Delta likely to sell-off its Coca Cola bottling assets

Beverage giant, Delta Corporation is likely to sell-off its sparkling beverages business, which bottles popular Coca-Cola brands, analysts say.

Delta stands to lose a third of its business if The Coca-Cola Company (TCCC) follows through on its intentions to rip up a Bottlers Agreement between the two.

An analyst briefing at the presentation of Delta’s financials for the six months to September 30 on Wednesday failed to provide clues into its management’s thinking of how to proceed.

Executives skirted questions of how to deal with the situation forced upon them by AB InBev’s acquisition of SABMiller, which made Delta an associate of the Belgium-based brewer.

TCCC, the world’s largest beverage company, has a Bottlers Agreement with Delta for 12 brands, which include popular products such as Coke, Diet Coke, Fanta, Sprite, Coke Zero, Powerade among others.

These products form Delta’s sparkling beverages business. For decades, Coca-Cola products have had a near monopoly in Zimbabwe’s sparkling beverages business.

The sparkling beverages contributed 29.32 percent and 23.45 percent to the Delta’s operating income in 2015 and 2016 respectively.  It contributed $22.53 million in operating income from the $96.1 million it achieved in the 2016 full-year.

“Coca-Cola does not intend to exit the Zimbabwe market … all involved stakeholders are engaged,” chief executive Pearson Gowero told analysts.

And Delta wants to keep that side of the business, but analysts say signs point to the beverage maker selling off TCCC related assets. 

Finance director Matts Valela said that Delta’s agreement with Coca-Cola was independent of SABMiller, but accept that business dealings of AB InBev, as a significant shareholder in the  company has a bearing on its activities.

SABMiller was a major bottler of Coca-Cola products in Africa, while AB InBev is a similarly major bottler of rival Pepsi in South America.

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