Australian Financial Review, pg 46. Sue Mitchell. 29 April 2009.
Coca-Cola Amatil (CCA) is under renewed pricing pressure in the $4 billion soft drink market following Asahi Breweries
$1.18 billion acquisition of Schweppes Australia this month. A new wave
of discounting started in supermarkets that raised the price gap
between Coca-Cola
and Pepsi to over 50 percent from 40 percent earlier this year, and 25
percent four years ago. Analysts indicated that Schweppes increased
discounting in the weeks leading up to the ownership change and had
funded the latest price cuts as a last-minute move to increase volumes
and market share. Woolworths sold 1.25 litre bottles of Pepsi and Pepsi
Max at 50 cents off the normal price compared with Coca-Cola,
while Schweppes lemonade and Solo varieties retailed at large discounts
to CCA’s Sprite and Kirks brands. One analyst said Asahi would need to
make money and was likely to become more rational on price as they paid
a large price for the Schweppes business.
Citigroup and Merrill Lynch
said CCA buys soft drink concentrate in Australian dollars, while
Schweppes buys this in United States dollars. CCA chief executive Terry
Davis believes Japanese beverage companies paid Alan Bond’ prices to
get entry in the local non-alcoholic beverage market, but would not
make proper returns unless pricing moves to more normal levels. Asahi
paid $1.185 billion for Schweppes, the second-biggest player in the
local market with brands such as Pepsi, Schweppes, Spring Valley and
Soho. Suntory paid $1.26 billion for Frucor Beverages, which leads the
market in energy drinks with its V brand. Lion Nathan and Japanese shareholder Kirin made a $7.6 billion offer for CCA last year, but CCA’s major shareholder, The Coca-Cola Company squashed the deal. Kirin has now focused on buying the 54 percent it doesn’t already own in Lion.
