Pepsi in South Africa – an uphill climb

In the last 25 years or so, PepsiCo soft drinks have had a hard time in S.A. The trouble began
when it re-entered the market after the transition to democracy in 1994.

Pepsi did pretty good business in South Africa up until the mid-eighties. In 1985, in response
to pressure to disinvest from Apartheid South Africa, it left. Coke followed a year later. However, while Pepsi disappeared entirely, Coke kept its brand strong through local ownership.

After the 1994 elections, Pepsi prepared for a bold return – as the soft drink of the new
South Africa.  3 years later, it was in trouble, and retreated. In 2006 it tried again – with Pioneer Foods. To some commentators at that time, the arrangement seemed a little odd – Pioneer owned Ceres Juices, and it also competed fiercely in the snack category. Still, the
arrangement went ahead, structured as a franchise agreement.

They failed to gain traction, and in 2014, Pioneer pulled out, citing serious financial losses. In 2015, Pepsi appointed SoftBev. By 2018 it was declared a discontinued operation. Fast forward to 2019, and PepsiCo is pushing hard to acquire Pioneer. The reasons are good: Pioneer has an excellent distribution network, which covers not only modern trade, but traditional trade as well: Spaza’s, General Dealers, Independent Wholesalers, and so on. That’s the kind of structure that would have the potential to greatly extend the reach of PepsiCo
in South Africa and Sub Sahara. 

I guess that if all goes as planned snacks are likely to do well in South Africa and Sub Saharan Africa, and kudos to PepsiCo for that. But getting traction in the beverage category might not be easy. Historically it has not gone well. Some say that history will repeat itself. Others believe that local consumers will be receptive to PepsiCo beverages if it can sustain availability in key channels and on enough shelves, supported, of course, by extraordinary marketing and promo. Time will tell.

Author: Kevin Abraham