US: Coke pays US$128m for Danone water business
As reported in just-drinks yesterday, the soft drink giant Coca-Cola and French bottled water company Danone have confirmed they have sealed a deal giving Coke a share of Danone's US mineral water brands.
Coca-Cola has paid US$128m in cash for a 51% stake in a partnership to market and distribute Danone's bottled spring and source waters in the US.
Danone chairman Franck Riboud told the French newspaper Les Echos that the joint venture, which controls a third of Danone's US water activities, should boost the French company's pre-exceptional profits next year.
However Riboud said that the creation of the partnership did not mean Danone was going to sell its bottled water business to Coke. "Coca-Cola doesn't hold an option to acquire the rest of the capital in the joint venture," Riboud said in the interview with the paper.
"The deal with Coca-Cola will allow us to get back to a strong growth rhythm. The simple fact that we will have the capacity to negotiate with the giant of soft drinks shows the potential of our brands," Riboud said. "The impact on our pre-exceptional result will be neutral this year and positive from 2003. The creation of the joint venture will, nevertheless, mean we have to amortise US$280m of goodwill in 2002, given the price paid by Coke.
"But we hope to make up this difference because our participation in the joint venture will bring us strong and lasting growth in our brands and our profits," he said.
Danone's part in the deal will see it contribute the assets of its retail bottled spring and source water business in the US, including five production facilities, a license for the use of the Dannon and Sparkletts brands and ownership of several value brands.
The companies expect to close the transaction shortly.
The deal will see a shift in the balance of power in the US water market with Coke overtaking Pepsi as the country's number two operator.
Nestle leads the US market with its collection of water brands across price segments, including Perrier, Poland Spring, Deer Park and Zephyrhills. Nestle held 37.4% of the US market last year, according to Beverage Digest. Pepsi was second with 16.7%, with Coke on 10.9%.
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