Coke to end bottling deal with Zimbabwe’s Delta Beverages

Atlanta-based Coca-Cola Company (TCCC) has given notice of its intent to terminate the bottler’s agreement it has with Delta Beverages Limited, Zimbabwe’s largest brewer.

The notice to end the bottler’s agreement follows Coca-Cola’s announcement earlier in October to buy SABMiller’s stake in Coca-Cola Beverages Africa (CCBA). SABMiller is Delta’s largest shareholder with over 40% stake. In addition, Delta has a 49% shareholder in Schweppes Zimbabwe. Together they produce and sell Coca-Cola’s soft drink brands under the bottler’s deal.

Coca-Cola’s bid to end the bottler’s agreement with Delta and Schweppes follows the acquisition of SABMiller by Anheuser-Busch InBev NV/SA (AB InBev), which now has a stake in Delta.

This Notified Intention has been given on account of AB InBev becoming an indirect shareholder in Delta Corporation Limited following the combination of AB InBev and SABMiller Plc,” said Delta in a cautionary statement.

Delta Beverages is Zimbabwe’s largest brewer and soft drinks producer. The company began in 1946 as Rhodesian Brewery Limited. Some of its brands include Eagle Lager, Lion Lager, Castle Lager and Chibuku, a traditional African beer brewed from malted maize and sorghum. It also bottles Coke’s brands such as Coca-Cola, Fanta, Sprite, Sparletta, among others.

A spokesperson for Delta said that the company is considering the ramifications of the notice which may have a material impact on the company’s business.

Delta sells more than 1,385,000 hectolitres of soft drinks per year. Gross sales from the soft drinks business was $183m or 29% of the company’s total revenue for the financial year ended 31 March 2016.

The brewer said no changes to the company’s operations and its associates are anticipated at this time.

The company will continue to operate in the usual manner in the meantime,” said the spokesperson.

Analysts say that it is still too early to speculate on the direction the business will take as talks around the disengagement are still to start as this was just a notified intention but also noted that there are a lot of options which would not disenfranchise Delta shareholders.

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