East Africa Bottling Company to Form a Joint Venture with Ambo Mineral Water Factory

By Eddyson Lugangwa Posted 30 June 2006 @ 01:15 am EET     Print     Reprint     E-Mail     Comments

Addis Ababa (IBTimes.com) - East Africa Bottling, franchiser of Coca Cola and related brands in Ethiopia, is one of the three bidders interested to enter into a joint venture (JV) arrangement with the nation's oldest mineral water bottler, Ambo Mineral Water Factory. Ambo was first established in the town of Ambo by businessman Teferi Sharew in 1931. It was transferred to the Imperial estate and finally nationalized by the Derg in the mid 1970s. Located in Senkele-Ambo woreda, 130Km west of Addis, in Oromia Regional State, the factory wants to partner itself with an outside company to triple its capacity.

Click to Enlarge East Africa Bottling, franchiser of Coca Cola and related brands in Ethiopia, ...

The local demand for sparkling mineral water is a whopping 321 million bottles, while supply is limited at 127 million, according to a study conducted in 2005 by ABD, a local consulting firm. Ambo controls 86pc of this market, although the study projects that the market will grow annually, reaching 544 million bottles in 10 years. Ambo has planned to commence an expansion project at the end of this year. Ambo's invitation for joint venture has attracted three companies: East Africa Bottling, South African Brewery (SAB) and Hassia, a German company. The two international companies displayed their interest by submitting thick documents days before the deadline.

Sources told Fortune that SAB, which has a well-known interest in acquiring the three state owned breweries, has submitted a 70-page bid document, while Hassia has 100 pages. In contrast, the East African submitted a one-page expression of interest right on the final deadline, which was Friday, June 15, 2006. The first invitation for an expression of interest only managed to attract SAB when it was closed on May 2, 2006. There were seven companies that bought the bid document but did not show up at the opening of the tender, company sources disclosed.

The low turnout of companies participating in the tender was "totally unexpected" according to the management of Ambo, who had expected that a large number of companies would rush to the opportunity. Ambo's big slice of the market was hoped to attract several companies both from here and aboard. What is left of the market after Ambo is shared between the other state-owned company Babile Mineral Water Factory, located in the eastern part of Ethiopia, and Crystal Mineral Water, bottled by the East Africa Bottling Company. New competitors such as Apex Bottling, a private local company which introduced still water and Royal Crown mineral water in Addis Ababa, and Bure Mineral Water, from the area of Bure Baguna, were among the first in the sector. Both left the market before establishing their brand. With few bidders, Ambo management is expected to announce the result of the winner in the next three weeks.