Coca-Cola is working closely with SABMiller

Coca-Cola is working closely with SABMiller

SABMiller CEO Alan Clark was happy last week to talk about the future of Coca-Cola Beverages Africa, the bottler his firm is setting up with The Coca-Cola Co. He was predictably more tight-lipped when asked if the partnership lays the groundwork for further bottler purchases, in Africa or other emerging markets such as South America.

“We're not commenting on future M&A,” he said.

Others, however, have been more willing to speak about the potential ripple effect of the Coca-Cola Beverages Africa formation. Analysts at Nomura have completed a detailed study of the global Coca-Cola distribution network and found a number of regions where SABMiller could find more mileage from its strengthening relationship with Coca-Cola. 

But the possible benefits are not just for SABMiller - Nomura claims that a softening in Coca-Cola's attitude towards working with beer companies, as discussed here, means opportunity exists for any beer company looking to grab a share of the soft drinks industry and its comparatively stronger growth trends.

For example, Heineken already has a relationship with Coca-Cola as a partner with Coca-Cola HBC in Serbia and Macedonia and with Coca-Cola Femsa in Brazil. That relationship is even stronger in Central Africa, and in an interview with just-drinks in June, Heineken's Africa head Siep Hiemstra said he expects his unit's soft drinks volumes in Central Africa to double by 2020. However Nomura says any plans Heineken may have had to consolidate Coca-Cola's bottling operations in Africa were dealt a blow last week with SABMiller's announcement. 

Carlsberg, meanwhile, may well have to choose who its friends are. The Danish brewer partners with both Coca-Cola and PepsiCo in Scandinavia, but Nomura says conflict between the two deals could become more of an issue if Carlsberg doesn't pick a side soon.

But it is SABMiller that has the brightest prospects of a Coca-Cola-fuelled future. Last week's announcement showed the company is serious about its soft drinks portfolio after a few months of dropping heavy praise on existing Coca-Cola tie-ups. SABMiller already takes 20% of its volumes from soft drinks (30% own-brand, 70% Coca-Cola), and Nomura suggests a few markets that could keep that figure rising.

Number one on the list is the Coca-Cola bottler operations in Nigeria, which is currently Coca-Cola Enterprises' best performing unit. Nomura values it at US$1.6bn and says its acquisition “would significantly enhance SABMiller’s route to market in beer in Nigeria”.

SABMiller will probably have to bide its time and first bed in Coca-Cola Beverages Africa. But there is more immediate appeal for another global brewer - Anheuser-Busch InBev. Nomura believes the company will have watched with interest recent news stories suggesting that Brazilian investment firm 3G may be lining up a bid for Coca-Cola. 

If that were to happen, A-B InBev is well placed to swoop for Coca-Cola's bottling operations worldwide, according to Nomura.

The move would require A-B InBev to switch its soft drinks focus away from PepsiCo, with which it has a number of bottling agreements in South America through its regional subsidiary, Ambev. However, it would give the brewer the chance to expand in markets such as India, where beer penetration is still relatively small, and gain synergies in the US as the Coca-Cola franchising model there starts to resemble beer's.

So will it happen?

Nomura says A-B InBev would have to stump up $26bn for it to do so, but that the company could safely absorb the price tag. For anyone looking for signs, Nomura suggests paying attention to the end of next year. That's the latest A-B InBev has to inform PepsiCo if it wants to terminate their Latin America bottling partnership. An affirmative would likely mean the brewer is betting on Coca-Cola rather than its long-term rival. 

A-B InBev now has a year to decide.

CORRECTION: This article was amended on 2 December. Heineken's bottling partner in Serbia and Macedonia is Coca-Cola HBC and not Coca-Cola Enterprises.