Coke bottler focusing more on non-carbonated drinks
The Atlanta Journal-Constitution
Published on: 02/21/08
BOCA RATON, Fla. — Coca-Cola Enterprises' top executive said Thursday that carbonated soft-drinks remain the heart of the company's business but that it must continue to broaden its line-up of non-carbonated beverages for long-term success.
Atlanta-based CCE, Coca-Cola Co.'s largest bottler, would have been hard-pressed to hit its goals without Glaceau, said CCE Chief Executive John Brock in a presentation to a Florida conference hosted by the Consumer Analyst Group of New York.
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CCE added Glaceau, which makes Vitaminwater and Smartwater, to its distribution system in November after Coca-Cola bought the company earlier in 2007.
"Had Glaceau not come along we would have found ourselves, I think, still trying our damndest to achieve that same set of results we are talking about with you today," Brock said. "The way of getting there would not have been nearly as neat or as clean."
The addition of these non-carbonated, or still, beverages gives CCE more leverage against rising costs for core materials, including aluminum, sweeteners and plastics, Brock said. Without them, CCE would have had to raise prices higher on carbonated soft drinks and risk losing volume, he said.
"What we now have is a far more robust plan," Brock said. "We aren't going to have to take pricing in sparkling (carbonated soft drinks) to the degree that we would have if we didn't have our significantly expanded still portfolio, and we have much greater confidence that we can achieve the set of results that we plan to achieve."
Last week, CCE reported 2007 net income of $711 million, compared to a $1.1 billion loss in 2006. Net revenues rose by 5.7 percent in 2007 to $20.9 billion.
CCE reaffirmed Thursday 2008 revenue growth projections of 4 percent to 5 percent and high single-digit growth for earnings per share.
CCE will continue to push its "Red-Black-Silver" strategy for the carbonated soft drink segment that focuses on Coca-Cola Classic, Coke Zero and Diet Coke, Brock said. The non-carbonated business should benefit from a full year of Glaceau, he said.
CCE also will roll out this year Powerade Zero, a no-calorie beverage that extends the "Zero" tag to the sports drink segment. Powerade Zero will help CCE chip away at the market share of its chief rival, Brock said. PepsiCo Inc.'s Gatorade dominates the segment.
"It is going to be a winning combination and it will help create an even stronger Powerade brand," Brock said.
Brock did not provide details on possible expansions into the tea segment, but he pointed to it as an area that also needs attention. Coke's Nestea trails Lipton, tied to Pepsi through a joint venture.
The Coca-Cola Co. recently completed a deal to buy a 40 percent stake in Bethesda, Md.,-based Honest Tea. It's still unclear whether CCE will bottle and distribute Honest Tea, Brock said. But the Coke bottler will be pushing for a new tea game-plan, he said.
"In terms of the bigger tea strategy, maybe that's a question you could ask them (the Coca-Cola Co.) tomorrow," Brock told the group of analysts. Coca-Cola Co. executives present Friday.
"We remain very interested in it and we are hopeful at some point we'll have the makings of a real honest to goodness tea program," Brock added.



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