The Coca-Cola Co. will make a one-time cash payment of $715 million to distribute Dr Pepper and certain other DPS brands in United States and Canada territories where they are currently [image-nocss] distributed by CCE. The new license agreement will have an initial term of 20 years, with 20-year renewal periods. This license agreement will replace the existing agreements between DPS and CCE upon the completion of Coca-Cola's acquisition of CCE's North American bottling business.
Coca-Cola will distribute Dr Pepper trademark brands in the United States, and Canada Dry in the Northeast United States, where they are currently distributed by CCE. The company will distribute Canada Dry, C'Plus and Schweppes in Canada.
Additionally, in certain U.S. territories where it has a manufacturing and distribution footprint, DPS will begin selling Squirt, Canada Dry, Schweppes and Cactus Cooler, which are currently sold by CCE.
In addition, the company will offer Dr Pepper and Diet Dr Pepper in local fountain accounts currently serviced by CCE and will include Dr Pepper and Diet Dr Pepper on its Coca-Cola Freestyle fountain dispenser. The Coca-Cola Freestyle agreement has a term of 20 years and DPS's investment associated with the program is estimated at $115 million to $135 million.
"We are pleased to have reached a fair and mutually beneficial agreement with Dr Pepper Snapple Group to continue distributing their brands, marking yet another key milestone in our acquisition of the North American operations of Coca-Cola Enterprises," said Muhtar Kent, chairman and CEO for Atlanta-based Coca-Cola. "Importantly, this agreement aligns with our 2020 Vision of more than doubling our system revenue while increasing our system margins by leveraging the world's most powerful distribution network."
He added, "Through this new relationship, The Coca-Cola Co. will become one of the largest Dr Pepper trademark bottlers in the United States and will provide CCE's current customers with uninterrupted distribution of Dr Pepper brands. Based on early pilot program results, we believe our Coca-Cola Freestyle customers will be excited about having an even greater choice of brands available to distribute in their outlets."
"These agreements build a strong foundation for the continued growth of Dr Pepper and our leading flavor brands," said Larry Young, president and CEO of Plano, Texas-based DPS. "It solidifies Coke's support of the Dr Pepper trademark while enabling us to optimize our route-to-market by assuming distribution of several key brands. Additionally, we're increasing our fountain presence, enabling millions of consumers to sample our brands each daya great win for Dr Pepper."
The closing of the CCE acquisition is expected to occur in the fourth quarter of this year and is subject to, among other things, regulatory and CCE shareholder approvals.
The Coca-Cola Freestyle dispenser uses proprietary PurePour Technology and has the capacity to dispense more than 100 beverages in the same amount of space as a standard eight-valve machine. In development for more than four years, the units offer consumers a wide assortment of branded waters, juice drinks and sparkling beverages, including many drinks that have never before been sold in the United States. The Coca-Cola Freestyle dispenser has already been rolled out to more than 20 customers in select locations, and the company will add another 500 machines as part of pilot tests later this summer.
In February, Coca-Cola and CCE announced that they entered into definitive agreements enabling the company to acquire CCE's North American bottling business, and for CCE to acquire the company's bottling operations in Norway and Sweden. Additionally, CCE will have the right to acquire Coca-Cola's majority interest in its German bottler. At the close of the acquisition of CCE's North American bottling business, Coca-Cola Refreshments USA Inc. will integrate four business components into a bottling and customer service operation in both the United States and Canada. The four components are CCE North America, CCNA Foodservice, the Minute-Maid/Odwalla Juice business and CCNA Supply Chain Operations. Also, following the closing, a newly reshaped Coca-Cola North America will provide franchise leadership and consumer marketing for the company's flagship operation.
DPS is a leading producer of flavored beverages in North America and the Caribbean. In addition to our flagship Dr Pepper and Snapple brands, its portfolio of more than 50 brands includes Sunkist soda, 7UP, A&W, Canada Dry, Crush, Mott's, Squirt, Hawaiian Punch, Penafiel, Clamato, Schweppes, Venom Energy, Rose's and Mr & Mrs T mixers.
Coca-Cola has more than 500 sparkling and still brands. Along with Coca-Cola, it offersamong other brandsDiet Coke, Fanta, Sprite, Coca-Cola Zero, vitaminwater, POWERADE, Minute Maid, Simply and Georgia Coffee. Globally, it is a leading provider of sparkling beverages, juices and juice drinks and ready-to-drink teas and coffees.
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