Coca-Cola in Talks to Acquire Stake in Glaceau

Coca-Cola Co. is in serious negotiations to acquire part or all of Vitaminwater manufacturer Glaceau. A deal is not thought to be imminent, although Coke might choose to announce a transaction at or just before its North American bottlers' meeting in Atlanta in May. According to the Wall Street Journal, New York-based Glaceau could be worth more than $2 billion. Thirty percent of Glaceau is owned by the Indian conglomerate Tata Group, which purchased its stake last summer for $677 million. An acquisition of Glaceau could help Coke reverse sales declines and build up its nonsoda offerings. The purchase of a stake would follow Coke's acquisition in February of Fuze Beverage LLC, a manufacturer of energy, tea and vitamin drinks. Coke has also held discussions with Arizona Beverage Co. about a possible acquisition of Arizona Teas. Enhanced water is rapidly growing in popularity: in 2006, Glaceau's volume more than doubled. The enhanced water segment is forecast to account for 22% of North American beverage revenue over the next five years.

Sources: Wall Street Journal, MarketWatch, Reuters
Commentary: Coke, Pepsi Losing Market Share • Questioning Sell-Side Consensus On Coca-Cola • Outlooks for Select S&P Dividend Aristocrats
Stocks/ETFs to watch: The CocaCola Company (KO). Competitors: Cadbury Schweppes plc (CSG), Pepsico, Inc. (PEP). ETFs: Vanguard Consumer Staples ETF (VDC), Consumer Staples Select Sector SPDR (XLP), PowerShares FTSE RAFI Consumer Goods (PRFG)
Conference call transcripts: Q1 2007

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Comments

[Victor Cook:]

MARKETING HELL

For all its virtues the 1986 marriage of KO and CEE was made in marketing hell. The battle between Pepsi and Coke for shelf space in supermarkets was punishing. And CEE was caught in the cross-fire.

Coke wants to be the best buy on the shelf because the lower its shelf price the more it sells. Of course, that means more syrup sales to its bottlers. CEE wants to maintain shelf price because that's the only way to keep its margins from shrinking. Who wins in this battle between shelf price and syrup volume?

Check out my answer to this quesiton at www.customersandcapita...

2007 Apr 26 10:29 AM