Coca-Cola’s Investment in Nigeria’s Chi

Coca-Cola has announced its intention to purchase a 40% stake in Nigeria’s Chi (holding company Tropical General Investments) and will buy the rest of the group within three years. This is not a surprise move as it fits Coca-Cola’s coordinated global strategic movements in enlarging investment in dairy and juices. Euromonitor International’s latest data show that Nigeria is one of the major forecast soft drinks growth markets, expected to see overall net increase by US$1.6 billion in off-trade value, while dairy is expected to fetch US$123 million in growth in 2015-2020. Demographically, Nigeria has a large population and its emerging middle class aspires to better foods and beverages. Despite sharing the uncertainty and unpredictable nature of many developing markets, Nigeria continues to represent an attractive, long-term growth market for many consumer goods.


Nigeria has a highly underdeveloped soft drinks market, which is reflected in the currently small sales of RTD tea, RTD coffee, concentrates and sports and energy drinks. Low capita consumption points to huge long-term growth potential. Overall, all categories are advancing, with bottled water being the growth engine. Euromonitor International’s Competitor Analytics tool shows that Chi’s core businesses are juices, pastries, yoghurt and condensed milk. The company has few sales in bottled water and this has already resulted in missing the water boom. In 2015, Coca-Cola led bottled water with a 0.7% off-trade volume share, Nestlé at 0.6% while Danone has no registered share. Coca-Cola sees Africa as a next wave of growth and the investment in Chi is clearly part of its African penetration strategy. In the medium term, Coca-Cola can certainly help Nigeria’s market consolidation, particularly in bottled water.

In terms of exploring growth categories, Coca-Cola put dairy as one of the top drinks to expand into, which is reflected in a string of “milky investments”. In Brazil, Coca-Cola partnered with Leão Alimentos e Bebidas and reached an agreement to acquire the dairy company Laticínios Verde Campo for an undisclosed sum in late 2015. In India, the cola giant is planning to launch Vio in February 2016. Flavoured milk drinks is a rapidly growing category in India. In China, Coca-Cola purchased a plant-protein beverage company, Culiangwang, in 2015, marking entry into the fast-growth non-dairy milk alternative category. Chi is the third largest dairy player in Nigeria, making incremental share gains over the past few years. Chi’s major international rivals include Arla, Nestlé and Clover. Thus far, Coca-Cola has not made noticeable steps in Russian dairy, where PepsiCo has a strong position through its local subsidiary.

In our latest Soft Drinks Global Corporate Strategy, when predicting Coca-Cola’s future movements, we stated that “exploration of drinkable and value-added dairy products on a large scale in the medium term will be used as a new source of revenue to offset carbonates’ continued sluggishness.” All signs show that Coca-Cola is moving towards this and the list of acquisitions for the dairy purpose is likely to become longer in years to come.