BY ADEBAYO OBAJEMU
For close to three decades, the fierce competition and struggle for a larger share of the soft drinks market was restricted mainly to the two soft drinks giants– Coca-Cola and Seven-Up.
Watchers of the beverages market in the country witnessed a major seismic shift in the direction of the Cola war, as a new flank of aggression from unlikely quarters was opened in 2014, with a bang arrival of Rite Foods, a major disruptor as it turned out.
For Ziad Maalouf, the Lebanese managing director of 7UP Bottling Company, the wee hours of Wednesday, November 13th 2019, had an unease air, presaging something he could hardly fathom. Burdened by the problems facing the company from dwindling sale to a new challenge posed by the arrival of a new kid in the block– Biggs drinks; he felt heavily weighed down.
Part of his brief was to figure out a solution to this challenge. And that was exactly what preoccupied his mind as he sat in his study that early morning, typing furiously on his computer.
Shortly before dawn, the account goes, he had sent out an internal memo, copying 25 top executives of the company. The memo like Balfour Declaration of 1917 which made National Homeland for the Jews its cardinal feature, Maalouf’s memo made it clear that to win back the dwindling market share of Seven Up, he had to declare war against the company’s competitors. And his goal was to win the war at all cost.
Before the day was over, the secret memo leaked and by evening it was all over the internet.
He had put his trust on the executives to do their side for the overall objective of the memo to be realised. But it was not so, as one of them leaked it to the public.
Many insiders said the aggressive style and tone of the memo was probably the main reason why it was let out to the press by an executive who felt insulted by the acerbic rebuke of some of them for the downturn in the market fortune of the company.
An insider told BusinessHallmark that Maalouf had by indirection and the insinuation accused some of the executives of not doing enough, ” that may be the reason it was leaked”, said the source.
It was the memo that revived the Cola war according to many people spoken to by this newspaper. As expected, the press made interesting headlines out of the story and had a field day with this development but the bottling company never issued a rebuttal.
For decades the Cola competition had largely been between Seven-Up and Coca Cola, the latter produces and distributes Coca-Cola products in Nigeria, while the former produces and distributes Pepsi and other soft drink brands. In 2014, there was a major challenge from Rite Food Nigeria Limited.
Rites Foods has had an interesting story behind it. The foods company had no background in agricultural product, as its parent company, Ess-Ay Holdings Limited, had no business with food production until the 2000s. Sulaiman Adebola Adegunwa, the founder, was a photographer, and a successful one at that.
He was among the beneficiaries of the digital revolution in the photography industry, thus he was adventurous enough to look for a new frontier where he could apply his skills. This singular adventurous spirit led him to diversify.
But instead of just choosing a business model related to what he had already been doing for years, he chose to bet on the food industry.
This bold move led to spectacular success. His line of sausage roll became an option for consumers who had only known Gala sausage roll, manufactured by UAC Foods. Thanks to Rite Foods’ ability to endear the sausage roll to millions of Nigerians over a rather short period, the product soon became a market mover, thereby positioning the company as a major player in the market space.
As a visionary and a forward-looking one at that, Adegunwa kept moving, probing and looking for a new plank and how to consolidate on Rite Foods’ new-found success. Soon, they decided on a product that capitalised on the fact that Nigerians love to combine their sausage rolls with soft drinks. His soft drinks adventure became successful.
And that is exactly what Rite Foods did. It built a larger factory in Ogun State, assembled the needed skilled labour (many of whom were poached from its current competitors), and then began production. Before long, the company’s Bigi soft drink brands were able to find a permanent place in the hearts of millions of Nigerians. This has been much to the displeasure of people like Ziad Maalouf.
Coming into success in the soft drinks was not easy given that It’s important to note that breaking into the soft drink market wasn’t easy given that the market was already dominated by Coca-Cola and Seven-Up. Moreover, Nigerians were, at this point, already used to drinking either Pepsi or Coca-Cola, Mirinda or Fanta, as well as choosing between Sprite or 7-Up.
What was required of Rite Foods was a unique selling point strategic enough to surprise and take advantage of established competitors.
The company had to offer Nigerians one thing they can’t reject – a good deal. The deal came as two things wrapped in one, which is more quantity at really affordable cost prices.
The company’s wide array of soft drink brands quickly gained acceptance among Nigerians. Everything from Bigi Cola, Bigi Apple, Bigi Tropical, Bigi Orange, to Bigi Bitter Lemon are sold for N100. Rite Foods has also successfully positioned itself as the one-stop brand for all carbonated drink flavours, all within a space of six years. Little wonder Seven-Up Bottling Co. is very disgruntled and disturbed, thus the need for Maalouf’s famous memo.
Coca-Cola Bottling Company realised the threatening strategy adopted by the new challenger and responded with aplomb. The company was one of the first to reduce the prices of its products to align with the realities on the ground and maintain the loyalty of its customers.
After the memo, the Cola war intensified. The war has always been predicated on price, volume and campaign activities. These are indices that can be noticed easily by the consumers however, there are other metrics.
Other metrics used in the course of the war which is latent include trade incentives, trade margins and other freebies which are given to the trade partners.
The Pepsi 50cl bottle was selling at the same price that Coca-cola was selling their 35cl bottle (price war) and over time, this prompted a reaction from Coca-cola with some aggressive advertisement and promotions (campaign war).
By November last year, it became clear that the trade margin of Coca-cola products made the hawkers who sell in traffic in Lagos to drop it for a more preferred Pepsi and its other flavours. This obviously would have led Coca-cola to lose some volume because of the high sales in traffic.
There is a lot of volumes that go into traffic sales in Lagos which doubles as the economic capital of West Africa. The #Cola War continued with each brand having its areas of strengths and competitive advantage and taking leverage of same by dominating sales in such areas.
In 2014, the new entrant, Bigi products came into the market with a penetration strategy using price. They upstaged the market by introducing a 65cl bottle (volume war) at a reduced price of 90 NGN (price war).
This volume and price war was accompanied by a lot of BTL materials. This rattled the market leaders and Pepsi was the first to react with “long throat” (a 60cl bottle). They also embarked on media campaign with ATL promotions leveraging on celebrity adverts.
It took some time before Coca-cola reacted but they eventually did. They also reacted with a 60cl bottle. However, they have been seriously impacted before they executed their decision. Meanwhile, with the response of Pepsi and Coca-cola, prices ranged between N100 and N120 while Big Cola was selling their 65cl for N90 with its price printed on the product.
“At that time, Coca Cola had no option but to come up with a big bang response to retain its market share, and that was the strategy Seven-Up adopted too among other responses”, Dr Owolabi Adebisi, a brand analyst and a leading researcher at Numericals told BusinessHallmark.
Trust Nigerians, quantity at a less price has always been a unique selling point so Nigerians of all classes started patronising the new kid. Coca Cola was losing customers and needed to do something to address that. What it did was to reduce prices and introduce some new product lines to have a better competitive advantage. The company also intensified its marketing and distribution strategies instead of going about complaining.
Seven-Up Bottling Company followed suit since that was the only option left in the circumstance. Reducing price for Seven-Up was difficult but inevitable given that the company was already struggling to survive the stiff competition posed by Coca-Cola.
But, it had chosen to declare “war” on just Rites Food for daring to offer more affordable drinks to Nigerians.
Maalouf’s leaked memo never stated how Seven-Up intended to go about “diminishing” Rite Foods’ growing prominence. However, in 2019 when the matter was still fresh, there were reports that Rite Foods accused the company of threatening it’s security and existence. Lawyers representing Rite Foods Limited later filed a petition against Seven-Up Bottling Company and its MD, Ziad Maalouf.
The matter became serious that the Senate had to broker peace
In November last year, representatives of the “warring” companies flew to Abuja upon invitation by the Senate Committee on Ethics, Privileges, and Public Relations. The lawmakers summoned them to the closed-door meeting for them to dialogue and possibly reach a peaceful resolution.
At the end of the closed-door meeting, the Chairman of the Senate Committee, Senator Patrick Akinyelure persuaded them to resolve their differences and compete as friends, for the good of the Nigerian economy. The committee also tasked both companies to go and deliberate on the proposed peaceful resolution measure. They are expected to report back to the Senate in two weeks with their decisions.
BusinessHallmark went round last week sampling opinion of soft drinks sellers in bus stops and traffic, about 45 per cent said they sell more Bigi products than Pepsi or Coca Cola- products of Seven-Up and Cocacola respectively, while 55 per cent said Seven-Up and Coca Cola still have a field day sharing the larger market share between them. The locations sampled included Berger, Agege, Obalende and Ikeja bus-stops.
Coca Cola Bottling Company, Seven-Up and Rites Foods did not respond to our text message seeking their reaction to the Cola war.