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For the first time in nearly half a century,
bottlers of Coca-Cola and sister beverage brands
closed their plant on Thursday, March 12, 2009,
sending 1,000 workers on a forced annual leave, but
with full pay.
The plant, located in Addis Abeba on Dejazmach
Balcha Aba Nefso Street, and one of the two operated
by East Africa Bottling Share Company (EABSC), was
closed after instructions given last week to the
Acting General Manager, Izan Bombom. The management
told Fortune that the closure would be
"temporary;" however, no one seems to know when
production will resume.
The plant was quiet on Friday; machines were no
longer running, and medium-sized distribution
trucks, flourishing the company's logo, were parked
idle inside the compound. The scene outside was more
revealing. The line of heavy trucks and trailers,
that had been waiting for their load for the past
three weeks had not yet disappeared.
But there were no workers to load them. Only a very
few management staff members were still in their
offices, and security personnel were guarding the
facility when Fortune visited the complex.
Employees hope that this is just a temporary
drawback.
"I expect to get my job back very soon," an employee
in the Supply Chain Department of the company, told
Fortune. "In case this is not an alternative,
I am hopeful that the company will do something for
us."
The supreme body of the company, the Board of
Directors, are scheduled to meet next Tuesday, March
17, to discuss the crises, in addition to the
regular agenda of reviewing EAB's performance for
2008, sources disclosed.
The news of the closure of the plant was shocking to
some of the shareholders. Dereje Yesuwork (Jambi)
and Munir Duri, were two of the five shareholders
informed about it by this newspaper when approached
for comments.
"It can't be true," Dereje reacted on the night the
plant was closed.
The company said it was forced to stop bottling
beverage brands - Coca Cola, Fanta, Coca-Light,
Sprite, Orange and Fanta Ananas (Pineapple) - and
shutdown the plant because it is unable to import
raw materials for production due to the shortage of
foreign currency the country currently suffers from.
Recently, Ethiopia was confronted with a depilated
amount of foreign currency in its reserve. This is
what the International Monetary Fund (IMF) described
as a positioning "into critical territory."
Ethiopia's gross reserve, amounting to 906 million
dollars in 2007/08, was the lowest recorded since
2004. Although modestly improved lately, and
reaching an amount that could pay for seven weeks of
the nation's imports, commercial banks are no longer
at ease with processing requests for letters of
credit for imports of goods.
EABSC is one of the victims.
Restructured to its current format in May 1995,
after businessmen bought the factory from the
Privatization Agency for 10 million dollars, East
Africa Bottling has been in continuous expansion.
Its original shareholders - Negussie Hailu, Munir
Duri, Bereket Haregot, Kassim Hussien and a fifth
shareholder sold all or part of their shares to
newcomers. Today, 73pc of the company is owned by
the South African Beverage Company (SABCO), while
Negussie Hailu, Munir Duri, Dereje Yesuwork and
Abinet G. Meskel, own the remaining 37pc. The latter
two are close confidantes of the Saudi tycoon,
Sheikh Mohammed Ali Al-Amoudi, who, together with
his wife, owns MOHA Soft Drinks Industry, bottlers
of the competing soft drink, Pepsi Cola.
East Africa Bottling has grown so much ever since
the mid-1990s. Its current capital is 400 million
Br. Its expansion project, that cost 12 million
dollars spent on procurement of two plants and a
bottle washing machine, helped it enhance its
production capacity from five million crates in 1995
to 21 million crates last year.
It was unable to fill a single crate of soft drinks
beginning last week.
"Due to the current shortage of foreign currency, we
are now faced with quite a shortage of crown cork,"
said the management in a statement faxed to
Fortune a day after the closure of the plant.
The management said that although it tried to
substitute imported raw materials with locally
produced ones, it was not able to substitute all of
its requirements. Neither was the company permitted
to receive loans of million of dollars from its
major shareholder, SABCO, nor supply on credit for
six months offered by Coca Cola International, as
authorities from the central bank are reluctant to
commit the country into debt, sources disclosed.
"The shortage is forcing us to temporarily stop the
production of Coca Cola products," EABSC said. "We
are using this opportunity to maintain our machines
and fleets."
But there are many affected by this decision, in
addition to the work force of the plant. Immediately
hit are the 761 distribution vending shops, and the
drivers and their assistants of the 250 trucks EAB
contracted for deliveries. Around 35,000 outlets,
scattered throughout the country will also be unable
to serve Coca Cola and its sister brands for an
unknown period. This will affect an estimated
150,000 beneficiaries involved in the value chain of
the bottler, according to East Africa's management.
And its customers are the most disappointed.
"Almost every customer asks for Coca," a cafeteria
owner around Piassa area, on Arbegnoch Street, told
Fortune.
One of these could be Hagos Sahle, a Lada-taxi
driver. He cannot spend a day without consuming Coca
Cola.
"I am addicted to it," Hagos told Fortune. "I
don't know what I am going to do."
Industry observers see a wider effect of the problem
than that simply confined to East Africa Bottling.
Although bottlers of Pepsi Cola are still running
their plant, owing to their opening of letters of
credit earlier, they could face tough time in the
months ahead should the forex crunch persist.
"We are alright so far," Getachew Birbo, chief
executive officer of MOHA, told Fortune. "We
have planned our imports for up until June to July.
And we're supported by Dashen Bank; should there
come the need, we'll depend on the owner of our
company."
The two giant bottlers share the 40 million crates
provided to the market almost equally. Nevertheless,
Ethiopia's soft drink market is estimated to reach
at 100 million crates, 38pc of which is believed to
be in the south. Both have series limitations in
their capacity to satisfy this market, which is
growing annually by 25pc, according to industry
experts.
Industry observers believe it is just a matter of
time before other beverage companies find themselves
in the same position as the soft drinks bottlers,
due to empty stock of raw materials. They anticipate
that the breweries are next on the line. |
