Pro-poor model pays off

A ‘pro-poor’ initiative by Coca-Cola in East Africa has generated 12,000 jobs while increasing the company’s competitiveness in the region.

The soft drinks giant, along with a bottling partner, Coca-Cola Sabco (CCS), has seen its ‘manual distribution centres’ model – whereby deliveries in Ethiopia and Tanzania have been switched from lorries and vans to individuals using pushcarts and bicycles – contribute to both the economic development of East African countries and to improvements in its own bottom line.

Over the past decade CCS, which operates 25 bottling plants across Africa and Asia, has implemented the manual delivery network across most of its African operations. It first developed the idea as a pilot in Ethiopia, creating ten manual distribution centres in Addis Ababa in 1999. By 2002, CCS had implemented the system throughout its markets in East Africa, and there are now more than 1000 centres in Ethiopia and Tanzania alone, while the company also relies on manual deliveries in Kenya, Uganda and Mozambique.

Coca-Cola, which has had a presence in Africa since 1928 and is now one of the continent’s largest private sector employers, initially decided to expand the system in response to the UK prime minister Gordon Brown’s ‘Business Call to Action’ in July 2007, which appealed to companies to help reduce poverty in the developing world, particularly in relation to the United Nations Millennium Development Goals.

Businesses have been under pressure to use their influence and expertise in developing countries to alleviate poverty with pro-poor business initiatives for around the past five years, particularly in Africa.

In addition to the creation of an estimated 12,000 jobs across 2500 new distribution centres in Africa, Coca-Cola has also generated more than $500million (£305m) in annual revenues as a result of the venture – chiefly by opening up new markets in remote areas where there were no roads for trucks to navigate. In addition, around 87 per cent of the new delivery staff in Ethiopia and Tanzania say they make more money now than before, while a recent Harvard Kennedy School report estimated that these individuals support nearly 50,000 dependants.

The new system has also created economic opportunities for women, who own 19 per cent of the manual delivery centres in Ethiopia and 32 per cent in Tanzania.

For Coca-Cola, business benefits of the model have been the facilitation of delivery across poor or non-existent roads, the introduction of small, frequent drop sizes at retail outlets, and improved, more demand-driven customer service.

Since the introduction of the system, Coca-Cola’s sales in Ethiopia and Tanzania, where 80 per cent of the companies’ products are distributed by manual means, have grown. A new report on Coca-Cola’s distribution methods in East Africa by the Harvard Kennedy School, in collaboration with the International Finance Corporation, cites the system of manual distribution as a ‘contributing factor’ to Coca-Cola’s increased revenues.

Though CCS still uses trucks and vans across its operations, it is planning to spread the manual model to cover a much wider area.