consumer tastes by broadening our portfolio and introducing new products. Today's announcement positions both Coca-Cola and Chi well for future growth in what is an exciting time in the beverage industry in Africa."
Chi, a maker of fruit juices, nectar drinks and drinking yogurt, said that it is exploring local sourcing to reduce its reliance on imports, which has become a need of the hour considering the drastic fall of oil prices which has led the Nigerian government to restrict foreign exchange access to businesses that depend on imported raw materials, the publication reported.
In 2014, Coca-Cola had increased its investments in West Africa to $17bn for the period 2010-2020. The investment, which is triple the amount the company invested in the region in the previous decade, is intended to fund new production lines, distribution capacities, and cold drink machinery, along with new job opportunities across the continent.
The stake acquisition also comes at a time when Coca-Cola is batting falling sales in developed markets that contributes up to 70% of its overall turnover. However, soda continues to remain popular in Sub-Saharan Africa and hence the move is considered as a natural step forward, reported The Financial Times.
