A high demand for processed fruit juices among Kenya’s expanding health conscious middle class is seeing new entrants who are upstaging traditional giants in a market model that is benefiting smallholder farmers who are earning from demand for raw materials from these companies.
The $1 billion Kenya’s soft drinks market has been dominated by Coca Cola, Pepsi, Del Monte and Softa, but a growing demand by Kenya’s middle class obsessed with their health and lifestyle is seeing more players enter the market to sate the demand.
Milkah Obudho, a sales manager in a Coca Cola distribution unit in Thika town, said that the Alcohol Control Act enacted in 2010 had helped to boost sales of soft drinks. More people are now opting for fresh juice rather than the conventional soft drinks.
Several health awareness campaigns for government health department against synthetic soda’s and preservatives, due to rising cases of cancer, diabetes and other lifestyle diseases, has also contributed to this change in taste among Kenyan consumers. Manufacturers have also been advertising aggressively using the mass media, public billboards, sports stadia and public events.
This growing market has enabled both the large multinationals and small local firms to shift focus to the fresh fruit juices market. Data from the Kenya’s statistics agency shows that in the first quarter of 2013, production of soft drinks increased by 5.8 percent to 109,707 metric tons compared to the same period in 2012.
Global soft drink company and the dominant player in Kenya, Coca Cola introducing Minute Maid – a fresh fruit juice. Market estimates put Coca Cola’s share of the fresh fruit juices market at 11 per cent.
According to Milkah Ng’ang’a, a soda distributor in Ruiru town on the outskirts of Nairobi, whereas soda sales vary with hot and cold seasons Minute Maid sales are constant in all year round. “During dry seasons, we sell approximately 15,000 liters of sodas, while in cold spells the sales can go down as low as 7,000 liters. Minute Maid sales will always range between 2,000 liters and 2,500 liters in all seasons,” said Ng’ang’a.
After exiting the Kenyan market 40 years ago Pepsi, Coca Cola’s main rival, has also re-entered the market with a $30 million manufacturing plant in February 2013 in order to compete strategically with the local market leader. The plant, which has a capacity to produce 600 bottles per minute, is constructed on 12.5 acres of land on the outskirts of Nairobi.
Bottled water consumption has also increased due to the poor quality of tap water, especially in urban areas that has forced city dwellers to buy bottled water for office and home consumption. Soft drinks companies are also venturing into healthy drinks and bottled water production to exploit this opportunity. Coca Cola launched Dasani water, a pure bottled water brand, in Kenya in 2001.
Del Monte Company is the local market leader in production of fresh fruit juices. The company majors in cultivation, production and canning of pineapple dices and juices but also manufactures other fruits, vegetables and snacks.
In 2012, it generated $3.7 billion in net sales in the US, according to an investor fact sheet released in April 2013. It has invested over $18 million since 2011 to expand their business in the region.
According to Mwihaki Kibutu, Del Monte Kenya Thika region sales manager, the company has over the years continued to produce high quality fresh juices and the market base keeps widening.
“The company began production of tropical fruit brands such as mangoes and pineapples in 2000, but has continued to blend other types of fruits such as grapes and apples. We will continue to introduce new products to suit the growing market.”
Kibutu added that the company had remained the fresh fruit drinks market leader in Kenya due to an efficient distribution network across the country and aggressive marketing of its wide range of products.
According to the Euromonitor Report 2013, both Coca Cola and Del Monte products have continued to be market leaders due to strong distribution networks and frequent advertising in the media. New entrants into the fresh juices market such as Kevian Kenya Ltd are posing a threat to the dominant Del Monte products, going by their recent aggressive marketing.
Kevian has taken a substantial share of the fresh fruits market with their ‘pick n peel’ fresh juices and Afia brand of juices. The latter is especially popular with children.
“I think they understand the health benefits of drinking fresh fruit juice. Children love Afia; I sell approximately 150 bottles of 500ml Afia bottles daily,” said Mary Mwangi, who owns a fresh juice bar at a bus terminus in Nairobi.
The major challenge faced by many fresh fruit juice processing companies is supply of fruits, most of which are seasonal. Del Monte says there was a worldwide drop in consumer sales in 2013 due to constraints in the supply of fruits.
To overcome this challenge, Del Monte Kenya has leased 1,000 acres of land in Thika, for growing fruits. Musundi of Del Monte said “The land is meant for growing pineapples for export purposes.”