It was early morning on Wednesday, November 13th 2019, and Ziad Maalouf was not asleep. He could not sleep, not with his mind burdened by what had become a serious problem facing Seven-Up Bottling Company (makers of Pepsi), which he oversees. It was part of his job as the Managing Director to figure out a solution to this challenge. And that was exactly what he was doing as he sat in his study that early morning, typing furiously on his computer.
By 4:37 am that morning, Maalouf had sent out an internal memo and copied 25 top executives of the soft drink manufacturing company. In the memo, he made it clear that he was ready to declare war against the company’s competitors. He would not rest until the war was over and Seven-Up had emerged victorious, he declared.
Below are excerpts of the leaked mail,
“After our sales workshop day (Friday, November 1) and finance workshop day (Saturday), I decided to test our system in terms of readiness to go for War.”
“It is extremely obvious to me that we are not yet ready for war By Any Means”
“Let me start by explaining the competitive playground once again. This season is not like any other, so the mindset of growing vs last year, achieving budget, business as usual cost management, Will Not Work!!! The outcome of this season must write the future and destiny of the 3 major competitors, along with the future of B-Brand industry (Bigger pack and lower price concept) disruptions in Nigeria.”
“One company will flourish. One company will diminish. One company will finish. B-Brand disruptive business model will either become a temptation for anyone who has a bit of money to start own brand in Nigeria, or it will be a curse that ensures no one takes such a decision again.”
But the internal memo leaked
Interestingly, when Maalouf sent out that internal memo, little did he know that a copy of it would leak on the internet and that it would be read by millions of people around the country. He probably trusted that every one of those he sent the memo to would take his concerns seriously and work assiduously towards solving the problem that had been identified. But that was not quite the case.
The threatening tone of the memo was probably the main reason why it leaked. Maalouf had been too passionate, talking about declaring war against his competitors and squashing them once and for all. As a business executive whose market share was being threatened by the activities of competitors, the Lebanese expatriate felt his passion was justified. Little wonder, he went nearly as far as of calling out some of his colleagues for not being passionate enough. So, possibilities abound that one of those colleagues had secretly leaked the memo just to spite the boss.
A sensational story
As expected, the press had a field day with this development and you can’t even blame them. The content of the memo made for the kind of sensational stories that every tabloid journalist thrives on. Consequently, many blogs and a couple of the mainstream media carried the story. But despite media coverage and the social media backlash that heralded the leaked memo, Seven-Up Bottling Co. never issued a rebuttal.
In the meantime, the competition continued…
To digress a little bit, the fiery managing director of seven up bottling company granted an interview to a foreign based journal before he sent that infamous but leaked memo and this is what he has to say about the battle for the soul of beverage and market share in Nigeria
Until 2015, we were a healthy, highly profitable company. But in 2016, we suffered a 70% devaluation in Nigeria. In the past, it was just Coca-Cola and us in the business, so whenever a devaluation happened, we both upped our prices and life went on as before,” Ziad notes. “But this time, two new soft drink brands entered the market, forcing us to decrease our prices and we began to incur heavy losses. In the month before I became managing director, we lost US$6.2 million.”
Despite having only just stepped up to the role, Ziad wasn’t afraid of a challenge. “Some people would consider it bad timing, but I saw it as the opportunity of a lifetime.
Over the past two years, I’ve focused on shaving off unnecessary costs and pushing our top line through a price and cost leadership strategy. This means that we still want to be the cheapest, despite having losses, but we also need to keep our costs the lowest in the industry. I knew this journey wouldn’t be easy and it wouldn’t happen overnight, but our losses slowly reduced month by month until, in May 2018, we finally broke even.”
How Rite Foods came to drag market share with Seven-Up and Coca-Cola
For many years, competition in the Nigerian soft drink market was mainly between Coca-Cola Hellenic Bottling Company and Seven-Up Bottling Co. The former produces and distributes Coca-Cola products in Nigeria, while the latter is licensed to produce and distribute Pepsi and other soft drink brands. But in 2014, Rite Food Nigeria Limited came and disrupted the space.
The story about how Rite Foods ventured into the Nigerian soft drinks market in 2014 is just as fascinating as the story of how it emerged on the Nigerian FMCG space in 2008. Its parent company, Ess-Ay Holdings Limited, had nothing to do with food production until the late 2000s.
The company’s founder (Sulaiman Adebola Adegunwa) had until this time achieved his initial fame and fortune in the photography industry.
The digital revolution in the photography industry had prompted Adegunwa’s decision to diversify. But instead of just choosing a business model related to what he had already been doing for years, he chose to bet on the food industry.
Needless to say that his gamble worked. His line of sausage roll became an option for consumers who had only known Gala sausage roll, manufactured by UAC Foods.
Thanks to Rite Foods’ ability to endear the sausage roll to millions of Nigerians over a rather short period of time, the product soon became a market mover, thereby positioning the company as a major player in the market space.
Meanwhile, being the astute businessman that he is, Adegunwa kept on strategizing with his team on how to further consolidate on Rite Foods’ new-found success. Soon, they decided on a product that capitalised on the fact that Nigerians love to combine their sausage rolls with soft drinks.
By the way, this delicious combination of sausage roll and soft drinks has been happening for many years. Hardly does a Nigerian buy “Gala” without getting a chilled drink to “wash it down.” So, with this being the case, Adegunwa and his team realised that it could also venture into soft drink manufacturing. After all, if they were able to venture into sausage roll making and succeed, they could indeed make it in the soft drinks industry.
And that is exactly what Rite Foods did. It built a larger factory in Ogun State, assembled the needed skilled labour (many of whom were poached from its current competitors), and then began production. Before long, the company’s Bigi soft drink brands were able to find a permanent place in the hearts of millions of Nigerians. This has been much to the displeasure of people like Ziad Maalouf.
Rite Food’s strategy
It’s important to note that breaking into the soft drink market wasn’t as easy for Rite Foods as it may have seemed. Recall that the market was already dominated by Coca-Cola and Seven-Up. Moreover, Nigerians were, at this point, already used to drinking either Pepsi or Coca-Cola, Mirinda or Fanta, as well as choosing between Sprite or 7-Up.
As such, Rite Foods knew it needed to be very strategic in its efforts to get Nigerians to start drinking another set of cola drinks which, in all honesty, are more or less imitations of what were already available in the market. If it had failed to strategize and implement properly, the company would have failed woefully. But then again, you can trust the Adegunwa effect, because the rest is history.
So, what was Rite Foods’ strategy you ask? Well, the company had to offer Nigerians one thing they can’t reject – a good deal. The deal came as two things wrapped in one, which are more quantity at really affordable cost prices.
The more-size-and-less-price approach worked
Rite Foods’ wide-ranging soft drink brands quickly garnered acceptance among Nigerians. Everything from Bigi Cola, Bigi Apple, Bigi Tropical, Bigi Orange, to Bigi Bitter Lemon are sold for N100.
Rite Foods has also successfully positioned itself as the one-stop brand for all carbonated drink flavours, all within a space of six years. Little wonder Seven-Up Bottling Co. is very disgruntled.
So, why is Seven-Up the only one complaining?
So far, Coca-Cola Hellenic Bottling Company has been very mature with the way it had been handling the competition created by Rite Foods’ Bigi soft drink brands. Coca-Cola was one of the first to reduce the prices of its products in order to align with the realities on ground. Of course, the company may not have liked the unnecessary competition. But it was losing customers and needed to do something to address that. What it did was to reduce prices and introduce some new product lines in order to have a better competitive advantage. The company also intensified its marketing and distribution strategies instead of going about complaining.
Seven-Up Bottling Company also had no choice but to reduce the prices of its products. This must-have understandably been a very difficult decision to make. The company was already struggling to survive the stiff competition posed by Coca-Cola Hellenic, which it still faces. But, it had chosen to declare “war” on just Rites Food for daring to offer more affordable drinks to Nigerians. Quite interesting!
Let’s get back to Maalouf’s leaked memo for a moment…
“Let me start by explaining the competitive playground once again. This season is not like any other, so the mindset of growing vs last year, achieving budget, business as usual cost management, WILL NOT WORK!!!
The outcome of this season must write the future and destiny of the 3 major competitors, along with the future of B-Brand industry (Bigger pack and lower price concept) disruptions in Nigeria.
“One company will flourish. One company will diminish. One company will finish. B-Brand disruptive business model will either become a temptation for anyone who has a bit of money to start own brand in Nigeria, or it will be a curse that ensures no one takes such a decision again!!!”
Quoted above is an excerpt from the memo. As you can see, Maalouf’s strategy entails destroying Rite Foods and the success it has recorded in recent times. He also made it clear that there’s a need for Seven-Up Bottling Company to send a strong message to anyone who might be thinking of following in the footsteps of Rite Foods. Has he succeeded in accomplishing these?
Let’s be clear – Maalouf’s leaked memo never specified how Seven-Up Bottling Company intended to go about “diminishing” Rite Foods’ growing prominence. However, there have been reports that Rite Foods accused the company of threatening it’s security and existence. As a matter of fact, lawyers representing Rite Foods Limited recently filed a petition against Seven-Up Bottling Company and its MD, Ziad Maalouf. That goes to show that this has been treated as a pretty serious matter.
Nigerian Senate has attempted to broker peace
3 months ago, representatives of the “warring” companies flew to Abuja upon invitation by the Senate Committee on Ethics, Privileges, and Public Relations. The lawmakers summoned them to the closed-door meeting for them to dialogue and possibly reach a peaceful resolution.
At the end of the closed-door meeting, the Chairman of the Senate Committee, Senator Patrick Akinyelure persuaded them to resolve their differences and compete as friends, for the good of the Nigerian economy. The committee also taxed both companies to go and deliberate on the proposed peaceful resolution measure.
They are expected to report back to the Senate with their decisions.
At the moment, Rite foods controls the beverage market in Lagos and most part of the country with over 35 percent market share followed by Coca cola and Pepsi.