ATLANTA -- Coca-Cola is continuing to cut ties with Nestl a as it tries to catch up to the booming U.S. ready-to-drink tea market, according to a report in the Atlanta Journal-Constitution.
The Atlanta-based company announced Tuesday that it is once again scaling back Beverage Partners Worldwide (BPW), a joint venture created with Nestl a in 2001 to develop and market ready-to-drink teas and coffees.
The reorganized partnership opens the door for a long-rumored purchase by Coke of AriZona, the No. 2 bottled and canned [image-nocss] tea maker in the United States. Coke is a distant No. 4 in the U.S. when it comes to ready-to-drink tea.
Coke has reportedly been talking to AriZona about a purchase or distribution deal since at least 2005, but the BPW agreement didn't allow Coke to pursue AriZona independently.
AriZona spokeswoman Francie Patton had no comment when asked Tuesday whether Coke and AriZona are negotiating or whether Arizona's owners would entertain a proposal, according to the report.
Coke president and COO Muhtar Kent alluded to the possibility of an acquisition in a note to employees posted Tuesday on an internal company website. "We now have the flexibility we need to aggressively grow our tea and coffee business and better serve consumers throughout the world," Kent said, according to the newspaper.
An acquisition of AriZona would immediately make Coke a significant contender in the U.S. ready-to-drink tea market, which recorded roughly $4 billion in sales last year. Coke trails PepsiCo, AriZona and Snapple in sales of bottled and canned teas, according to Beverage Digest, which tracks industry sales.
Coke and Nestl a held a 10% share of the U.S. ready-to-drink tea market in 2006, which was down three points from 2005. That's compared with PepsiCo's 37% share and AriZona's 33% share. In 2006, case sales a key beverage industry measurement of ready-to-drink tea grew nearly 26%.
The reworked BPW deal allows Coke and Nestl a to compete independently in the U.S. ready-to-drink tea market. Coke and Nestl a had already scaled down the BPW joint venture last November, pulling green teas out. That allowed Coke to buy juice and tea maker Fuze this year.
But Coke still wanted to develop its own black or brown teas without having to share the profits or collaborate with another company, according to the report.
The newest agreement means the BPW joint venture will operate only outside of the United States. Coke will continue marketing BPW's Nestea and Enviga sparkling green tea brands in the U.S. under a sublicense. Nestl a will take over BPW's coffee "initiatives" by the end of 2008, according to Coke. The revised agreement is expected to close by April 30 after a regulatory review.
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