Econet not selling Mutare Bottling Company

Published: 09 April 2014

ECONET Wireless has reaffirmed its commitment to its investment in Mutare Bottling Company, seeing through the installation of a $17 million new line and factory investment, which will boost the firm's ability to service the southern region franchise.

MBC chairman, who is also chief executive for Econet Capital Mr John Gould said the decision to make further investments is proof of the confidence the group has in the bottling company, which would in turn contribute to the telecoms company bottom line.

MBC is owned 69 percent by Econet through Pentamed Investments, including a 6 percent shareholding in the form of convertible instruments. The remainder is owned by the Goldberg family, which were the founders of the company in 1950.

The company bottles Coca-Cola International products. Econet acquired the MBC stake in November 2007 as part of a diversification programme.

MBC yesterday officially commissioned a new Returnable Glass Bottling line in the Eastern Highlands city at a total cost of $17 million.

The new line from Italy, Sidel SpA is more efficient from a capacity perspective producing 1 250 cases per hour in a nine hour shift.

"This is double the combined output from our two old lines which give us economies of scale both in terms of manufacturing as well as distribution. Obviously it can do more once we get over the teething problems."

He added: "Another factor that has become increasingly important for us as a business is the longer-term sustainable benefits that this new technology brings to our operation."

The plant has the capability to bottle a range of RGB packages including 300 millilitre and 1 litre bottles.

Finance manger and deputy managing director Mr Brian Maphosa said all in all the group will realise cost savings of around 15 percent.

The $17 million capital had been obtained from PTA Bank and MBCA. The PTA loan at $8,8 million was a four-year facility at a cost of 10 percent.

Mr Maphosa noted that the company had, however, been given a two-year grace period. MBCA had provided $4 million short-term facility while the balance was from internal resources.

Mr Gould said with improved production and delivery processes, the company will be able to serve more areas and deliver better quality product than ever before.

He added that the company expects a return on its investment in five years. The company is also targeting five million cases in 2016 from the current three million cases. Mr Gould said the company was looking at expanding into other product areas.

"We are looking at installing a small pet line. But as you know these investments are long term so the near term focus is on getting repayments improving our distribution."

As part of the investment the company had boosted its fleet by purchasing 15 hoses and trailers. Analysts say Econet has benefited from its association with the Coca-Cola family as the telecoms company has built its marketing model around the success of what is called the Coca-Cola machine.

"If you look today at how Econet manages its brand and distribution channels it's exactly a replica of the Coca-Cola system," said Jerome Negonde a market analyst.
- The Herald