Industry Issue

June 1, 2007
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Coca-cola Picks up Glacéau
In a widely anticipated move, The Coca-Cola Co. reached an agreement last month to acquire Energy Brands Inc., maker of Glacéau Vitaminwater, Smartwater and Fruitwater products, for $4.1 billion.
“Glacéau has built a great business with high-quality growth, as well as a strong pipeline of innovative products and brands,” said Neville Isdell, chairman and chief executive officer of The Coca-Cola Co., in a statement. “We envision even faster growth for Glacéau as part of Coca-Cola’s enhanced range of brands for North American customers and consumers. We will manage this opportunity in a way that delivers attractive returns for our shareowners and also appropriately benefits our system.”
Glacéau will operate as a separate business unit within Coca-Cola North America, which Coca-Cola says will allow it to continue to maximize its focus, speed, sales and execution capabilities, while leveraging the scale of CCNA’s resources in supply chain, marketing and consumer insights, customer management and foodservice.
Glacéau’s management team, including J. Darius Bikoff, Mike Repole and Mike Venuti, intend to lead the business for a minimum of three years. The transaction is expected to close this summer.
“Overall we believe this acquisition is positive and indicates [Coca-Cola’s] increasing willingness to acquire growth and innovation,” said Wall Street Analyst Bonnie Herzog in a report about the acquisition.
Pepsi invests in Ukraine juice company
PepsiAmericas Inc., Minneapolis, and PepsiCo, Purchase, N.Y., will jointly acquire 80 percent of Sandora LLC, the leading juice company in Ukraine, for $542 million plus assumed debt. The companies say Ukraine is one of the fastest-growing beverage markets in Europe, and Sandora’s brands represent approximately half of the juice volume consumed in Ukraine. The company operates two production facilities located in Nikolaev.
In a statement announcing the acquisition, Robert C. Pohlad, chairman and chief executive officer of PepsiAmericas, said Sandora “provides immediate scale in a high-growth market and a strong business platform to leverage and expand into other categories. Ukraine’s emerging economy and beverage market, coupled with Sandora’s strong brands and distribution capabilities, provide significant growth potential.”
The transaction is expected to close in the third quarter of 2007. PepsiAmericas will consolidate the joint venture into its financial results, while PepsiCo will recognize the earnings of the joint venture as equity income in PepsiCo International’s line of business.
Sunny D sells plants
Sunny Delight Beverages Co. has sold three of its bottling facilities to Angelo, Gordon & Co.’s Net Lease Group. The plants are located in Anaheim, Calif., Dayton, N.J., and Atlanta, and will operate on a lease-back basis. According to Bill Schumacher, Chief Financial Officer for Sunny Delight, “Our goal in this transaction was to free up valuable capital that we could use to grow our business. We are aggressively pursuing several significant new product launches and major investments in new packaging capability that will be much more affordable now that we have completed this transaction.”
Coca-Cola makes water-reduction pledge
The Coca-Cola Co. announced a new water resources initiative, pledging to lead its global beverage operations, including those of its franchise bottlers, to replace the water it uses in its beverages and their production. The company announced the plans at the annual meeting of the World Wildlife Fund (WWF) in Beijing. It also launched a partnership with WWF to provide $20 million to help conserve fresh-water resources.
“We are focusing on water because this is where The Coca-Cola Co. can have a real and positive impact,” said Neville Isdell, chairman and chief executive officer at Coca-Cola, at the event. “Our goal is to replace every drop of water we use in our beverages and their production. For us that means reducing the amount of water used to produce our beverages, recycling water used for manufacturing processes so it can be returned safely to the environment, and replenishing water in communities and nature through locally relevant projects.”
According to Coca-Cola, the company and its franchised bottlers used approximately 290 billion liters of water for beverage production in 2006. Of that amount, approximately 114 billion liters went into beverages, while 176 billion liters were used in beverage manufacturing processes such as rinsing, cleaning, heating and cooling.
FTC says kids not seeing more food advertising
The Federal Trade Commission (FTC) released a report early this month that indicates kids today are not exposed to more food ads than they were in 1977, but the ads they do see are concentrated on children’s programming as opposed to general audience programming.
The report is a bit of a good-news/bad-news situation for beverage and food marketers who have been criticized for targeting children. The research was designed to measure not only the number of ads aired during the time period, but also the size of the viewing audience.
According to the report, in 2004 promotions for television programming accounted for 28 percent of all TV ads viewed by children ages two to 11. Food ads accounted for 22 percent. Other categories included screen and audio entertainment and games, toys and hobbies.
Children get approximately half of their food advertising and about one-third of their total television advertising exposure from programs in which children are at least 50 percent of the audience. That compares to 1977, when children were exposed to a quarter of their advertising during children’s programming. The actual number of food ads children saw dropped from about 6,000 in 1977 to about 5,500 in 2004.
Other findings show that kids in 2004 were exposed to:
• 25,600 total television ads (18,300 were paid ads. Most of the remaining 7,300 were promo- tions for other television programming; some were public service announcements.)
• 10,700 minutes of televisions ads
• Ads averaging 25 seconds in length
• Two and a quarter hours of ad- supported television a day, or 16 hours per week (Ad-supported television accounted for only 70 percent of their television viewing.)
• More than 50 percent of the ads between 4 p.m. and midnight and less than 5 percent of the ads during Saturday morning between 8 a.m. and noon.
The report was based on analysis of Nielsen Media Research/Nielsen Monitor-Plus data. The FTC also is conducting a study on all methods of marketing foods and beverages to children and adolescents, including television, radio, print, movie theaters, videos and video games, company-sponsored Internet sites, other Internet advertising, digital advertising, in-store advertising and promotions, and other types of grassroots marketing. The FTC and the Department of Health and Human Services plan to host a Forum on Marketplace Responses to Childhood Obesity next month. The forum will review industrywide initiatives and specific product, packaging, and marketing innovations implemented by individual companies.

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