ATLANTA & VEVEY, Switzerland -- The Coca-Cola Co. and Nestle said that both companies have agreed to refocus the activities of their 15-year-old Beverage Partners Worldwide (BPW) joint venture on black tea beverages. The transaction, which is subject to certain regulatory approvals, is expected to close early 2007.
This agreement means Coca-Cola and Nestle will independently develop, produce and market ready-to-drink (RTD) coffee and non-black tea based beverages.
Both companies recognize the significant potential of these [image-nocss] rapidly growing segments and will expand their offerings in these categories by identifying innovative new products and creating a broader choice for consumers. And both partners believe a concentrated focus on black tea beverages by the joint venture throughout its territory will accelerate the growth and bolster the market presence of BPW.
The joint venture will continue to market the green tea-based calorie-burning functional drink Enviga, recently launched in the United States and scheduled for rollout in Europe in 2007.
BPW, a 50-50 joint, was created in 2001 following a period of 10 years during which Nestle and Coca-Cola cooperated in a joint venture called Coca-Cola and Nestle Refreshments (CCNR).
Industry watchers said the revised deal will allow Coke to develop new coffee and tea products faster and avoid having to split the profits. It gives each company the unfettered ability to compete in the marketplace individually and against each other, John Sicher of Beverage Digest told Cox News Service.
One of Coca-Cola's most popular drinks in Japan is an RTD coffee called Georgia. Under the agreement with Nestle, Coca-Cola cannot bring something like Georgia coffee to the United States without going through the partnership, Coca-Cola spokesperson Dana Bolden told Cox.
Japan accounts for roughly one-fifth of Coca-Cola's annual profit, thanks in large part to Georgia coffee. The pull for Coca-Cola to do more with the concept globally is strong. The coffee category is a major opportunity, Bolden said.
Coca-Cola is experimenting with single-serve brewed coffee at restaurants and convenience stores in North America under the brands Far Coast and Chaqwa. Those brands could be used for a new RTD chilled coffee under the same name, using the technology already created for Georgia.
Coca-Cola's new Godiva drink, just hitting stores in Atlanta, contains coffee, but is marketed as a chocolate drink, keeping it outside the Nestle joint venture.
Morgan Stanley analyst Bill Pecoriello said in a research note that the restructured partnership is a net gain for Coca-Cola, but he pointed out that it could complicate matters. While they are competing against each other in non-black tea, will they cooperate in black-tea products? he asked, according to Cox.
Members help make our journalism possible. Become a CSP member today and unlock exclusive benefits, including unlimited access to all of our content. Sign up here.