Coca-Cola invests in Egypt; sees big sales growth
Cairo, June 18, 2014
By Shadia Nasralla
Coca-Cola Co expects to start production in five new factories in Egypt and Pakistan over the next 18 months, seeing double-digit percentage growth in sales for both markets this year, its Middle East and North Africa president told Reuters.
The US soft drinks maker's investment is a particular boost for Egypt, which is desperate to attract foreign direct investment after three years of political and economic turmoil that has seen its foreign currency reserves shrink and budget deficit swell to around 14 percent of GDP last year.
"Egypt is going to be one of our key anchor countries," Curt Ferguson said on Wednesday, citing the country's large and growing population as a big positive. "For sure the other key anchor will be Pakistan."
As part of a $500 million investment plan announced for Egypt in March, Coca-Cola will start constructing a new juice plant in 6th of October city near Cairo next year in a joint $100 million dollar project with Saudi Arabia's Aujan Coca-Cola Beverages Company.
The $500 million will be spent over the next three years, Ferguson said.
The beverage group is in talks to buy a plot of land between Cairo and Alexandria to build a plant for sparkling drinks and water which should go online next year, Ferguson added.
The rest of the $500 million will be used to increase production at existing plants such as its concentrate factory in Cairo, the only one of its kind in the Middle East, and to cover capital spending.
In Egypt, the company wants to redevelop production lines and keep distributing tens of thousands of Coca-Cola branded fridges to small supermarkets every year. Just to keep its business ticking over, Coca-Cola needs to spend more than $75 million a year in the country on such costs.
The Cairo concentrate plant exports more than 30 percent of its produce and Coca-Cola wants to double exports from this facility within about three years, Ferguson said, sipping a can of coke light in the regional headquarters in Cairo.
When asked about recent tax increases in Egypt, Ferguson said Coca-Cola could live with the tax rates and understood Egypt's need to increase its revenues, but added lower taxes and clear, well-organised economic reforms would help investors.
"Business needs certainty," he said, listing recent presidential elections as helping stability in the country. "The clearer, the easier, the lower the tax rate, you're going to attract the most investment. It's that easy."
EXPANSION BEYOND EGYPT
Surpassing Egypt for its sales growth, Pakistan will see three new plants open in the next 18 months in Karachi, Multan and Islamabad to serve the domestic market with sparkling drinks such as Coke, Fanta and Sprite.
"We watch the needle in Pakistan and almost every month we red-line on what our capacity is," Ferguson said, adding he expected sales growth of around 20 percent in Pakistan this year. "We're just scratching the surface there."
Coca-Cola has also purchased land in the Palestinian Gaza Strip for a bottling factory for which it has already paid $20 million and which should go online in the first quarter of 2015, Ferguson said.
The company hopes US Secretary of State John Kerry might open the Gaza plant, Ferguson said, adding the group had received all necessary permits from Israel, which has imposed a blockade on the Gaza Strip. Kerry has not visited the Gaza Strip since becoming Secretary of State.
Further expanding into the region, Coca-Cola has started building its first factory in Qatar for $40 million, to be finished before an expected surge in demand for the 2022 soccer World Cup in the desert country. "It's us and nine stadiums," Ferguson joked of the construction. - Reuters