Natural Foods Merchandiser

Coca-Cola to spend a healthy $4.1 billion on vitaminwater

The Coca-Cola Co. reached an agreement today to acquire Energy Brands, Inc., known as Glacéau, for $4.1 billion in cash. Energy Brands, well-known for its popular vitaminwater, is a leading producer of enhanced water beverages also offering fruitwater, smartwater and vitaminenergy.

The acquisition is expected to help boost Coca-Cola's sales in the non-carbonated beverage sector, an area previously dominated by giant rival PepsiCo, maker of Gatorade and Propel.

Both companies have recently been sipping on non-carbonated and non-soda lines including Coca-Cola's purchase of Fuze and PepsiCo's acquisition of SoBe.

The Glacéau purchase represents a move into nutritional and functional beverages, coined "active-lifestyle beverages" in the conventional marketplace. Glacéau is currently the best-selling enhanced water in North America and expected to lead sales in non-carbonated beverages domestically and internationally for the next three years, according to Coca-Cola.

"This is an outstanding opportunity for both our companies to build an expanded active lifestyle business, first in the United States and then around the world," Muhtar Kent, president and CEO of The Coca-Cola Company said in a statement.

Functional beverages posted sales of $40 billion in 2005 and are expected to push $54 billion in receipts by 2010, according to Euromonitor International in Chicago. Recent buying trends for beverages showed more consumers reaching for health and wellness benefits including ready-to-drink teas, bottled water and sports drinks, according to the January 2007 Times & Trends Report by Information Resources Inc. in Chicago. At the same time, consumer attitudes are shifting from weight loss to total health management, making enhanced beverages a more inviting purchase.

Coca-Cola will acquire 70 percent of Glacéau next month and the remaining 30 percent from stakeholder Tata Tea for $1.2 billion in November this year. Glacéau will operate as a separate business unit within Coca-Cola North America and key executives and managers have agreed to stay at Glacéau for at least the next three years.

"We welcome vitaminwater, the icon of active lifestyles, to Coca-Cola, the ultimate and enduring icon of refreshment," said Neville Isdell, chairman and CEO of The Coca-Cola Company in a statement. "Glacéau has built a great business with high-quality growth as well as a strong pipeline of innovative products and brands. We envision even faster growth for Glacéau as part of Coca-Cola's enhanced range of brands for North American customers and consumers."

"It's a perfect match connecting the hottest active lifestyle brand with the full resources of the world's best beverage company," J. Darius Bikoff, Glacéau founder and CEO, said in a press release.

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