By Moses Kaketo
MTN Uganda U has remained a market leader for the last 20+ years. That is no mean feat.
The telco, a subsidiary of South’s MTN Group, topped the 2023/24 taxpayer’s list for 2023/24. According to interim financial results for the nine months ending September 30, 2024. The telco posted a 30% growth in profit to UGX. 459.41bn subscriber base reached 22 million, with data subscribers reaching 9.28 million, and #MoMo subscribers grew to 13.19 customers in 3Q2024.
Airtel Uganda financial results indicate that as of December 2023, the #telecom’s largest revenue stream, voice, which generated UGX. 899bn and data services UGX. 775bn. While MTN-U, during the same period, generated UGX. 1.2 trillion from voice UGX 771bn and 621bn from mobile money and data services, respectively. Analysis of all the key parameters, including revenue, shareholder returns, etc., gives a clear place for MTN-U.
#PepsiColaUganda vs. Coca-Cola Beverages Uganda
Crown Beverages Limited (CBL), the makers of Pepsi Cola, is another success story worth recognizing. Owned and managed by local entrepreneurs, CBL has given Coca-Cola Beverages Uganda Limited (CCBU), one of the heavy advertisers, a run for their money.
Numbers don’t lie.
In April 2023, CBL opened a new $76 million bottling plant in Kakungulu, on the outskirts of Kampala, with the capacity to produce 116,000 bottles per hour. A second phase of the project brings the total cost to around $90 million. The plant has the ability to produce 80,000 bottles of carbonated soft drinks and 36,000 bottles of water per hour. The expansion is part of a wider attack on Coca-Cola Beverages Uganda Limited (CCBU).
A year later, in July 2024, the CCBU, launched a state-of-the-art production line at its headquarters in Namanve. The facility, with a capacity of 67,000 bottles per hour, it was commissioned in 2022.
In 2009, Crown Beverage sold 22 million cases in Uganda. In 2022, it sold 65 million cases.
Crown Beverages (Pepsi Cola Uganda) and the CCBU are selling almost the same product. Equally, Airtel and MTN-U are offering the same services.
The question remains: then what is behind MTN Uganda and Pepsi Uganda success?
According to analysts, MTN-U and Pepsi Uganda, undoubtedly studied the Ugandan market and came up with a clear, distribution strategy that suits the Ugandan market.
While Airtel Uganda and the CCBU ‘airlifted’ – a distribution strategy that thrived in another place and espoused it in Uganda. They were mistaken.
The MTN-U and CBL, adopted a macro distribution model. While Airtel and the CCBU went for the micro distribution model. These two approaches are said to largely determine the success and ‘failure’ of these companies.
Distribution—how your product or service reaches the market—is just as important as production [offering a service]. This explains the market failure of a strong brand with a subpar distribution strategy. And examples are not hard to find.
Macro vs. Micro distribution model
Macro distribution model: the company allocates distributors a wide territory to cover. Because of the large region they cover, the return on investment is generally huge. This inspires them to put in extra energy and resources to meet the set targets whilst they lose the territory rights.
Since they launched in Uganda in 1998, MTN-U has had only 16 lead distribution partners covering the entire country. Simba Telecom, at one point, Patrick Bitature’s Simba Telecom had almost 50% share of distribution in Uganda, covering Kampala, Jinja, Kamuli, Masaka, Isingiro. Indeed, he covered the area so well—so was the profitability. Before capitalization issues came in.
MTN Uganda lead distribution partners have largely remained the same for the last 20 years; this long relationship alone tells us that both parties [MTN Uganda and distributors] are doing their part so well. The distributors are doing their best to meet their targets, whilst they lose the rights.
Enter Airtel-Uganda
Airtel Uganda subscribes to the micro distribution model. The model allocates small territories to distributors; generally, their turnover is below UGX. 100m. For example, from Kampala to Mubende, Airtel Uganda can have like 8 distributors; given the small area of coverage, profitability is usually small. Coca-Cola Beverages Uganda applies the same distribution model.
While this model ensures quicker market penetration, the returns to distributors are characteristically not healthy. Thus, they don’t put in their best. They see it as any other business. They don’t care if they lose their territory. It is for this reason that Airtel Uganda distributors come and go, just like that.
The number two telecom company has over 200 distributors. I struggled to identify them. Otherwise, they are always on the go.
The persistent change of distributors comes with its own confronts. The new distributor(s) needs ample time to master the business and the area. As they do so, they quit. And the trend continues like that.
The Airtel Uganda distribution model was perhaps airlifted from India [Airtel-Uganda is an Indian multinational company], where it’s well-matched, given the huge population, estimated at 1.42 billion. One state or union territory has a population that is bigger than Uganda’s total population. Add the fact that Uganda’s economy is still strained; such a model cannot properly work in Uganda.
The macro-distribution model looks at sustainability long-term, while the micro-distribution model looks at speedy market penetration.
Breweries [Uganda Breweries Ltd. & Nile Breweries Ltd.] success in Uganda is somewhat accredited to the macro distribution system. They operate long-term. The distributors are given a wide territory; thus, profitability is guaranteed. It explains why the beer distributors build their own warehouses, and wherever asked by the manufacturers to add more distribution trucks, they are easily and willing to do it—the business is booming, it is profitable.
How Pepsi Cola Uganda allocates distributors
Coca-Cola Beverages Uganda has about 100 official distributors across the five geographical territories of Kampala, Central, North, East, and South.
As a Fast-Moving Consumer Goods manufacturer, Crown Beverages Ltd. identifies a prominent person—or leading businessperson—in the region to manage their territory. These people are usually respected, famous, or role models. It is for this reason that Pepsi products usually dominate local functions. The idea behind it is to ride on their name. The people in the region buy Pepsi products because they want to associate with the prominent person.
This approach has worked for them.
People are not just Pepsi Cola products but similarly supporting their own. It is important to note that Crown Beverages Ltd. is owned by billionaire Ugandans—Amos Nzeyi, Chris Kayoboke, and Dr. Maggie Kigozi. Talk about Build Uganda, Buy Uganda in the real sense of the word.
The model seems to be working well for CBL. For example, while Coca-Cola Uganda Beverages has a plant in Mbarara, Pepsi Cola is selling more than Coca-Cola in the region. Overall, Coca-Cola Beverages Uganda usually has more sales staff [ratio of 3 to 1] in the field than CBL. However, CBL is still doing well.
Wavah Water is a very good product, struggling in the market.
Research conducted by a top hotel in Kampala, a few years ago, revealed that only five bottled water brands in Uganda passed the quality test – fit for human consumption. Wavah water was among them. There are over 100 bottled water brands in Uganda.
Market reports indicate the sales for Wavah Water are frustrating. However, some bottled water brands of [poor quality] command a high market share.
Part of the problem is Wavah water model of distribution that is not sustainable. Wavamunno chose to distribute his product. Wavah Water is a premium brand, yet bottled water is a mass market product. Not very many Ugandans know Wavah; he misfired, thinking that he would ride on his name to sell his water.
Imagine a Wavamunno truck moving from one shop or supermarket to another (from Kampala to say Mubende) to sell a few boxes of water. This is not sustainable.
After establishing the brand, Wavamunno should have appointed an established distributor. Otherwise, the dynamics of production and distribution are different. There are dynamics in distribution that the manufacturer cannot handle.
For example, credit is a very serious and expensive undertaking in distribution. Established distributors know how best to handle credit. Vero Water, another quality bottled water at one time, had more than half sales in debts .
Recently, one of the distributors lost UGX. 30m to fraud. After selling goods worth UGX. 30 m in western Uganda, the salesman disappeared in thin air and crossed into DRC with the truck. These are some of the issues the manufacturer wouldn’t want to be dragged into if they hand over distribution to those who know the game better.
About the author: The writer is a marketing and distribution expert. He can be reached via WhatsApp at +256782507579