Coca-Cola USA buys CCE

[mission vending]

Here is a cut and pasted article from the Vending Times from my e-mail newsletter:

ATLANTA -- Coca-Cola Co. agreed last week to buy the bulk of its largest bottler, Coca- Cola Enterprises Inc., in a deal valued at $12.17 billion, including debt. The announcement came on the heels of PepsiCo closing its $7.8 billion purchase of its largest bottlers, Pepsi Bottling Group Inc. PBG (see story above).

Under the agreement, Coke will relinquish its 34% stake in Coca-Cola Enterprises, worth $3.4 billion, and assume $8.88 billion in debt, and all North American assets and liabilities.

CCE agreed to buy Coca-Cola's bottling operations in Norway and Sweden for $822 million, and acquire an 83% equity stake in its German bottling operations in the near future. CCE shareholders will get one share of a new Coca-Cola Enterprises company devoted to European bottling, along with a one-time $10-a-share payment.

By folding in CCE's operations, Coke will control about 90% of the bottling of its products in North America. CCE represents 16% of Coke's volume worldwide and is the primary bottler for the U.S. and Canada. Last year, the North American operations accounted for 70% of CCE's net operating revenues, with the remainder coming from Europe.

Coke expects cost savings of $350 million over four years. The transactions are expected to close in the fourth quarter.

END of cut and paste....

Coca-Cola is tightening it's grip on the manufacturing and distribution of it's products . See the part about Coke controlling about 90% of the bottling of its products? Who wants to take a stab at what this means for third party vending programs? IMO nothing good will come from it.

[mxer518]

I just ordered 20 machines this afternoon to put into storage in my warehouse to stock pile in case there are some cut backs on the third party program in my area.

[snack dude]

Its almost like they sat down and said "were losing market share so lets make it harder for our vendors to sell our products"

I have a friend that owns a convience store and the other day he wanted to know if I could order coke products for him. He said that they are getting to be a real pain to deal with. He said he wished he could get away with not stocking coke at all but knows better

I have some of both pepsi and coke third party machines and here pepsi is five times easier to deal with and order product from

[mission vending]

FWIW Pepsi has already done this as well.... here is the article:

PURCHASE, NY -- PepsiCo announced said it has completed the $7.8 billion acquisitions of its two largest bottlers, Pepsi Bottling Group Inc. and PepsiAmericas Inc.

With the completion of the mergers, PepsiCo stakes its claim as the largest food and beverage business in North America and the second largest in the world, with nearly $60 billion in annual revenues and approximately 285,000 employees. It also is the global leader in savory snacks.

PepsiCo said 80% of its North American beverage manufacturing, sales and distribution system will be consolidated, enabling greater operating efficiencies and speed-to-market. The company added that ownership of the bottling operations would provide it with greater control over development, distribution and marketing of new products.

The transactions are expected to create pretax synergies of approximately $125 million to $150 million in 2010 and $400 million annually when fully implemented by 2012. The company said some of the cost savings would be reinvested in high-growth emerging markets, global research and development and new operating capabilities.

PepsiCo Americas Beverages (PAB) segment, which encompasses PepsiCo's beverage businesses across the Americas, will be comprised of two business units.

Eric J. Foss will lead the newly combined bottling operations, called Pepsi Beverages Co. and Massimo F. d'Amore will continue to lead Gatorade, Tropicana and Latin America Beverages as chief executive of PepsiCo Beverages Americas. He remains responsible for PAB marketing and franchise management. The operations of PBG and PepsiAmericas in Europe will be consolidated into PepsiCo Europe, led by Zein Abdalla.

PBG and PepsiAmericas common stock ceased trading on the New York Stock Exchange at the close of the market on Friday, Feb. 26, and have been de-listed. PepsiCo reiterated previous guidance that it expects to achieve 11% to 13% EPS growth in 2010 and low- double-digit EPS growth in 2011 and 2012.

[snack dude]

I get what your saying, Its an overall difference in attitude at least here in cincinnati.

For example I get a call from the pepsi call center like im sure alot of others get to get my order for the next week. They call me every friday morning at around  9:30. I mean i can almost set my clock by it. If I call my local rep and ask for a machine he says where and when and then calls me to see if everything is all right.

I used to get a weekly call from coke and then they told me they were only going to call me once a month but I was free to call them only on  wednesdays for a deliverry if I needed it.

two months later my local rep called me for the first time in forever to tell me I was not ordering enough. A DUH

I found another souce to get coke, so now I order once a month when they call me and I order the absolute bear minimum and I havent put a coke machine anywhere in months. I put coke and diet coke and some sprite in the machines I own but I dont push it. If I need a third party machine its all pepsi.

Thats a hell of a sales campaign coke has going on dont ya think.

[sbishop]

I bought around $400 worth of coke product for a new machine I ordered in Dec. The machine is still not on location and the $400 of product that will not vend in my machines is still sitting in storage.

[mxer518]

I am just amazed that all of you vendors are having such a tough time with Coca Cola. I have nothing but issues with Pepsi and coke has been wonderful to me. The moral to all of this is to make the best of what your area has to offer with the bottlers and always make sure you have an exit strategy if things were to change abruptly on any given day. I am not proud that I depend so much on the third party programs but for quick growth and the needs for new machines I have very little choice. I also feel it also has a ton to do with your business model and relationship with the bottlers. I for example have a great relationship with my reps, I get location calls from the bottlers on a weekly basis asking me if my company will service accounts that they are getting calls for their Full service Dept. I can not blame these company's for not wanting to deal with the small guys but we all start small at one point, For example my business plan has projections for over 250 drink locations in the next 18 months so for me it is so very important to align myself in a professional manner with the bottlers to make sure that this goal is met. From talking to my various reps they are just trying to get rid of the small fly by night guys that are ordering less than 5 pallets at a time and having the deliveries brought to residential addresses.

[snack dude]

It is absolutly regional. My area is on the border between two pepsi bottlers and the difference is night and day. But the local coke bottler has this whole region so I am stuck. I know what your saying about the small fly by night guys and I cant blame them for that.

In my case I have a small warehouse with a loading ramp in an industrial park and I use to order about 4k a month from them. Now I realize thats not that big a number for some vendors but I still order that much a month from the local pepsi bottler and they fall all over me.

That may change I dont know, But out of about one hundred machines eighty two of them are mine.

I only do third party if I absolutly have to. The difference probably is I do not have any public locations like malls or outside stores and such. If I did I would probably go the third party route for those.

[mission vending]

Snack Dude I'm kind of in the same position as you. Small warehouse with ground access as well as a dock, 4-5K monthly order with Coke (bottles only), and 12 lease machines.

I HOPE that all they are trying to do is get rid of the smaller vendors that consistently lose/steal equipment and seldom order product, that part of what they are doing makes sense. The question then becomes, where is the line going to be drawn the separates those will get equipment and those that won't and have their existing stuff taken back. Like you, I can replace all my lease stuff in pretty short order if they decide that they want it back and I like it that way. 

I've said it before, IMO letting another company, and a competitor at that, get deep enough into your company that you are at their mercy and can dictate terms to you is not a good idea.

Again, IMO anyone having third party equipment with any bottler ought to at least stop for a bit and think about the "what if" doomsday scenario that we all might eventually have to return our third party equipment and how they would handle the situation, that's just good planning.

Mxer,

We all have very different ideas on how to run and grow our businesses, on this subject we part ways. I don't think either of us is wrong, we just have different views based on our experiences in this industry. I honestly wish you all success with all that third party equipment that you've got. It sounds like you have a fantastic relationship with your rep and that is something to be cherished.  Good relationships in this business are few and far between. I sincerely hope that you don't come to regret having that level of dependence on the bottler.

Mike

[mxer518]

I agree that to much dependency with the bottlers is something that can virtually put me out of business over night. i would greatly love to be able to have zero third party machines out on location but at the end of the day I feel that the growth is more important. In the last 6 months I have been able to have some pretty sizable growth that would have never before been possible without being able to get the machine from bottlers for absolutely no money. It might be even more of a backwards way of thinking but I have the mindset that if I am able to grow fast enough with them to a point where I am a sizable account for the local sales center they will not but the hammer down on me when they start getting tight with who gets machines and who they are going to start taking them away from. I am at this point so far deep into this that it would cost me nearly 75K to be able to replace all the machine with ones of my own.

[mission vending]

So in poker parlance you are "all in"

I see your thinking......  and given your predicament that's probably not a bad idea.

[snack dude]

Sometimes you just have to bet it all on a pair of fives