Beverage Industry

Coca-Cola takes on DPS brands in CCE's territory

June 7, 2010

The Coca-Cola Co., Atlanta, announced a distribution agreement with the Dr Pepper Snapple Group, Plano, Texas, for certain DPS brands in Coca-Cola Enterprises’ (CCE) territory as well as the addition of Dr Pepper and Diet Dr Pepper on Coca-Cola’s Freestyle fountain dispenser.

The Coca-Cola Co. will distribute Dr Pepper trademark brands and Canada Dry in the northeast United States, where they are currently distributed by CCE. The agreement is subject to completion of The Coca-Cola Co.’s acquisition of CCE North America’s bottling business. The company will make a one-time cash payment of $715 million to distribute Dr Pepper and some other DPS brands in the United States and Canada, where Coca-Cola will distribute Canada Dry, C’Plus and Schweppes. The new license agreement will have an initial term of 20 years with 20-year renewal periods.

In addition, Coca-Cola will offer Dr Pepper and Diet Dr Pepper in local fountain accounts currently serviced by CCE and will include Dr Pepper and Diet Dr Pepper on its Coca-Cola Freestyle fountain dispenser. The Coca-Cola Freestyle agreement has a term of 20 years. DPS’ investment in the program is estimated at $115 million to $135 million, the company said. The Coca-Cola Freestyle dispenser can dispense more than 100 beverages in the same amount of space as a standard eight-valve machine. The machine is currently available in 20 accounts in select markets with 500 additional Freestyle machines to be tested later this summer.

“Through this new relationship, The Coca-Cola Co. will become one of the largest Dr Pepper trademark bottlers in the United States and will provide CCE’s current customers with uninterrupted distribution of Dr Pepper brands,” said Muhtar Kent, chairman and chief executive officer of The Coca-Cola Co., in a statement. “Based on early pilot program results, we believe our Coca-Cola Freestyle customers will be excited about having an even greater choice of brands available to distribute in their outlets.”

The CCE acquisition is expected to close in the fourth quarter of this year and is subject to regulatory and CCE shareholder approvals.