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Varun Beverages (Zambia) Ltd

Varun Beverages (Zambia) Ltd has lots of bottle

Sheree Hanna

A leading Indian food and drink giant is set to invest even more and open new businesses in Zambia following the success of its first plant in Lusaka
Varun Beverages (Zambia) Ltd has lots of bottle

The warm welcome received in Zambia by a major Indian food and drink giant has paved the way for a further $30 million investment in expansion and job creation.

India’s leading Pepsi franchisee RJ Corp’s first Zambian bottling plant became operational in 2010 through its wholly-owned subsidiary Varun Beverages (Zambia) Ltd.

The Lusaka-based facility directly employs 350 people and indirectly through distributors another 600 throughout the country.

Group Chief Executive Officer Krishnan Shankar, who heads up Varun’s operations in both Zambia and Mozambique, says the sound political climate and the support the company has received from the Zambian government has influenced the parent company’s decision to invest more.

He said: “We are investing $15 million in setting up a dairy plant next to our bottling facilities here in Lusaka and a further $15 million investment is being made in a second bottling facility in Kitwe which should be operational by the end of 2014.

“What we are finding in Zambia is a very good political climate and support from the government and local agencies. They have helped to fast track our plans by granting clearances from the Environmental Council of Zambia as well as cooperation from other government agencies.  The Zambian government has also helped us to identify and procure the land for our project in Kitwe. We are very happy to expand here.”

Milking it

The new dairy will be modelled on a similar facility operating in Uganda, which processes half a million litres of milk a day. Ten years ago, RJ Corp took over the National Dairy Board of Uganda and over this period of time has engaged some 30,000 dairy farmers to provide milk to the dairy.  The company assists and advances local farmers by providing veterinary support, fodder cultivation know how as well as micro-financing in order to grow the capabilities of the local farmers who supply them.

 “We will do a similar thing here with local farmers and ultimately the dairy, which is planned to start operating in September, will produce a range of dairy products and will initially employ some 150 people,” said Shankar.

A further development for Zambia will be the opening of a brewery facility planned to become operational in 2016/2017, which will provide local consumers with a range of top brands including Stella Artois, Becks and Budweiser.

Parent company RJ Corp is a $1.5 billion turnover business, which is the largest Pepsi franchisee in India (where it now has 12 bottling plants) and the third largest PEPSI bottler in the world.  RJ Corp also has a joint partnership with AB InBev International, a Belgian company who are the world’s largest brewers, manufacturing a range of internationally renowned beer brands.  It is also India’s largest ice cream manufacturer through its brand Cream Bell.

As well as that it has the franchisee rights for Pizza Hut, KFC, and Costa Coffee across India. It has also further diversified its operations into education and healthcare.  RJ Corp is a franchisee of Delhi Public School, which runs a number of pre-school educational establishments in India, which benefits children from both privileged and non-privileged backgrounds.  The system is currently educating more than 10,000 students.  Children from disadvantaged backgrounds are currently being given free education in the same facilities. 

And somewhat surprisingly, under another joint initiative with an American company runs seven stem cell banks in India and recently opened a diagnostic centre in Nairobi.

Bottled up

The company already has a significant footprint across African countries having already opened 10 KFC branches across Nigeria with the promise of taking it to 250 outlets in three years’ time.

The state-of-the-art Pepsi bottling facility in Lusaka has enabled Varun Beverages (Zambia ) Ltd to win market share from its biggest competitor and prides itself on being able to offer the Zambian consumer a choice.

“To date we have invested $30 million in the Lusaka facility,” said Shankar. “We have a glass bottling line, a plastic PET line, a bottled water line and a can line, (which is the first of its kind in Zambia in the past 50 years).  Through our backward integration facility, we are also able to make our own plastic crates here. In addition, we have our own fleet of 20 trucks for primary distribution. We presently have a respectable 25 percent share of the market, which we expect to continue to grow.

“Also in Zambia we have done a unique thing. We have given employment to an underprivileged group by making them Pepsi vendors. We have given out free ice boxes and free ice to vendors who sell Pepsi for us across the country.  Previously unemployed people are now able to earn a livelihood of three to four dollars per day.  We now have around 10,000 vendors,” he added.

While the top-level management and team of directors mainly comprise Indian ex-pats, there are local Zambian understudies at every level.  Training is an ongoing activity.  Before the bottle factory commenced operations in Zambia, 25 employees were sent to India for training on the Indian bottling facility.  “We take good care of our employees,” said Shankar. “We offer good salaries and provide a range of facilities including medical for them.”

Three As

The company prefers to source goods locally and uses a large number of suppliers for its sugar, carbon dioxide gas and other chemical ingredients, although empty cans are imported from South Africa.

Shankar explained that in order for the business to be successful the company focused on the three-pronged principal of availability, affordability and acceptability.

He said: “We have to ensure our product is easily available to our customers no matter where they are. Competition helps keep prices down and we will grow stronger just as we have in India, where we now produce a volume of 200 million cases per annum.”

With the roll out of its current expansion plans, Varun Beverages Ltd looks set for a fizzing future and could well pave the way for other large Indian companies looking to invest in Africa. Shankar said: “I am sure we are setting a good example for other Indian investors who may wish to come to Zambia.”

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