Coca-Cola Enterprises (CCE) says it would be keen to buy or distribute more brands like Capri Sun to expand in still drinks alongside increasing its footprint in Western Europe.
Addressing the Consumer Analyst Group Europe (CAGE) 2014 conference in London yesterday, CEO John Brock was asked by analysts about the company’s cash use and M&A – both in terms of geographic reach and portfolio extensions.
“We’d like to get bigger in stills – juices and juice drinks, as well as in waters – but we also recognize that we’re very strong in carbonates, far and away the most profitable part of the business,” Brock said.
“While we’d like to see a broader portfolio – we and the Coca-Cola Company constantly talk about opportunities in these other areas – we’ve got to see they’re going to create value,” he added, stressing that CCE did not simply want to grow sales for the sake of it.
‘We're always on the lookout' - Brands that create value
“We love our business with Capri Sun – it’s a great brand, we’d like to see more brands like that and if we can find some to buy – either in concert with The Coca-Cola Company or to distribute – we’re always on the lookout,” Brock said.
(Capri Sun is owned by German firm WILD but is licensed to CCE in The Netherland, France, the UK and Ireland – UK value sales grew 16.6% to £94m in August 2013.)
In terms of geographic reach, Brock noted wryly that Coke is sold in more countries worldwide than there are countries in the United Nations “so there’s a Coke bottler everywhere”.
“We’ve been very clear in saying that we would, as one of our two top priorities, like to get bigger in Western Europe,” he said.
“But we’ve also said very clearly that we’re going to do it in a very disciplined and focused fashion.
That’s still the case – I think it’s pretty obvious to you where the geographies in Western Europe are that we don’t own.”
Western European expansion – CCE will not overpay
CCE is present in Britain, Belgium, France, Luxembourg, Holland, Norway and Sweden – two key markets it is not present include Germany and Italy, with Coca-Cola Hellenic covering the latter.
“We’d like to own them all, but we’ll only want to own them if we get them for the right price, with a willing seller. Acquisitions are almost by definition opportunistic, we’re not going to overpay.”
Brock said that many analysts thought it was inevitable overpay to enter Germany following the sale of its North American bottling assets to the Coca-Cola Company four years ago.
“But we chose not to do that. We will never do that,” Brock added. CCE chose not to exercise the option to buy into Germany last year.
Weak start to 2014 in UK, but things improving?
Confronted with an analyst suggestion that the UK market was proving problematic given resistance to CCE’s price increases and lackluster volumes, Brock insisted things were improving.
He blamed a slow start to 2014 in Great Britain (GB) on wet weather, promotions by rivals, CCE’s preparations for a move from 2 liter straight wall PET to 1.75 liter, and weak Christmas sales that resulted in excess retail capacity.
“The good news is that as we’re going through the quarter it’s getting sequentially better, which gives us reason to believe that as our marketing programs kick in – they’re just about to do in a big way – Cherry Coke and the FIFA World Cup will see a return to the overall growth profile in GB.”