Coca-Cola Agrees To Distribute Dr Pepper Drinks (KO)
Share this Article
Twitter
Facebook
Delicious
Digg
Stumble
RedditAuthor:
SXXAZJ
Tags:
Coca-Cola Dr Pepper Dr Pepper Drinks Dr Pepper Snapple investor Investors stock stocksCoca-Cola (KO)Coca-Cola is one brand that is easily recognizable in countries across the globe. The brand has been ingrained in societies for decades and now the company is making moves to ensure that this level of staying power continues for years to come. Coca-Cola said it has reached a 20-year agreement to distribute some of Dr Pepper Snapple Group Inc. products, with the latter getting $715 million. The company is known for making some wise decisions when it comes to acquisitions, so many are wondering if this will turn out to be one of those smart moves? What are some of the important aspects of the deal?
Daily Chart
Stock Analysis
Dr Pepper Snapple (DPS: Charts, News, Offers) manufactures, markets, and distributes more than 50 brands and several flavors of carbonated soft drinks, ready-to-drink teas, juices, mixers, waters and other beverages. Under the agreement, Coke will make a one-time cash payment of $715 million to distribute Dr Pepper and certain other Dr Pepper Snapple brands in the U.S. and Canada, where they are currently being distributed by Coca-Cola Enterprises (CCE: Charts, News, Offers). Coca-Cola also promised to sell Dr Pepper and Diet Dr Pepper in its “Freestyle” soda fountain machines, which allow consumers to mix and match beverages to create their own concoctions. Coca-Cola’s distribution license agreement with Dr Pepper will have an initial term of 20 years, with 20-year renewal periods. However, the agreement is subject to Coca-Cola completing the proposed acquisition of the North American Bottling Business of its largest bottler Coca-Cola Enterprises, which is expected to close during the fourth-quarter.
The deal is mutually beneficial to both parties involved. Coca-Cola is able to continue distributing a product that consumers covet on a daily basis while capitalizing on the popularity of the Dr. Pepper brand. This is the second large windfall for Dr Pepper Snapple this year. Dr Pepper Snapple has reaped $900 million from Coca-Cola’s main rival, PepsiCo (PEP: Charts, News, Offers), which bought its two biggest bottlers in February. It appears that Dr Pepper Snapple is receiving the best of both worlds. Now they have lucrative agreements with two of the largest beverage producers in the world. Coca-Cola is definitely building a portfolio of products that have the ability to take the company to the next level. Larry Young, President and CEO of Dr Pepper Snapple Group, said the agreements build a strong foundation for the continued growth of the company and its brands. “It solidifies Coke’s support of the Dr Pepper trademark, while enabling us to optimize our route-to-market by assuming distribution of several key brands.”
Overall, this deal appears to be a good one for both companies despite Dr Pepper Snapple reporting that its first-quarter earnings tumbled 33 percent. While some analysts question the strategy, Dr Pepper Snapple’s practice of splitting its allegiance between Coca-Cola and PepsiCo for distribution gives the company leverage, industry insiders said. If the deal goes through, Coca-Cola will prevent some of the popular brands under Dr. Pepper Snapple from possibility going to other competitors. Coca-Cola shares fell 13 cents to $51.14 in morning trading. Dr Pepper shares dipped 27 cents to $36.22.
View full post on InvestorGuide» Stock of the Day
No related posts.
Related posts brought to you by Yet Another Related Posts Plugin.
Comments are closed