Coca-Cola M&A Activity: Company Portfolio Analysis (3)

After PepsiCo acquired its two largest bottling and distribution partners in late 2009 and early 2010, Coca-Cola seized an opportunity with Coca-Cola Enterprises (CCE). CCE, as one of Coke’s largest and oldest bottling partners worldwide maintained substantial capital-intensive operations in the North American market. The landscape of the beverage industry has changed in recent years to reflect updated consumer preferences and the reality that most markets worldwide are saturated with a variety of beverage companies. This verity has resulted in lucrative financial opportunities to be found in the acquisition of bottling partners. This second major trend of the industry is the one Coca-Cola embraced in 2010 with its acquisition of substantially all of CCE’s home-market activities. The way Coke has addressed these industry trends has proven the company a formidable global foe that is becoming increasingly better poised for future profitability and market dominance.

An M&A deal worth noting, but that did not come to fruition, was Coca-Cola’s failed 2009 bid to takeover Chinese juice maker Huiyuan. Huiyuan, one of China’s largest juice makers and sellers in the country’s fastest growing beverage segment, had agreed to sell itself to Coca-Cola for approximately $2.4 billion.[ Buckley, Chris. "China Says Rejection of Coke-Huiyuan Deal No Blow to Open Trade."Reuters.com. 19 Mar. 2009. Web. 29 Apr. 2011. http://www.reuters.com/article/2009/03/19/us-cocacola-huiyuan-china-idUSTRE52I27120090319 .] The deal was agreed upon after months of due diligence, market research, and negotiations between the companies. Ultimately, however, it was struck down by Chinese regulators who claimed the deal would have given Coke a virtual monopoly on the beverage industry in China. There is wide speculation that other political forces were to blame for the deal turning sour, and that market dynamics were only lightly considered.

The significance of this failed transaction is that Coca-Cola followed its “buy the brand” strategy in line with the major industry trend of simply acquiring solid brands that have already been established, rather than build out a new product line. The company followed every step appropriately, and reached a deal to access a large portion of the Chinese beverage market. The deciding factor in this case became a nationalistic government flexing its political muscle, and the deal failed at little or no fault of Coca-Cola’s. While the beverage industry’s dominant trends are generally positive steps for beverage makers to improve bottom-line and top-line growth, there is a pitfall in the strategy in that deals do not always close. Political forces present a major risk to multinational food and beverage companies like Coca-Cola and PepsiCo going forward as a result.

More posts from a paper on Coca-Cola M&A Activity (including merger with CCE):

Coca-Cola M&A Activity, CCE Acquisition: Executive Summary
Coca-Cola M&A Activity: Introduction
Coca-Cola M&A Activity: Product Trends
Coca-Cola M&A Activity: Demand and Economic Trends
Coca-Cola M&A Activity: Business Model Trends in the Beverage Industry
Coca-Cola M&A Activity: Beverage Industry Business Model Trends (2)
Coca-Cola M&A Activity: Company Strategic Objectives
Coca-Cola M&A Activity: Company Strategic Objectives (2)
Coca-Cola M&A Activity: Company Portfolio Analysis
Coca-Cola M&A Activity: Company Portfolio Analysis (2)
Coca-Cola M&A Activity: Company Portfolio Analysis (3)
Coca-Cola M&A Activity: PepsiCo M&A Portfolio Analysis (Largest Competitor)
Coca-Cola M&A Activity: PepsiCo M&A Portfolio Analysis (Largest Competitor) (2)
Coca-Cola M&A Activity: Other Beverage Industry M&A Activity
Coca-Cola Acquisition of CCE North America: Deal Structure
Coca-Cola Acquisition of CCE North America: Deal Structure (2)
Coca-Cola Acquisition of CCE North America: Major Legal and Financial Players
Coca-Cola Acquisition of CCE North America: Regulatory and Shareholder Approval of the Transaction
Coca-Cola Acquisition of CCE North America: Implementation Analysis: Likelihood of Acquisition Success
Coca-Cola Acquisition of CCE North America: Implementation Analysis: Likelihood of Acquisition Success (2)
Coca-Cola Acquisition of CCE North America: Conclusion to M&A Deal Analysis
Coca-Cola CCE Merger: Table of Contents and Works Cited List