Analysis: Why is Coca Cola, the World’s Most Recognizable Brand Remodeling in Liberia
Monrovia – When the leading global brand Coca Cola began sending out official communications to employees and distributors in Liberia Tuesday, it marked the beginning of the end of a three-year effort to keep the company afloat in Liberia.
A senior management official speaking on condition of
anonymity Tuesday told FrontPageAfrica that the soft drink giant is set to shut
down its operations in Liberia in the very near future.
Discussions on that line started with a decision to notify workers and distributors about a redundancy plan which was confirmed by the company on Wednesday.
The Liberia Coca-Cola Bottling Company (LCCBC), in a statement Wednesday confirmed that a number of its employees have been made redundant as part of a number of changes taking place at the company. “These changes were effected as part of a strategic program designed to ensure the long-term sustainability of our business, so that we can better serve the people of Liberia, ensuring their access to our complete beverage portfolio,” the company said.
No More Manufacturing; Only Importation
The statement continued: “The realities of the Liberian market have evolved and become more complex in the last few years. After a recent evaluation of our current business model in the country we recognized that it needed to be reorganized so that it can respond quickly to the evolving needs of our customers more efficiently and sustainably. Despite various other changes applied to date, the current business model remains unsustainable, so the company has decided to take steps to transform the facility into a distribution center to ensure the service to our customers.”
This means the company will no longer be manufacturing the beverage in Liberia but will import drinks for distribution in Liberia
The LCCBC said its primary concern throughout this process is the wellbeing of all the employees. “We have taken steps to ensure that we go beyond the care and compensation required by the law at every stage of the process, offering training and assistance to them as they enter the next phase in their career.”
Since 1949, the bottling company which produces and markets Bonaqua, Schweppes, Burn, Fanta, Sprite, Coca-Cola, Coca-Cola Light, Coca-Cola Zero at its Liberia plant on the Kakata road, has been a fixture. The brand has hundreds of Liberians in its employ and serves more than 6,000 retail outlets. In the last five years alone, the Coca-Cola system has invested more than US $10 million in Liberia.
The company said Wednesday that it has been present in Liberia for more than 70 years fulfilling its corporate social responsibility, showing dedication to its customers, as well as to the communities we serve. “We remain committed to doing our part in improving the livelihoods of Liberians, especially by contributing to the economic empowerment of Liberia’s women and its young people, improving education and taking care of our shared environment.”
The steps at redundancy, the company said is further demonstration of its long-term commitment to serving and investing in Liberia and its people. While demonstrating its optimism about its future, and just like any other business, we remain open to future investment should market conditions present the opportunity.
Insiders however cautioned that several discussions between the government and the company over the past year had failed to address some of the burning concerns on the table.
In addition to deepening economic situation, the Liberian market is said to be flooded with low quality unregulated soft drinks. “We are a brand and a quality known around the world, we cannot compete in a market where quality control is not the rule,” one executive told FPA Tuesday.
Commerce Minister: ‘Meeting in a Week’ Planned
The source also pointed out that because of the inflation, the price of soft drinks has multiplied by 5, putting it out of range of customers. “This is a big blow to our economy… thousands of people make their living with Coca Cola.”
Contacted Wednesday for some clarity, Jacob Parley, Public Relations Officer at the Ministry of Commerce did not fulfill a promise to address a FrontPageAfrica inquiry but Minister Wilson Tarpeh, replying via a text message said: “There is no issue between Commerce and coca Cola per se. The company has some strategic hiccups for which we having been working with them to resolve. There is a planned meeting within a week.”
The debacle has reportedly been spurred by what insiders say is the failure of the government to control the market. Both the Ministry of Commerce and the Freeport of Monrovia have kept their eyes off the ball by allowing all kinds of beverages including Coca Cola rival, Pepsi and others into the market without duty, thereby allowing importers to price at or below the price of the locally produced product, which also limits the ability to take prices up.
During the EJS years, the government provided some
protection against inputs, but that is now all gone. As a result, the Coca
Cola product produced locally has been feeling the pinch. Priced in local
Liberian currency to the consumers, all the ingredients are imported and priced
in US dollars, to the company’s detriment. Thus, one source said Wednesday,
when the LD devalues, it completely destroys profitability because you cannot
take prices up to cover all of the devaluation.
The risk of allowing imported products created a major problem for Coca Cola and for the government which has put local jobs at risks and millions in lost taxes to its coffers.
The end result means, the world’s largest beverage company is being forced to lay off scores of Liberians, thereby limiting its operation to the importation market which has contributed to its declining revenue.
The Liberian market is joining a wave of recent actions taken by the company on the continent. In Liberia’s next-door Ghana, a similar redundancy plan was announced in 2015, where the bottling company laid of more than 250 employees as part of efforts to enable it stay in business at its Kumasi plant. In Nairobi in 2014, Coca-Cola’s East Kenya Bottlers, the biggest employer in Eastern Province, closed its operations leading to the closure is expected to affect 20,000 workers and other people indirectly employed by the firm.
For Liberia, the redundancy by a major global brand signals yet another slap to the country’s economy on the decline. On Wednesday, Sime Darby Plantation commenced giving out 30 days redundancy notice letters to 350 employees and effective August 10th, the redundancy will take effect. In August, another 370 letters are expected to be given to workers in what is poised to be one of the largest job loss circles in Liberia in recent memory.
In March, the Firestone Natural Rubber Company, an indirect subsidiary of Bridgestone Americas, Inc., announced the difficult decision to reduce its workforce by 13%, approximately 800 employees. Headcount reductions have been ongoing throughout the company’s operations, and include retirements, the discontinuation of certain work contracts, and redundancies.
The redundancy has been spurred by fallen global rubber prices by more than 40 percent since January 2017 which are now only slightly above historic lows. Firestone had prior to that laid off over 400 workers in 2016, again crediting the decision to falling rubber prices.
Exchange Rate Conundrum
For the immediate future, economists say the Weah-led government faces a daunting task in getting its local currency to a respectable rate to avoid companies like Coca Cola from losing revenues. Similar trends are being reported by the Total Gas Station Brand.
Many consumers relying on the local currency to purchase are being forced to pay nearly double and Total in turn is said to be losing money through the devaluation of the dollar which, like Coca Cola is affecting the company’s ability to make profit.
In its Article IV Consultation in June, International Monetary Fund Directors highlighted the need for the government to improve its external position by tightening monetary and fiscal policies, allowing for greater exchange rate flexibility, and raising competitiveness through improvements in the business environment. While welcoming that the authorities’ pro-poor agenda focuses on physical and human capital, particularly improving service delivery in health and education, Directors noted that in the context of the development agenda, aggressive efforts should be made to strengthen governance and reduce corruption. They advised the authorities to upgrade their anticorruption and AML/CFT frameworks in line with international standards and emphasized that continued efforts to improve the quality and availability of data are essential for Fund surveillance and economic policy making.
For the foreseeable future, the window of opportunity for the likes of Coca Cola, Sime Darby and Firestone to revisit their current economic positions in Liberia appear to be limited by a rather complicated economic environment and a high-flying dollar exchange rate causing serious debacle for not just the high-end businesses like Coca Cola but also those at the bottom of the economic ladder looking to make a profit, or at least break even.