20 July 2018

Falling Demand forced slash production for Soda companies in Kenya

Falling Demand forced slash production for Soda companies in Kenya

As per the reports, Coco-cola, the soft drinks manufacturer, had reduced its soda production in the last ten months because of the fall in demand due to inflation. The drop in soda production bucks the recent industry trend that had seen production grow consistently since 2006 to 2011 i.e. from 230,750 tonnes to 472,005, has helped in bringing new players into the sector.

As per the latest economic data, due to falling consumer demand, in the first ten months of last year there was a reduction in soda manufacturing. Coca-Cola, the largest producer of soft drinks in the Kenyan market, had recognized the drop in demand to consumer shift to fresh fruit juices and high inflation in the first half of 2012, which reduced disposable incomes.

According to the latest report given by Kenya National Bureau of Statistics i.e. KNBS, the production of soft drinks dropped to 472,005 metric tonnes in the first ten months of 2012 as compared to 494,778 metric tonnes in the same period the previous year.

Because of high inflation in the first six months of 2012; there was a drop in demand which forced the company to reduce its costs, according to Rocky Finley, country manager of Coca-Cola Sabco, which is the bottling company of Coca-Cola. He also added that, the prices of soda were reduced mainly due to the competition from juices and nectar which affected our sales along with high inflation. But he also expects Coca-Cola to gain higher sales in the fourth quarter of 2012, which normally sees high demand because of holiday celebrations.
As per the reports, the major manufacturers of the ready-to-drink juices are Kevian Kenya which sells the Pick N Peel brand and Delmonte among other smaller players.

Coca-Cola recently launched a local range of Minute Maid fruit juice to respond to the rising competition for its territory. It also launched a sugar-less brand of soda called Coke Zero to counter the increasing consumer aversion to sugar-rich drinks.

According to the reports given by Coca-Cola, its sales were influenced by high inflation in the first six months of the year, hurting their overall ten month’s production. Inflation in the first six months of the year was between 18 and 10 per cent mainly due to high food prices, electricity and transport which reduced the demand of consumers towards secondary goods such as soft drinks. To raise the consumption of soft drinks, Coca-Cola had reduced its prices from Sh25 for the 300ml soda to Sh23 in June 2012.

According to the reports given from Nairobi Bottler, the growth in output had also been restricted in the first half of the year, due to limited production capacity that was limited due to an old facility and lack of enough water. But, the company increased its production capacity in July 2012 with a Sh1.6 billion bottling plant that increased the Nairobi Bottler’s capacity from 24,000 bottles per hour to 52,000 bottles.

Source: businessdailyafrica.com

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