The move mirrors one that rival PepsiCo made in August to buy its two biggest bottlers for about $7.8 billion.
The deals by Coke and Pepsi come at a time the $110 billion U.S. beverage industry is seeing its unit volume shrink and sales flatten. The amount of beverages sold fell 2.1% in 2008, 2.2% last year and is expected to fall again in 2010, says Michael Bellas, chairman of Beverage Marketing, a research firm.
“This is unprecedented,” he says.
This downshift is taking place at a time consumer beverage habits are radically changing. A nation of carbonated beverage drinkers has more recently evolved into one increasingly interested in bottled waters, juices, teas and energy drinks. Even then, the recession has knocked a hole into brand-name sales of all of these beverages. So consumers are turning to cheaper store brands — or even to tap water.
Under the deal, Coke acquires the North American operations of Coca-Cola Enterprises while giving up its 34% stake in the bottler, worth $3.4 billion, even as Coke assumes its $8.88 billion debt.
Coke also will sell its Norwegian and Swedish bottling operations to Coca-Cola Enterprises for $822 million. The bottling group receives an option to purchase Coke’s 83% stake in its German bottling operations.
“Our franchise can not remain static,” says Coca-Cola CEO Muhtar Kent. “We have to create the next generation of high-return opportunities.” Coke made the deal to:
•Save consumers money. Coke figures that cost efficiencies could help it save $350 million over four years. It can pass some savings on to consumers, particularly for bottled water.
FULL STORY: http://www.usatoday.com/money/industries/food/2010-02-25-coca-cola-bottler_N.htm
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