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.