Coca-Cola kills off CCSB alliance

Cadbury Schweppes is selling its stake in Coca-Cola Schweppes Beverages to Coke’s biggest bottler, bringing to an end the increasingly tense relationship between the partners, as revealed exclusively in Marketing Week (April 5).

Cadbury is selling its 51 per cent stake for 620m to the bottler Coca-Cola Enterprises (CCE), which is 44 per cent owned by Coca-Cola but is separately listed on the New York stock market. Coke is also selling its stake in CCSB to CCE for 616m. CCSB was set up in 1987.

Cadbury has entered into a 15-year agreement with CCE to bottle and distribute its brands and says the deal will allow the company to devote its resources to expanding its branded business worldwide.

The company’s best known brands are Dr Pepper, Sunkist, Oasis and Kia-Ora. It has also agreed to provide 10.5m in marketing and transition support for the first two years and 10m for the following two years of the licensing agreement.

Coke is understood to have been unhappy with the partnership following Cadbury’s acquisition of the Dr Pepper soft drink for 1.6bn last year. This gave Cadbury Schweppes greater muscle in the soft drinks market. The deal made it the world’s third biggest soft drinks group since it owns 7-Up in the US.

In April, Coke is understood to have put pressure on CCE in the US to stop distributing some Cadbury Schweppes brands, including Sunkist and A&W Root Beer. Sources suggest this put increasing pressure on the UK relationship.

Coke was also angered by Cadbury’s decision to launch its Oasis new age soft drink through CCSB, forcing Coke to look to Food Brokers to distribute its own brand in that sector, Fruitopia.

Cadbury’s deal with Canadian supplier Cott, in which Cott bought drinks which Cadbury produced on the continent, also soured relations. Cott is the main supplier behind the rise of own-label soft drinks in the UK, which now hold about 20 per cent of the total cola market. The deal fell through last November.

Coke says the move follows a pattern already set in mature markets, where it pulls out of bottling to concentrate on marketing and supplying syrup.

See News Analysis, page 19

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