UL Unilever PLC

By Mike Esterl in Atlanta and Saabira Chaudhuri in London 

Coca-Cola Co. is making its first foray into soy as the soda giant widens its diversification drive, teaming up with a bottling partner to acquire Unilever PLC's Latin American soy beverage business for $575 million.

Atlanta-based Coke and Mexico's Coca-Cola Femsa SAB will each own 50% of AdeS, Latin America's leading nondairy milk alternative brand. AdeS, which sells soy milk and soy with fruit drinks, had $284 million in revenue last year.

Coke is increasingly targeting faster-growing niches after its soda volumes were flat in the first quarter, reversing five straight quarters of increases. The maker of Coke, Sprite and Fanta also is responding to growing efforts by governments around the globe to tax sugary drinks in a bid to curb obesity and diabetes.

Unilever has been shedding food brands in recent years and making acquisitions in the higher-margin, personal-care sector under Chief Executive Paul Polman, a strategy analysts have said gives it stronger growth prospects.

The Anglo-Dutch company in 2014 agreed to sell its North American pasta-sauces business under the Ragú and Bertolli brands to Japan's Mizkan Group for $2.15 billion. Before that, Unilever sold its Wish-Bone salad dressing to Pinnacle Foods Inc. for $580 million and Skippy peanut butter to Hormel Foods Corp. for $700 million.

"This sale is a step in reshaping our portfolio in Latin America to deliver sustainable growth for Unilever and enables us to sharpen our focus, said Miguel Kozuszok, Unilever's executive vice president of Latin America.

Unilever's AdeS brand had a 46% share of Latin America's $1.19 billion market for nondairy milk alternatives last year, according to data service Euromonitor. General Mills Inc.'s Mais Vita brand was a distant second, with a 3.7% share, followed by Nestlé SA's Sollys brand, with 2.6%. The category averaged 1.9% annual growth between 2010 and 2015.

Coke still generates about 70% of its sales from soda, but also is a leading seller of juice, bottled water and teas. It has struck a recent string of deals to further branch out after missing growth targets each of the last three years.

"The acquisition of AdeS marks another milestone for the Coca-Cola system in providing increased choice of nutritious and delicious products to our consumers," said Brian Smith, Coke's Latin America president.

Coke agreed in January to buy a 40% stake in Nigeria's largest juice maker, TGI Group's Chi Ltd., in a deal that valued the company at a little less than $1 billion. In March it closed its earlier-announced acquisition of China Culiangwang Beverages Holdings Ltd., which specializes in multigrain beverages with flavors such as red bean, walnuts and oats, paying about $400 million including debt.

Last summer the company paid $2.15 billion for a 16.7% stake in U.S.-based energy drink maker Monster Beverage Corp. and shelled out roughly $90 million for a nearly 30% stake in Suja Life LLC, which makes organic, cold-pressed juices in the U.S.

But many of Coke's acquisitions are taking place overseas. That is partly because the lion's share of the company's cash is parked outside the U.S. and it faces a tax bill when repatriating profits. Coke also has teamed up with bottling and distribution partners in some of those deals, lowering its cost.

Coke has built up a small dairy business in recent years after largely avoiding the category. It launched Fairlife,a lactose-free milk with 50% more protein and 30% fewer calories than regular milk, in the U.S. in late 2014.

In Latin America, the company teamed up with Coke bottler Arca Continental SAB in 2014 to acquire the majority of Ecuadorean dairy company Tonicorp. It partnered with Coca-Cola Femsa in 2012 to take control of Mexico's Santa Clara, a maker of milk, yogurt and ice cream.

Coca-Cola Femsa is Coke's largest bottler in Latin America, with operations in Mexico, Central America and South America. It also bottles and distributes Coke in the Philippines.

Write to Mike Esterl at mike.esterl@wsj.com and Saabira Chaudhuri at saabira.chaudhuri@wsj.com

(END) Dow Jones Newswires

June 01, 2016 12:57 ET (16:57 GMT)

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