Coke and P&G in Joint Mega-Venture

21 February 2001

A united global juice, drink and snack business is the goal of multinational titans Coca-Cola and Procter & Gamble, who today announce a 50/50 owned limited liability company to develop and market juices, juice-based drinks and snacks.

The joint venture will include Coke’s Minute Maid juice brands, along with Hi-C, Five-Alive and Fruitopia drinks; while Procter will proffer its Sunny Delight juice drinks and Pringles snack brands. According to observers, a major benefit of the deal is the melding of Coke’s global distribution system to P&G’s research and product development knowhow.

Heading the unnamed new entity as chief executive is veteran Coke staffer Donald Short, whose star has been in the ascendant since turning around Coke’s sagging fortunes in India. Newco will have its own management plus two directors from each partner company, responsible in all for some 40 brands, 6,000 employees and 15 manufacturing plants.

According to P&G's chief executive officerA G Lafley, the concept took wings some six months ago when he invited Douglas Daft, Coke’s chairman, to lunch in Cincinatti.

Explained Lafley: “We knew we had a stymied global snack brand in Pringles, and Sunny Delight couldn't achieve its potential and gain access to channels of distribution that would establish it within an 'arm's reach of desire'," (quoting a Coke slogan about the universality of its drinks). He had considered selling the brands but “felt an alliance would generate significantly more shareholder value”.

Daft concurred. Linking with P&G jigsawed neatly into Coke’s gameplan of aggressive expansion into non-carbonated beverages: “Brilliant stuff comes out P&G's R and D, and it fits in perfectly with what we're trying to do," he eulogized.

The venture will address as a priority the distribution of existing products: "Pringles are in one-tenth of the outlets that Coke is in the world," said Donald Short. Equal importance will be attached to innovations in both juice and snacks. Despite its highly structured progeniture, Newco’s esprit will be entrepreneurial: "We'll capture the value of both companies," Short insisted. "If our parents are a little bureaucratic, we won't be."

Regulatory authorities worldwide are expected to display less enthusiasm.

News source: Wall Street Journal