The European Commission formally approved reforms to a joint venture linking the Coca-Cola Co. and Nestlé SA on Thursday that will allow the alliance to expand its production and distribution in the growing iced-tea sector.

The expanded alliance between Nestlé and Coke, announced in January, allows the new company, Beverage Partners Worldwide or BPW (formerly the Coca-Cola Nestlé Refreshment Company), to increase its operations from 24 to 40 countries as well as adding new products to its distribution network.

Based on the strong competition in the European iced-tea market, including rival Unilever's Lipton brand, the Commission said that the merger "does not give rise to any competition concerns."

New brands, research

Created in 1991 to make and distribute Nestlé's Nestea brand, as well as iced coffee and chocolate drinks, the reformed venture will add Coke's Tian Yu Di and Yang Guang teas as well as Planet Java coffees and Nestlé's Beltè tea to its product list.

BPW will be based in Zurich, Switzerland, and expects sales to reach a volume of 250 million cases annually. The company will operate worldwide, with the exception of the US, Canada and Japan.

It will also concentrate on new research into tea drinks containing calcium, herbs and other "health positioning" ingredients.

Tough competition

The European Commission's merger regulators decided that BPW would face tough competition in Europe in the iced-tea market. Unilever's Lipton brand is the market leader in several European countries, where Nestlé has either "relatively low market shares" or is "even absent."

Nestea and Beltè in Italy will be rivaled by San Benedetto and Tè Guizza say the regulators. And in Spain and Denmark, where Nestea sales are higher, the Commission argues that iced tea "is still a novel product" and other brands will soon arrive.

Warren Giles