When you put mobile money enthusiasts in a room and ask them to talk about distribution, it’s only a matter of time before someone brings up Coca Cola. In the ensuing conversation, Coke is usually praised for their distribution prowess and held up as a model to which our industry should aspire. But this story is familiar to us all by now, so today I want to tell a different one. In this new story, we see Coca Cola leveraging Zain’s Zap to solve a major distribution challenge in Tanzania: dealing with cash.

Before addressing why cash is so painful and how Zap is helping, let’s quickly review the distribution model Coke uses to get their product onto the shelves of retailers. In Tanzania, there are a handful of distributors who regularly supply about 400 ‘mini distribution centres’ (MDC) that are scattered across the country. These mini distribution centres are then responsible for supplying Coca Cola product to between 80 and 300 retailers each. Coke’s model is simple and clearly effective, but their reliance on cash for settlement at various phases – whether it’s the retailer paying the MDC truck driver in cash, or the MDC branch paying the Coke distributor’s truck driver in cash – creates serious challenges.

Consider the scene at an MDC when their truck returns from making deliveries to retailers. The inventory has all been delivered, but now the driver is carrying cash – and lots of it. This makes them an instant target for thieves upon their return to the MDC, which offers little in terms of security or privacy. A similar challenge occurs – but on a much bigger scale – when the Coke distributor truck comes to re-stock an MDC. As the distributor’s truck approaches, the MDC owner patiently waits with all of the cash he’s accumulated since the last delivery – and as the crates are unloaded, the driver and owner sit together and slowly count hundreds – or thousands – of notes.

Clearly, the use of cash creates security risks in Coke’s distribution model. But it also creates inefficiency and tension since drivers are often paid per delivery run completed and are not eager to sit around counting notes, first at the MDC and then again at the distribution headquarters.

To address these challenges, Zain and Coke are conducting a pilot with about a dozen MDCs who have begun paying their distributor via Zap. Thus, when an MDC delivery truck receives cash from a retailer, they can either deposit it into a Zap account via an agent at any stage of their delivery run, or the owner can take the entire sum to a Zap bank partner at a later stage. Then, when their distributor comes to re-stock them, the settlement is done safely through Zap in a matter of seconds. This eliminates the security risk of carrying cash, as well as the need to spend time counting notes at the MDC and the distributor’s headquarters during a delivery.

Today we’d consider this a B2B application of mobile money, but that’s not to say it won’t have implications for the “C’s” at some point in the future. An ideal, though tricky, next step for this initiative would be to encourage the retailers who currently pay Coke in cash to transition to Zap, and for them to equally begin accepting Zap for retail payments from customers. Of course, making this transition is not easy and would require other building blocks to be in place, but Zain’s vision does offer a glimpse into how one cashless ecosystem might develop and function.

Zain isn’t the first mobile operator to conceive of providing this type of service to Coke-like customers. But where others have stumbled, they’ve had some early success for some small but important reasons. First, Zap is integrating with multiple banks. This is important to customers like Coke because the MDCs they work with often have lines of credit and are obligated to route money through a particular bank under the terms of a loan. Thus, with multiple bank partners, the number of MDCs eligible to use Zap increases. Additionally, Zap has a stated goal of providing ‘much more than money transfer’ – and view corporate customers as a key part of their ecosystem. Thus, they are willing to spend the time and money needed to customize the solution for these business partners, particularly ones as strategically valuable as Coke.

We’ll be watching this partnership closely to see how it grows in 2010.