Spirits next for CCA
What are the “don’t-tempt-us-with-booze” bosses at The Coca-Cola Company going to say to Mr Davis’ latest? The CEO of Coca-Cola Amatil (CCA), Terry Davis, is to turn the Australian company’s alcohol ambitions to spirits after losing its slice of the beer business to the new owner of Foster’s.
As BRAUWELT International reported, SABMiller will buy out its stake in the joint venture with CCA, Pacific Beverages, set up in 2006, for at least AUD 305 million. This deal, struck with CCA, allowed SABMiller to go after Foster’s alone, while obtaining full ownership of Pacific Beverages’ AUD 120 million brewery near Sydney.
Pacific Beverages brews and distributes the Peroni and Bluetongue beer brands in Australia.
Although Pacific Beverages has been operational for close to five years, it was never the success the market had hoped. In 2009, the joint venture made a loss, in 2010 it made a small profit. On ACNielsen’s figures the joint venture has captured between 8 and 9 percent of the premium beer category but has less than 2 percent of the overall packaged beer market. Not surprisingly, there are a few investors who think that CCA is fortunate to get out of the beer industry and make money in the process.
In exchange, CCA agreed to a non-compete clause, which means that CCA will be restrained from making, selling or distributing beer in Australia for two years.
But Mr Davis said the company intended to capitalise on its extensive distribution network by acquiring Foster’s spirits and ready-to-drink businesses, which include the Cougar and Black Douglas whiskeys.
CCA has a separate joint venture in place to distribute Jim Beam.
"We are still in the business of alcohol – it’s a key future growth pillar for CCA," Mr Davis was reported as saying. If the Foster’s takeover proceeds, CCA also has the right to buy Foster’s Fiji islands brewery business and the Cascade range of soft drinks.
Analysts estimate the total outlay on CCA’s acquisitions to be under AUD 200 million.
In an interesting twist to the Foster’s deal, the Australian competition watchdog ACCC is going to examine the non-compete agreement between SABMiller and CCA.
Rod Sims, Chairman of the ACCC told media on 28 September 2011: "It’s a separate issue of whether that restraint on trade issue violates another part of the Trade Practices Act, and we haven’t made an assessment on that. I’m not saying there’s a problem, but I’m not saying there isn’t a problem.”
"We will have a quiet look at it."
Imagine the ACCC nixes the two year restraint? And just think for a second that CCA knew this to be a distinct possibility when it signed the agreement with SABMiller? Then it will be a bit like “have your cake and eat it too.”
