Coca-Cola has made it clear it wants to keep AB InBev at arms-length

Coca-Cola has made it clear it wants to keep AB InBev at arms-length

Following completion of its takeover of SABMiller this week, Anheuser-Busch InBev has given notice it will sell SAB's share in African bottler Coca-Cola Beverages Africa to one of the former brewer's two former partners in the venture, The Coca-Cola Co.

The most obvious question now is: Who will Coca-Cola sell the stake on to? The soft drinks giant has indicated its intention to conclude a quick sale as it continues to refranchise its global bottler network. That leaves the path clear for the likes of Coca-Cola HBC and Coca-Cola European Partners to move for the 57% share in Africa's biggest bottler, for an estimated US$3bn to $4bn.

There is, however, a far more colourful aspect to yesterday's news. Coca-Cola's decision to keep the stake out of AB InBev's hands - part of a buy-back agreement triggered when SAB changed ownership - suggests the soft drinks giant is taking a defensive approach to the newly-enlarged brewer. In its statement announcing the move yesterday, Coca-Cola said that "while the company respects AB InBev's capabilities, it has a number of existing partners who are highly qualified and interested in these bottling territories".

In other words: Keep out, AB InBev.

In a subsequent note today, HSBC analyst Anthony Bucalo summed the news up, saying: "The implication of Coca-Cola's quick move seems clear to us: Coca-Cola clearly does not want to be engaged in a major commercial relationship with AB InBev.... We believe this confirms our view that Coca-Cola is taking steps to inoculate itself from AB InBev as quickly and thoroughly as possible."

According to Bucalo, Coca-Cola fears that AB InBev, despite having only just completed its US$103bn move for SAB, is a "possible bidder" for the company. SIG's Pablo Zuanic, echoes the theory, pointing out that Coca-Cola may also be averse to a relationship with AB InBev because of the brewer's existing partnerships with PepsiCo in South America. The overall implication, then, is that the risks that would go with Coca-Cola inadvertently sharing business practices and plans with its biggest rival would be too great.

Coca-Cola's move yesterday does not mark the last time the company will be discussed in the same breath as AB InBev: The brewer still bottles for the soft drinks giant in Botswana, Zambia, Zimbabwe, Lesotho and Swaziland, as well as in Honduras and El Salvador.

So, although Coca-Cola's decision may be a knock-back for AB InBev in the long-term - analysts believe the brewer could have benefited from the "learning nuggets" of a soft drinks partnership - the ultimate winner may well be PepsiCo. With AB InBev given the cold shoulder by one global soft drinks giant, it may be forced further into the arms of the other. Zuanic says that AB InBev is not only likely to now retain its South American ties with PepsiCo (previously considered under threat if Coca-Cola had come on board), but the brewer and Pepsi owner could now look to expand their relationship into other parts of the world.

Of course, closer bonds would make an AB InBev bid for PepsiCo more likely than one for Coca-Cola.

And, so it goes. We may have just called time on one mega-merger, but already the battle lines are being drawn for the next.

PepsiCo "better fit" for Anheuser-Busch InBev than Coca-Cola Co – analyst

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