Industry Issues

July 1, 2006
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Three Charged With Trying to Sell Coca-Cola Secrets
Three people have been charged with trying to sell Coca-Cola trade secrets to rival PepsiCo. Joya Williams, a Coca-Cola employee, Ibrahim Dimson and Edmund Duhaney appeared in a federal court in Atlanta on accusations of wire fraud and stealing and selling trade secrets. The group allegedly contacted PepsiCo through the mail, offering confidential information, and PepsiCo turned the letter over to Coca-Cola, who reported it to the FBI. The FBI conducted an undercover investigation that included offers to sell confidential documents and a sample of a product in development at Coca-Cola for more than $1.5 million.
Coca-Cola Chief Executive Officer Neville Isdell expressed “sincere appreciation to PepsiCo for alerting us to this attack,” and told employees in a memo that the company is reviewing its information protection policies. “Sadly, today’s arrests include an individual within our company,” he said. “While this breach of trust is difficult for all of us to accept, it underscores the responsibility we each have to be vigilant in protecting our trade secrets. Information is the lifeblood of the company.”
PBG expands in Mexico
The Pepsi Bottling Group Inc. has acquired Mexico’s Bebidas Purificadas S.A. de C.V. (BEPUSA). Based in northwestern Mexico, BEPUSA serves Sonora, Sinaloa and Baja California Sur.
According to PBG Chairman and Chief Executive Officer John Cahill, "This business is an ideal addition to our business in Mexico. It is contiguous to our existing operations, which will allow us to efficiently leverage our infrastructure across this territory. With this new business, PBG Mexico now will generate approximately 70 percent of Pepsi's total sales in Mexico."
BEPUSA operates seven manufacturing plants and 22 warehouses. Terms of the deal were not disclosed.
Miller pumps up offerings with energy products
Miller Brewing Co. has purchased the Sparks and Steel Reserve brands from McKenzie River for $215 million. Sparks is a citrus-flavored malt beverage containing caffeine, ginseng, taurine and guarana; and Steel Reserve is a higher-alcohol product.
The two companies have had a long-running relationship under which Miller brewed the McKenzie River products under contract, and the companies are said to be working on future product development.  
Study defends alcohol advertising
Arecent study by Penn State University indicates that, based on economic evidence, the alcohol beverage industry does not target underage consumers in magazine advertising, reports the Distilled Spirits Council of the United States (DISCUS), based in Washington, D.C.
“Results from analyzing magazine characteristics and readership demographics show significant effects for advertisement price, audience size and adult demographics in magazine alcohol ads, but fail to support claims of targeting youth,” said Jon Nelson, professor emeritus of economics at Penn State, in a statement about the report, which was published in the July issue of Contemporary Economic Policy.
The study reviewed alcohol ads in 28 magazines between 2001 and 2003 and analyzed them by demographics and magazine characteristics. The 28 magazines in the study contained a total of 3,675 alcohol ads, including 652 beer ads, 118 wine ads and 2,905 distilled spirits ads.
Peter Cressy, president of DISCUS, commented on the study saying, “The study’s conclusions are consistent with previous analyses by the [Federal Trade Commission], which have shown that alcohol advertising is directed to adults. We remain steadfastly opposed to underage drinking, but as this study confirms, calls to restrict alcohol advertising to prevent this illegal activity are misguided and will do nothing to address the serious issue of underage drinking.” Cressy said research shows parents are the most influential factor in a youth’s decisions about alcohol.
In other spirits advertising news, DISCUS reports that its Code of Responsible Practices, which includes semi-annual public reports on alcohol advertising complaints, was recently selected as the best “Business Ethics Communications” in the PR News Corporate Social Responsibility Awards. The award recognized the association that “clearly demonstrated unquestionable business ethics to all stakeholders, in some cases mitigating the crises of confidence that employees, customers and other stakeholders may have had in the wake of recent corporate scandals.”
To make the industry’s advertising review process more transparent and understandable to the public, the Council began publishing semi-annual public reports in 2005. It detailed complaints against specific spirits advertisements, decisions of the industry’s review board, and actions taken by each advertiser in response to the decision. Other award winners included Gap Inc., Daimler Chrysler, Sprint, Fireman’s Fund Insurance Co., Hyperion Solutions and Deloitte & Touche USA.
A-B picks up Goose Island distribution
nion Beverage Co., Chicago, has sold its Illinois distribution rights for Goose Island Beer and Grolsch Beer to the Anheuser-Busch distribution network for $9.1 million.
John Wittig, President of Union Beverage Co., commented on the sale, saying, “While we are disappointed to be giving up the distribution rights for these brands, Union Beverage could not pass up the opportunity to sell the distribution rights for an unprecedented amount that represents a tremendous valuation for the brands.”
In addition, Glazer’s Distributors of Illinois Inc. has purchased 80 percent of Union Beverage Co. The sale is expected to close before the end of the year.
InBev to sell Latrobe brewery
I nBev, based in Leuven, Belgium, is in talks to sell its Latrobe, Pa., brewing facility to City Brewing, LaCrosse, Wis. The company recently sold Rolling Rock and other brands produced at the Latrobe brewery to Anheuser-Busch, which decided to move production of those brands to its existing breweries rather than purchase the facility. City Brewing produces its own brands and has a large contract manufacturing business.
InBev and A-B also have been rumored to be discussing distribution of InBev’s European brands, including Stella Artois, Beck’s and Leffe.

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