Unstructured Finance

Deals wrap: Coke acting like a VC

The Coca-Cola Co – the world’s largest beverage producer – has been thinking and acting more like a venture capital firm over the last few years, as it attempts to find new ways to increase profits and stay ahead of the competition,  according to a Reuters exclusive.

Coke’s Venturing and Emerging Brands unit, dubbed VEB, was founded in 2007 with the purpose of investing in independent brands, like Honest Tea and Zico coconut water. VEB president Deryck van Rensburg told Reuters the venture arm currently receives three to four unsolicited pitches per week from entrepreneurs. Van Rensburg added it was “not inconceivable” for it to work in other places, such as China, where there is “a huge entrepreneurial community.”

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Pharmaceutical company GlaxoSmithKline is also looking at smaller strategic acquisitions. Glaxo CEO Andrew Witty told French daily La Tribune: “We may do small targeted deals, but nothing big. We will not do a large transaction in pharma nor in generics.”

For a Big Pharma company like Glaxo small is a relative term, as it is reportedly kicking the tires on a potential acquisition of U.S. biotech firm Genzyme, along with rival Sanofi-Aventis. The rumored deal last week sent Genzyme’s market value soaring 15 percent to $16.7 billion.

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The trend of private equity firms buying up consumer-oriented food companies continued with the announcement that Lion Capital intends to purchase French frozen-food firm Picard Surgeles from rival BC Partners. According to Reuters, the deal would be France’s biggest leveraged buyout since the collapse of Lehman Brothers. The Reuters story also quoted “three people familiar with the matter” that Picard had a pre-deal value of about 1.5 billion euros ($1.9 billion).

Check Out Line: Coke’s secret lab looking for newest drinks

cokeCheck out Coke’s scientists concocting the beverage maker’s next blockbuster.

With carbonated drinks sales fizzling, companies like Coca-Cola and PepsiCo have for years been exerting great efforts to find the next home run drink.  Bottled waters, energy drinks and sports drinks are now commonplace, with new variations popping up that claim to boost relaxation, health, beauty, anti-aging, muscle repair, mood and immunity.

At its Atlanta headquarters, Coke has a team of scientists feverishly working away like the Muppet Show’s  Dr. Bunsen Honeydew and Beaker, toying with new beverage formulations. And they have to be creative. Look how weird the world of drinks has gotten: some of the unusual products out on the market now include chunky aloe vera drinks and spicy drinks like those made by Prometheus Springs, with flavors like Lychee Wasabi and Pomegranate Black Pepper.

Check Out Line: Have a Coke and a confused looking grin

Check out the confused American consumer. COCACOLAENTERPRISES/

Coca-Cola Co actually saw sales volume rise in North America in the second quarter, a rare feat.

Now imagine what would happen if U.S. consumers could actually figure out if they can afford to keep spending the money on a soda, what with high unemployment and the jittery stock market.

The world’s biggest soft-drink company says it has the brands to grow in North America, the ability to spend to support those brands and other factors.

Check Out Line: Appetite grows for food deals

thistractorCheck out what we’re hearing from top executives attending our Food and Agriculture Summit in Chicago this week.

Kantar Retail Americas Chief Executive Ken Harris, a top industry consultant, said he sees a healthy appetite for strategic acquisitions in the food and grocery space this year as improving credit markets and a recovering U.S. economy tempt buyers.

“It’s not about making a big acquisition, but you’ll see some smart acquisitions starting to happen over the next six to 12 months,” said Harris, who advises food manufacturers and retailers on their business models and acquisition strategies.

Olympic Gold for Coke, McDonald’s and Visa

rings1When is Olympic sponsorship money well spent? A Performance Research poll shows it may depend on how the funds are used.

Coke, McDonald’s and Visa dominate consumer awareness when it comes to the Olympics, according to a study by the Rhode Island-based research firm that evaluates the sponsorship industry.

Sixty-eight percent of Americans polled confirmed the Olympic sponsorship of Coke and McDonald’s, followed closely by 66 percent for Visa, Performance Research said. Those three companies also were listed as having consumers’ favorite Olympic TV commercials and doing the most to support the Games.

Bottlers: the choice of a new generation?

Over the last few months, as Pepsi worked out its deal to buy its main bottlers, Coca-Cola said it wasn’t interested in such a deal. Well you can’t keep a good idea down and today Coke, which once liked to be known as “the real thing,” unveiled plans to buy the bottler’s North American business.

The deal includes about $3.2 billion in Coke’s equity in CCE and the assumption of nearly $9 billion in debt. PepsiCo is due to close the $7.8 billion purchase of its largest bottlers, Pepsi Bottling Group and PepsiAmericas, perhaps within the next 24 hours. Coke expects the transactions to add to earnings by 2012. It also expects cost savings of $350 million over four years, with 70 percent of the savings realized by the end of 2012. It expects to take a related one-time charge of $425 million over three years, but will not need to use any additional borrowings.

“Coke couldn’t sit back while Pepsi delivered $600 million (or more) in synergies for reinvestment and then transformed its U.S. business model,” said ConsumerEdge Research analyst Bill Pecoriello, who suggested Coke may not be interested in holding onto the asset for the long haul.

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

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.

Check Out Line: Have a Coke and an in-line quarterly profit

coke1Check out Coke’s quarterly profit.

Coca-Cola reported a fourth-quarter profit that matched Wall Street’s expectations as strong volume in China, India and Brazil offset a decline in North America. Lower costs and market share gains in both the carbonated and noncarbonated segments helped too.

Coke’s growth in the developing markets — fourth-quarter volume rose 7 percent in Latin America and 11 percent in the Pacific region — helped offset a 1 percent volume decline in the closely watched North American market. Volume was up 1 percent in Europe.

Also in the basket:

McDonald’s January same-store sales up 2.6 pct

Toyota adds new Prius to global recall list

Swatch Group sees sales pick-up, aims for record year

Molson Coors Q4 profit misses estimates

Warner Music falls to loss, but beats Street

(Reuters photo)

Coca-Cola’s tale of four cities

It was the best of times, it was the worst of times …

muhtar-kentWhen trying to determine how and when consumers will recover from the downturn, Coca-Cola CEO Muhtar Kent sees the world broken into four quadrants.  It’s “A Tale of Four Cities,” he said.

Think of four different quadrants, Kent said on a call on Tuesday after the company reported second-quarter results.

1. Europe, North America and maybe a couple of other economies – “where we will probably be experiencing resets in terms of the consumer psyche, where they’ll probably do things differently than they’ve done in the past.” 
 
2. China, India, Brazil - very strong, quick rebound 
 
3. Japan – “stagnation” 
 
4. Eastern Europe, Russia and the Ukraine - volatility.  “It could come back quickly and then it could go back down quickly. I think we’re in for a few years of zigs and zags for Russia, Eastern Europe and so forth.”
 
(Reuters photo of Kent at a 2008 news conference in Tokyo)

Cola truce? Coke and Pepsi trade niceties on Twitter

Cola rivals Coke and Pepsi gave their long-standing feud a rest last week after a user-provoked experiment on Twitter prompted the two pop makers to trade friendly greetings on the popular social networking service.

Coca-Cola responded first to a clever user’s message suggesting that the two make nice on Twitter, offering “A gracious (yet competitive) hello” to Pepsi. In return, Pepsi extended a Twitter-style olive branch of sorts to its competitor: “Can rivals and tweeps coexist? We’re willing to find out. :)” Tweeps, for those unversed in the lingo, is a cutesy term for Twitter users.

The whole episode began with the single Twitter message sent by a digital media consultant from a web marketing firm called Amnesia Razorfish based in Sydney, Australia, but quickly grew as other users got in on the fun and repeated (or “retweeted”) the message to their own friends and followers across the social network.

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