Today saw the confirmation of a blockbuster three way merger involving Coca-Cola Enterprises, the largest independent bottler of Coca-Cola brand beverages in Western Europe, with Coca-Cola Iberian Partners, a smaller independent bottler in Spain and Portugal, and Coca-Cola Erfrischungsgetränke AG, The Coca-Cola Company’s (TCCC) wholly owned bottling operation in Germany. The new entity will be called Coca-Cola European Partners PLC, with TCCC holding an 18% stake, with remaining holdings divided between CCE and CCIP.
This transaction is a long speculated consolidation of Coca-Cola’s vast bottling network in Europe, impacting 13 Western European countries – including Western Europe’s largest soft drinks market, Germany. The new bottling company will have combined company revenue estimated at US$12.6 billion, according to Coca-Cola Enterprises.
Efficiency, savings….and a powerful new partner for TCCC in Europe
For Coca-Cola and its bottling partners, this move is all about efficiency and savings. Bottling is a capital intensive and expensive enterprise, and The Coca-Cola Co has embarked on a recent process of refranchising these operations to local subsidiaries, spending more of its focus and resources on producing concentrates and the global marketing of its brands. To date, refranchising has mostly taken the form of smaller agreements with existing bottlers in the US, to release more operating territory.
However, this deal is a much larger and exciting proposition, creating the largest independent bottler of Coca-Cola products, and a powerful new partner in Western Europe. The deal seems like an excellent fit for CCE’s capabilities and expertise, bringing the high per capita soft drinks market of Germany under its umbrella, although a private label and discounter intensive grocery retail environment will present immediate challenges. The new entity will also take responsibility for the struggling but high potential markets of Spain and Italy, where there is room to generate per capita growth across soft drinks if economic recoveries take hold.
Three Challenges for the new Coca-Cola European Partners in its largest market
- Germany is a top 5 soft drinks market in terms of per capita consumption, but carbonate sales were flat in 2014 and not promising in 2015. How can the new bottling giant re-ignite the cornerstone of the European beverages business? Will non-cola continue to outperform?
- Coca-Cola has a successful portfolio of bottled water brands in Germany, which are not a traditional part of the CCE portfolio. Fruit stills, enhanced waters and non-CSD brands must be a big part of a new growth strategy for Germany.
- How can the energy drinks category be grown in Germany? Per capita consumption lags behind comparable markets in the European system. What role will Monster brands play in boosting the energy portfolio in Germany?
The State of Soft Drinks in the 13 Markets Served by the new Coca-Cola European Partners…