Bloomberg News

Coca-Cola Agrees to Buy Fuze to Add Healthier Drinks

February 01, 2007

Coca-Cola Co. (KO:US), the world's largest soft-drink maker, agreed to buy Fuze Beverage LLC to add more juice, tea and energy drinks in an effort to catch up with PepsiCo Inc.

Coca-Cola gains a half-dozen new products including Fuze Tea, NOS energy drinks and Fuze Slenderize, which has chromium and amino acids that Fuze says help promote weight loss. Atlanta- based Coca-Cola didn't disclose terms of the purchase.

Fuze beverages may help Coca-Cola win back customers who switched from sugary sodas to drinks such as PepsiCo's SoBe tea. It's Coca-Cola's biggest U.S. acquisition since buying Odwalla Inc. in 2001 for $186 million to gain protein drinks and juices, said John Sicher, editor of industry journal Beverage Digest.

``This represents Coke aggressively getting itself into a better place in the noncarbonated business in the U.S.,'' Sicher said. ``Fuze is small but growing strongly.''

Sicher estimated that Coca-Cola paid $225 million to $250 million for closely held Fuze. He said the Englewood Cliffs, New Jersey-based company sold about 11.5 million cases last year, up from 8 million cases in 2005, generating $90 million to $100 million in revenue.

Shares of Coca-Cola rose 22 cents to $48.10 at 4:22 p.m. in New York Stock Exchange composite trading. They increased 20 percent last year, their biggest gain since 1997.

Bottlers

The Fuze purchase may help sate bottlers that had complained about Coca-Cola falling behind PepsiCo in adding drinks other than soda. Coca-Cola depends on soda for 80 percent of its volume, compared with less than 20 percent for PepsiCo.

Coca-Cola Enterprises Inc. (CCE:US), the largest distributor, agreed to distribute Arizona bottled teas in the U.S. last year, making good on a promise to get new drinks from someone other than Coca- Cola if it needed to. The bottler is 36 percent owned by Coca- Cola.

``This should be well-received by Coke's bottlers,'' Bill Pecoriello, an analyst at Morgan Stanley, wrote today in a note.

Fuze was already distributed by 20 Coca-Cola bottlers including Coca-Cola Bottling Co. United of Birmingham, Alabama, and the Philadelphia Coca-Cola Bottling Co.

Only about 15 percent of Fuze's volume currently goes through Coca-Cola bottlers, Pecoriello wrote. The Cadbury Schweppes Bottling Group had distributed Fuze in much of the U.S., Sicher said.

Coca-Cola Bottling Co. Consolidated, the second-largest bottler for Coca-Cola, sells Cinnabon bottled coffee and created a separate unit called Beverages and Beyond Brands to create or buy drinks it wasn't getting from the soda maker.

Coca-Cola's soda volume in the U.S. dropped by a low single digit in 2005, while noncarbonated volume jumped 10 percent.

To contact the reporter on this story: Mary Jane Credeur in Atlanta at mcredeur@bloomberg.net.

To contact the editor responsible for this story: Michael Nol at mnol@bloomberg.net.


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Companies Mentioned

  • KO
    (Coca-Cola Co/The)
    • $40.69 USD
    • -2.60
    • -6.4%
  • CCE
    (Coca-Cola Enterprises Inc)
    • $41.75 USD
    • -0.16
    • -0.38%
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