There is a popular story often told in MBA courses and business school programs about a conversation between the CEO of a large American fast-food franchise and a new intern. Talking to the intern one day he asks, “Do you know what makes up the core of our commercial asset base?” The intern replies, “Our market-leading capacity to rapidly produce and sell burgers, of course”. The CEO smiles and replies, “Wrong. It’s actually real estate. Our restaurants are located in many of the most valuable retail corner piece locations in America. Our real estate portfolio is the biggest item on our balance sheet”.
Several variations of this story have been told over the years for the same basic reason – to illustrate how a business can have so much more going on under the hood than would appear outwardly. In 2015, I heard a version of this story in Nigeria when I was privileged to be part of a group session with a senior manager at Nigerian Bottling Company (NBC). He asked, “What do you think our main business activity is at Coca-Cola Nigeria?” Being Marketing people, most of us in the group (self-included) answered, “Selling bottles of Coke, Fanta and Sprite!”
He smiled and shook his head. In fact, he said, the bulk of Coca-Cola’s operations in Nigeria focused on supply chain management; sourcing for materials; getting materials from source to the facility; ensuring production almost never stops and transporting the product to depots nationwide. Never mind selling soda, he said, Coca-Cola was actually Nigeria’s largest logistics operator. The company just so happened to use this formidable logistical capacity to produce, deliver and sell bottles and cans of carbonated drinks. He was, of course, absolutely correct.
Earlier in the week, I was reminded of this anecdote when a friend of mine studying at Lagos Business School sent me a YouTube link to an interview with Nwamaka Onyemelukwe, Coca-Cola Nigeria’s Director of Public Affairs, Communications, and Sustainability. Talking about The Coca-Cola System’s supply-chain capacity, she mentioned that its distribution network was so extensive and so well-trusted that – wait for it – it was working with the Bill and Melinda Gates Foundation to deliver vaccines to the most remote areas of Nigeria.
Read also: Coca-Cola’s seven decades of powering Nigeria through education
The reasoning was that no other entity in Nigeria has the capacity to deliver fragile, temperature-sensitive cargo in large quantities to just about any inhabited location in Nigeria, and do so on time and reliably. If Coke bottles, why not vaccine vials? I found this extremely fascinating, and as is so often the case, I quickly found myself falling into the proverbial YouTube and Google rabbit hole to find out more about Nigeria’s biggest logistics operation, which is disguised as a soft drink brand. Here are some highlights I found.
Backward Integration: A Nigerian master class
At the start of production in 1951, Coca-Cola Nigeria through its bottling partner, Nigerian Bottling Company had just one product line (Coke) and one production location, which was in the basement of Mainland Hotel, Lagos. By 1960, the company introduced Fanta. Later came Sprite. Over the next 6 decades, through organic growth and acquisition came Schweppes, Limca, Parle Soda, Krest, Five Alive, and Eva Water, among others. From a single production facility in Ebute Metta in 1960, the company now has 8 bottling facilities across the country, each one employing hundreds of people and contributing billions in tax revenue every year.
The more interesting part of this growth story is what happened behind the scenes. The addition of every new product line was not a simple matter of changing a few production inputs and investing in marketing – it was a complete end-to-end supply chain challenge each time. Most Nigerians who consume Coca-Cola products do not realise for example, that practically every major input involved in manufacturing them – sugar, glass, plastics, corks – is not just locally sourced, but is grown, processed, or manufactured by businesses that fall under the company umbrella.
Instead of subjecting itself to the vagaries of importation or use of an external supplier, the company developed a sprawling maize farm in Agenebode, Edo State, where it harvests and processes corn, which is turned into high fructose corn syrup. Ditto for corks and glass bottles, which are manufactured by Coca-Cola umbrella businesses in Ogun State and Delta State respectively. Unlike other players in the bottling or brewing space, the company goes a step further than using contract growers to satisfy its demand for agricultural inputs – it actually owns its entire supply chain.
The reason given for this is that the company is passionate about making sure that its brands conform to global Coca-Cola quality standards, which can only be achieved by maintaining strict control over its supply chain. To this end, the company has funded the creation of an entire production value chain that did not previously exist in Nigeria, which has created jobs and opportunities as well as ripple effects on adjacent industries and spaces. Explaining this strategy in further detail, Onyemelukwe said:
“We leverage our vast distribution networks as we have developed a lot of partners – from our supply chain, the way we source our raw materials, to the vast distribution networks, to the coolers we provide to ensure that we continue to deliver our brands in the right way where and when the customers need them. That and the core competence we have built up from our vast supply chain network is actually what sets us apart as market leaders”.
Corporate community impact
According to the company, its social engagement policy focuses on women, water, waste and wellbeing. Water is the most visible of its many CSR engagements. In 2019 for example, the Kano State Water Board Laboratory in Panshekara received upgrades with new testing equipment and new pipe-borne water infrastructure for a supply network that supports about 1 million residents in the Madobi area of the state. It goes beyond water, however, and it definitely goes beyond handouts and donations.
Take for example, the Replenish Africa Initiative (RAIN), which was backed by a $65 million commitment from The Coca-Cola Foundation. RAIN aimed to contribute toward universal clean water and sanitation access in Africa, which is one of the Sustainable Development Goals. With a key focus on Water, Sanitation & Hygiene (WASH) projects, productive use of water, and watershed protection projects that preserve important water basins, RAIN successfully reached 216,740 people across 92 communities in Nigeria. This initiative has also successfully upgraded WASH access at more than 1,200 schools in Nigeria, and 59 healthcare facilities across the African continent.
Another standout example is the Mission Zero Plastic Initiative, backed by an $85,000 grant from the company in favour of the Aid for Rural Education Access Initiative (AREAi). The goal of this initiative was to implement a plastic recovery and recycling system with the twin outcomes of promoting community recycling efforts and specifically empowering women. This project is being implemented in 60 communities across 6 states namely, Yobe, Kano, Kaduna, Kwara, FCT, and Oyo. So far the company says, more than 5,220,000 PET bottles have been recovered in total.
A third sample is the “Cash4Trash” Initiative, designed to reward women and young children across 8 communities in Lagos and Abuja by providing them with income and food in exchange for them recycling tons of plastic waste. Across Nyanyan, Zuba, Gwagwalada, Bwari, Kuje, Jikwoyi, Kuje II, and Badore communities, 531,932kg of otherwise environmentally polluting plastic waste has been safely collected under the scheme until June 2021. 5,000 plates of food have been served, and over N4m worth of income paid out to women and young people across these communities. Also under this program, at least 1000 beneficiaries have been trained in transferable economic and financial literacy skills, in addition to over 13,000 beneficiaries of the wider initiative.
Onyemelukwe explained: “Our aspiration is to ensure that we continually craft loved brands as well as do them in a sustainable way, and ensure that we continue to create shared value for the communities where we operate”.
After exactly 70 years of such impressive success in Nigeria’s unique operating environment, absolutely no one would bet against Coca-Cola Nigeria taking its logistical capacity and its keen knack for backward integration into new spaces. After all, if they don’t, who will?
