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Retailers, consumers and prices

Check Out Line: Coke’s actions speak louder than its words

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coke1Check out Coke’s about face on its relationships with one of its bottlers.

Coke plans to buy the North American operations of its largest bottler, Coca Cola Enterprises, in a substantially cashless deal that would let it cut costs and be more flexible in its distribution.

The announcement of the deal comes just as Coke rival PepsiCo is about to close its own $7.8 billion purchase of its largest bottlers, Pepsi Bottling Group and PepsiAmericas. It also reverses Coke’s previous stance, spelled out in repeated comments over the past several months, that its current relationship with its bottlers was just fine and it didn’t need to copy Pepsi.

Coke CEO Muhtar Kent said last April when the Pepsi deal was first announced that its franchise model was the best way to go and repeated that stance again in July, September and December.

Also in the basket:

Dr Pepper Snapple tops view despite sales slump

Kohl’s profits up but outlook below expectations

Heinz third-quarter sales up 12.6 percent

BAT sees signs of recovery as earnings rise

Tim Hortons profit rises, boosts dividend

Carter’s Q4 beats estimates, sees growth in 2010

(Reuters photo)

from DealZone:

PepsiCo’s offers drag on and on

PepsiCo Inc's offers to buy its two bottling affiliates has dragged on and on and could be a distraction for the companies as they begin planning for 2010.
    
Bill Pecoriello, CEO of ConsumerEdge Research, said he believes PepsiCo would only be willing to raise its offer 10 percent and that would be insufficient to entice Pepsi Bottling Group to the negotiating table.
    
Pecoriello said the soda saga has dragged on longer than he expected and there's no catalyst in sight to trigger talks. 
    
"The biggest worry is that it becomes a distraction. You get to the point when you have to start planning for 2010 and everyone is in limbo," Pecoriello said.
    
PepsiCo's strategy could be to let time pass and hope PepsiBottling's shares drift lower -- making the $29.50 per share offer look more enticing. Still, PepsiCo has room to raise its offer and it would be attractive for the soda giant even if it paid in the upper $30-per-share range, Pecoriello said. PepsiCo could afford to pay in the high $20-per-share range for PepsiAmericas.
    
If PepsiCo walked away from the deal, it would have to invest $400 million to improve the performance of its North American beverage business, he said. Rival Coca-Cola is gaining momentum and could pressure PepsiCo.
    
PepsiCo has said its offers were "full and fair."

Check Out Line: Billions for bottlers

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PEPSIBOTTLING/Check out the multibillion bid for bottlers.

PepsiCo is offering about $6 billion to buy the shares it does not already own in its two largest bottlers, Pepsi Bottling Group and PepsiAmericas, to cut costs and secure control of its brands as growth switches to new noncarbonated drinks.

Pepsi‘s plan to consolidate its bottling business underlines an industry trend and would give it control of 80 percent of its North America beverage distribution volume.

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