Cokes Widens Diversity Push With Soy-Drinks Deal -- 2nd Update
June 01 2016 - 1:12PM
Dow Jones News
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)
Copyright (c) 2016 Dow Jones & Company, Inc.
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