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    Coca-Cola May Consider Bottler Purchase

    Recent reports say a deal between the beverage giant and its largest bottler is probable.

    NEW YORK -- Coca-Cola Co. may consider buying its largest bottler and distributor, Coca-Cola Enterprises Inc., according to a report in the weekly financial newspaper, Barron's.

    "The probability of a deal -- and the rationale for doing it -- is growing," said Bill Pecoriello, a beverage analyst with Morgan Stanley, who told Barron's in a recent edition that Coca-Cola may be willing to pay about $27 a share to take control of the bottling company.

    Coca-Cola already holds a 36 percent stake in Coca-Cola Enterprises, according Barron's.

    Coca-Cola Enterprises announced last week that starting in February, it will begin distributing three flavors of Hornell Brewing Co. Inc.'s Arizona Iced Tea throughout the United States, to boost its presence in the fastest-growing category of soft drinks, Reuters reported.

    The three flavors are Iced Tea with Lemon, Green Tea with Ginseng & Honey and Sweet Tea. The bottling company already sells seven Arizona flavors in Canada, the report said.

    "This is a smart move by Coke Enterprises as Arizona is a good and growing brand," said Beverage Digest publisher John Sicher. "The move probably and understandably concerns Coke because its biggest bottler is going to another source for a major noncarbonated product."

    Both Sicher and Morgan Stanley's Pecoriello said this could be the start of a relationship that could include other products in the future, according to Reuters.

    "We believe Coke Enterprises will continue to announce similar deals in the U.S. and Europe over the coming quarters," Pecoriello wrote in a research note. “We also believe these actions will increase the probability that Coke eventually consolidates Coke Enterprises ... as the potential loss of resources/focus on its brands is a serious issue."

    Pecoriello added that this was a slight negative for rival PepsiCo Inc. and its largest bottler, Pepsi Bottling Group Inc., since carrying Arizona will make Coke Enterprises more competitive.

    Coke Enterprises, based in Atlanta, Ga., said it will continue selling Coke's tea drinks, including Nestea, Gold Peak and Enviga, a new calorie-burning drink made from green tea.

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