Courtesy of the Financial Times, a report on Coke’s recent Nigerian investment:

Coca-Cola has bought a minority stake in the Nigerian juice and dairy company CMH.

The deal demonstrates the long-term play multinationals and tech start-ups are making in the country of more than 180m, which has one of the world’s fastest growing populations. Companies such as Coke and Google are betting the trends of youth on the continent may mirror those elsewhere despite the fact that the oil-dependent country is grappling with a deepening economic crisis and a declining currency due to the crude price crash.

Coke is paying about $240m in cash for a 40 per cent stake in Lagos-based CHI, which is owned by TGI Group. Cornelis Vink, owner and chairman of TGI, said CHI would continue to invest in new products and production facilities.

“Coca-Cola will put its leading still drinks brands on to the CHI platform and contribute its know-how in innovation, branding and operational efficiency,” Mr Vink said. “We were approached by many prestigious global companies and we decided to do a deal with the largest of them all.”

“We are extremely optimistic about Nigeria’s future prospects and are firmly committed to playing a role in supporting Nigeria’s economic progress and social advancement through our operations and through the sustainability initiatives that we support”, said Nathan Kalumbu, president Coca-Cola Eurasia and Africa. He said Coke has invested, together with its local bottling partner, in Nigeria since 1951.

CHI makes fruit juice and nectar drinks and drinking yoghurt as well as snack foods Beefie Beef Rolls and Muff the Muffin.

The company says it is investing in expanding its local sourcing to become less dependent on imports, a must given the oil price collapse that has led the Nigerian government to sharply restrict foreign exchange access to companies that rely on imported raw materials.

Coke is confronting a decline in fizzy drinks sales, especially in developed markets, which make up almost 70 per cent of the company’s overall revenues. Soda is still popular in sub-Saharan Africa, but by acquiring a stake in CHI, Coke widens its portfolio in Nigeria away from fizzy drinks, said Ian Shackleton, analyst at Nomura.

“The growth dynamic in Nigeria is still good for carbonates, but Coke is thinking about 10,15 years down the line”, as the youth population booms, he said.

“CHI, with its leading position, with a lot of potential growth embedded in its platform, in a large growing market, is a very valuable asset that will trade at a large premium to the global fast-moving consumer goods companies,” said Miguel Azevedo, head of investment banking for Africa at Citigroup, which advised CHI on the deal.

Given the long-term growth potential in Africa’s biggest economy, Mr Shackleton said it was reasonable to expect CHI to trade on multiples, in the low to mid teens times earnings before interest, tax, depreciation and amortisation.

Coke has in recent years bought minority stakes in companies appealing to health conscious consumers with products such as coconut water and energy drinks.

Last August it paid about $90m for a nearly 30 per cent stake in San Diego-based organic, cold-pressed juice maker Suja Life.