$30m boost for Zimbabwe PepsiCo

Bottles of Pepsi cola are seen in a display at PepsiCo's 2010 Investor Meeting event in New York, March 22, 2010. REUTERS/Mike Segar/Files

Indian billionaire Ravi Jaipuria is investing $30 million in the construction of a PepsiCo plant in Zimbabwe in what is the single largest investment in the country’s manufacturing sector since independence in 1980.

By Barnabas Thondhlana

However, although the ground-breaking ceremony for the construction took place last November, no progress has yet been made due to bureaucratic red tape.

Jaipuria, one of India’s wealthiest people with a net worth estimated by Forbes magazine of $1.67 billion, has had to visit the country twice since then to sort out the problems.

Zimbabwean businessman Adam Molai, who is married to President Robert Mugabe’s niece Sandra, is the indigenisation partner for the new bottling plant, a joint venture with Jaipuria’s Varun Beverages Limited.

Molai has been given a 15 percent stake in the business, with the option to increase his shareholding “over time”.

Previously set for completion before the end of the year, the plant might now not be finished by December owing to delays by the City of Harare, which has to give the project the green light. It is now expected to be completed in the first quarter of next year.

“We have taken a stance to invest in Zimbabwe, and my team and I are prepared for the perceived risk factors associated with investing in the country because we see more positives than negatives,” Jaipuria said.

Molai confirmed the project had been stifled by red tape and bureaucratic bungling, which authorities were trying to resolve.

“The regional chief executive is here to run with the project and to make sure that we implement it as quickly as possible,” he said.

The regional chief executive is Krishnar Shankar, who leads the southern African operation.

Shankar helped set up plants in Zambia and Mozambique and was present at the ground-breaking ceremony in November. The event was also attended by government officials, including Industry and Commerce Minister Mike Bimha and Finance Minister Patrick Chinamasa.

On completion, the PepsiCo plant is projected to create at least 3 000 jobs. It will become the single largest competitor to beverages conglomerate Delta Corporation Limited, whose fortunes have been affected by a liquidity crunch that has combined with increasing joblessness to erode disposable income and consequently sales.

By publicly announcing plans to set up the Pepsi bottling plant in the capital, a competition powder keg in Zimbabwe’s beverages sector could have been ignited.

Consumers have already seen competitively priced Pepsi products on retail shelves and among street vendors.

In a market dominated by Delta Beverages, the appearance of Pepsi on the scene has undoubtedly caused a bit of discomfort for Delta.

Owing to the emergence of Pepsi, which retails at $0.50 per 330ml can, Delta had to go back to the drawing board with its pricing.

A whopping 40 percent markdown on the price of the United Bottler’s products – Coke, Fanta and Sparletta – has delighted consumers. Before the appearance of Pepsi and Twizza, Delta had kept prices at a premium, perhaps taking comfort in the fact that it had a virtual monopoly.

Naturally, United Bottlers, Coca Cola’s licensed bottlers in Zimbabwe, are watching the developments with keen interest.

While the rivalry between Coca-Cola and Pepsi is legendary, with the two companies splashing millions on advertising in a bid to win market share, nothing would worry Delta more than the appearance of an entrepreneur like Molai riding on a global brand like Pepsi.

Molai’s little-known Savannah Tobacco has given another global conglomerate, British American Tobacco Zimbabwe (Batz), a run for its money.

Molai, who can be likened to the biblical David in terms of stature in the tobacco industry, has seemingly taken on the Goliath of the market. What started out as a tobacco threshing plant 10 years ago has become a cigarette manufacturing company that global giant British American Tobacco (BAT) is worried about.

Today the company produces a selection of competitive cigarette brands such as Pacific Storm, which is popular with smokers, and rivals BAT’s premier brand, Madison. It produces between 35 000 and 40 000 master cartons.

If what Molai has achieved at Savanna Tobacco is going to be replicated at Varun, then the battle lines have been drawn for a season of Cola Wars.

Jaipuria said the $30m investment in Zimbabwe was small, to the extent that it would not ruin the company in the event that things did not go according to plan.

“I am very bullish about Africa and I see huge potential in Zimbabwe. This is why after the completion of the Pepsi bottling plant, we will make further investments in various areas of interest in the country,” he said, adding that his plans include setting up a tomato-processing plant and a hospital. – Africa Ind

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