Blog: Olly WehringSnappy headlines loom in Cadbury sell-off

Olly Wehring | 10 July 2007

Who is going to snap up Snapple? One thing you can guarantee as this deal rumbles on is months of rubbish headline writing from the world’s press. What also looks a certainty though is a prolonged period of horse-trading as the suitors for the business tussle for pole position for a brand in one of the most dynamic categories in the North American soft drinks market.

Snapple, for those of you who have been out in the wilderness for the last month, is part of the North American portfolio of drinks that confectionery giant Cadbury is looking to offload as it seeks to restructure its business.

Up until this week the favourites for the entire business included a number of consortia made up of private equity firms and the odd second tier trade buyer – Cott Corporation and Tata Tea have both been mentioned as bidders.

When just-drinks spoke to The Coca-Cola Company about a possible purchase at the end of June, the company was characteristically tight-lipped. “We will not talk about this,” was the simple response.

So it was something of a surprise this week to see reports that Neville Isdell, the company’s CEO, had seemingly thrown his hat into the ring. "We're always looking at whether to build or buy. That is a valuation that we undertake - whether it (Snapple) is of interest to us or whether we can do it on our own,” he told a journalist this week. I suspect the move may be a way of teasing a potential partner out the woodwork.

Coke’s entry into things will certainly set the cat amongst the pigeons, because the soft drink giant will have no chance under competition regulations of acquiring the whole of Cadbury’s North American business. In fact, Coke has already been blocked once by the US Federal Trade Commission from buying Cadbury’s carbonate business.

If Coke is to be successful then, the Cadbury business will have to be split up.

But Coke’s chances of success and even the prudence behind such a move seem to have split beverage analysts already. On the one hand there is a Snapple-sized hole in Coke’s portfolio and the continuing need for the giant to diversify away from carbonates and into faster-growing categories.

On the other hand, critics of a deal argue that Snapple is stagnating within its own category and Coke may be better off looking to a less well known and cheaper alternative, that has greater growth potential. If a deal were to occur, some analysts say they think Snapple could fetch around US$1bn and I have read a number of analyst reports that question the sanity of such a deal so soon after deals to acquire Glaceau Vitaminwater and Fuze Beverage LLC.

Anyway, all this assumes Coke will be allowed to take a serious seat at the negotiating table in the first place. Cadbury for one has said it wishes to offload the business in one piece rather that sell in a piecemeal fashion, so perhaps Coke’s only chance is to acquire the brand once the whole business has been sold to a private equity investor. But which private equity group is going to be keen to be left with a portfolio of brands in declining sectors, whilst waving goodbye to brand with the potential of Snapple?


Starbucks jumps on gin bandwagon

Starbucks has become the latest company to tap into the gin craze, with the launch of Starbucks Reserve Gin Barrel-Aged Cold Brew....


Feeling Blue on Monday? Help is at hand

It may not be scientific, but the third Monday in January has been coined 'Blue Monday' - the most depressing day of the year. Dreamed up in the UK by a psychologist commissioned by a holiday company ...


Bad day on the beer? This'll help

If you work for a brewer and are having a rough week, take a minute to regain some perspective with this, from the good people at US craft beer producer Sierra Nevada Brewing Co....


Brewers Association "bid" to buy Anheuser-Busch InBev strikes a chord

Is this a case of if you can't beat them, buy them?...

Forgot your password?