KO Coca Cola Company

By Mike Esterl 

Coca-Cola Co. is wading into the small but fast-growing niche of organic, cold-pressed juices by acquiring a minority stake in Suja Life LLC.

Wednesday's announced investment marks the latest diversification move by Coke, whose sales have slowed as health-conscious consumers scale back on soda, which still represents about 70% of company revenue.

The beverage giant also is trying to tap into growing consumer thirst for fresher, less-processed fruit and vegetable juices. Suja uses non-GMO ingredients and is among a small number of national brands such as Starbucks Corp.'s Evolution Fresh and Hain Celestial Group Inc.'s BluePrint that use high pressure instead of heat pasteurization to kill bacteria.

Cold pressing helps beverages retain more of their nutritional value and "is probably as close to raw" as packaged juice products "are ever going to get," industry tracker Euromonitor International wrote in a recent report.

New juice brands also are benefiting from consumers tiring of traditional mainstays like orange or tomato juice. Suja's top-selling flavor is Mighty Greens, which contains 14 ingredients including apple, kale and alfalfa grass.

Coke is paying roughly $90 million for a nearly 30% stake in San Diego-based Suja, with an option to buy all of the company after three years, according to a people familiar with the matter. The merchant banking arm of Goldman Sachs also agreed to pay about $60 million for a 20% stake, valuing the closely held company at about $300 million.

Suja says it booked $42 million in sales last year--a drop in the bucket for Coke, which reported $46 billion in revenue and whose billion-dollar brands include Sprite soda, Dasani water and Powerade sports drinks in addition to its namesake cola.

But Suja--whose juices also include combinations such as strawberry and flax seed--has posted rapid growth since being launched in 2012 and its sales more than doubled last year from 2013. The company's namesake juices also fetch higher prices than mainstream brands, selling for $4 to $8 a bottle. how many ounces?

Suja co-founder and Chief Executive Jeff Church said the company's beverages are sold in about 12,000 stores in the U.S., including Whole Foods, Costco and Kroger, but that he expects to double that number by next year with Coke's help.

"We decided we needed a partner to help us with distribution and greater leverage from a cost standpoint," Mr. Church said in an interview.

Following the deal with Coke and Goldman Sachs, Suja's four founders will own about 25% of the company and Boulder Brands Inc. another 5%. Other individual investors--which include actors Leonardo DiCaprio and Sofia Vergara--will own the remaining 20%.

Coke's Minute Maid and Simply brands and chief beverage rival PepsiCo Inc.'s Tropicana brand already dominate mainstream offerings like orange juice.

Coke acquired Odwalla Inc., a premium juice maker, in 2001 for about $180 million. But Odwalla has fallen behind Naked Juice, a competing premium brand that PepsiCo acquired in 2006. Suja will be transported on Odwalla's refrigerated trucks.

In a statement Wednesday, Coke said Suja "will nicely complement our broad portfolio" and that it plans to use its unmatched distribution system to expand its availability.

In recent years Coke acquired minority stakes in the makers of Zico coconut water and Honest Tea, an organic tea, before assuming control. Earlier this year it began a national rollout of the premium-priced milk brand Fairlife, which has more protein and fewer calories than regular milk, after forming a joint venture with Select Milk Producers.

Coke also has spent more than $4 billion since last year to acquire minority stakes in coffee machine maker Keurig Green Mountain Inc. and energy drink maker Monster Beverage Corp.

Write to Mike Esterl at mike.esterl@wsj.com

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(END) Dow Jones Newswires

August 19, 2015 17:15 ET (21:15 GMT)

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