Coca-Cola (NYSE: KO) has offered [subscription required] to acquire Beijing-based China Huiyuan Juice Group Ltd, China's number one 100% juice and nectar company. The deal, which would be the second largest in Coke's history (behind Vitamin Water), would require the approval of Chinese regulators.Coke says the deal would be accretive to earnings in third year -- but of course there are lies, damn lies, and forward-looking statements. The deal represents a continuation of Coke's efforts to diversify away from the declining soft drink industry and into higher-priced, more natural beverages.
The question is whether Coke will be able to add meaningfully to the value of these brands with its own marketing and distribution power. If Coke is just pumping up its sales by adding brands at high prices, that's probably not a good strategy for long-term shareholder value. Very few companies have been able to create such value through acquisitions, and Coke's shopping spree should be seen as a sign of increasing weakness in the company's current businesses.
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Reader Comments (Page 1 of 1)
9-03-2008 @ 2:42PM
adam hartung said...
This is a move by Coke to extend its existing business. But it ignores the competitive problems Coke has in existing markets - as well as expected competition in China. There is no innovation here, just "more of the same", which has allowed Coke's value to drop almost 50% from its highs in the mid-1990s. Unlike the Chrome announcement by Google, which is all about innovation, Coke is demonstrating its lack of innovation. Which should deeply concern Coke investors. Read more at http://www.ThePhoenixPrinciple.com