In the spotlight - Coca-Cola Amatil

Describing itself as a powerhouse in the Australian FMCG sector, Coca-Cola Amatil (CCA) is certainly an iconic figure in the Australian drinks industry.

The Sydney-based bottler, 32%-owned by Coca-Cola Co, last week posted a rather profitable first half set of results. Net profit leapt 22% in the first six months of 2008, driven by growth in its Australian and New Zealand beverage businesses, to a record A$172m (US$149m) - boosted by the sale of its South Korean business.

Managing director Terry Davis put it down to his firm's resilience in the face of "tougher trading conditions" and praised the company's strong performance in alcoholic drinks.

As CCA continues to grind its heels into the beverage industry, reports out this week have suggested the bottler is looking at making acquisitions exceeding A$800m in value. Rumours that the company has held talks with Danone over the possible acquisition of its Frucor New Zealand unit have surfaced, while Davis is also believed to have expressed an interest in Cadbury's local Schweppes unit.

Not bad for a company that started out in the tobacco business.

Yet CCA's involvement in the beverage industry is certainly not a recent one and dates back to the company's first acquisition of Shelleys and Marchant in 1964.

A year later, the company bought an interest in Coca-Cola Bottlers in Perth and followed that by taking control of the Perth operation and Coca-Cola Bottlers in Melbourne.

Over the next 25 years, CCA continued to acquire Coca-Cola bottlers in Brisbane, Geelong, Sydney, Port Macquarie and Newcastle. Then, in 1990, a decision was taken to focus on its core businesses of beverages and snack foods. CCA subsequently sold its interests in poultry, tobacco, communications and packaging.

Yet it is since 2003 that the company has experienced its most prolific growth, both thanks to its existing operations and through acquisitions.

The company bought bottled water company Neverfail Springwater for A$280m in July 2003 and subsequently sold on its trademarks and associated property to Coca-Cola Co for A$28m a mere four months later.

By the close of 2006, CCA had acquired Peats Ridge Springs, Quirk's Refrigeration, Crusta Fruit Juices, Grinders Coffee, Northern Territory and SPC Ardmona.

Its biggest move however, was in August 2006 when Amatil made its first move into the alcoholic beverage sector.

The joint venture with brewer SABMiller meant the company would now begin selling and distributing imported premium beer in Australia under the name Pacific Beverages. Initially importing SABMiller, the portfolio gained momentum with the addition of Peroni Nastro Azzurro, Miller Genuine Draft and Pilsner Urquell.

A further agreement with global premium spirits distributor Maxxium meant Pacific Beverages was now selling and distributing a portfolio of spirits including Absolut Vodka, Jim Beam and Remy Martin.

The JV banked strong returns for Amatil in the first half of 2008, with its share of the premium beer market growing to 7%.

Yet things haven't run completely smoothly for the bottler this year, as it saw itself scaling down one of its SPC Ardmona facilities resulting in the loss of up to 60 jobs in Australia.

The juice company, which was acquired in February 2005 for A$500m, put the move down to "increasing pressure" as a result of the drought and a higher currency.

Despite trying times, CCA is remaining bullish about its future, claiming a "robust" financial position and "at least high single digit" profit growth anticipated.

As a major multinational company boasting overseas operations in New Zealand, Papua New Guinea, Fiji, South Korea and Indonesia and profits of A$172m, business is certainly continuing to fizz for CCA.

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