Coke, P&G Venture Called Off

Consumer products giant Procter & Gamble Co. and number-one soft drink maker Coca-Cola Co. yesterday scrapped plans to form a joint venture to sell and develop snacks and juice drinks.

The announcement comes eight months after the companies unveiled with great fanfare a venture that would have combined Cincinnati-based P&G's Pringles potato chips and Sunny Delight juice drinks with Atlanta-based Coca-Cola's Minute Maid juices and Hi-C, Five-Alive and Fruitopia drinks, according to Reuters.

But that plan, hatched developed by P&G Chief Executive A.G. Lafley and his Coca-Cola counterpart, Douglas Daft, began to unravel as the two companies took a closer look at it.

Coca-Cola said in August it decided to retain 100 percent ownership of its own brands, though the two companies continued to discuss a smaller deal arrangement.

Reuters reported that Coca-Cola found its juice drinks were growing faster than Sunny Delight and Pringles. Through mid-August, Pringles and Sunny Delight sales had fallen in at the retail level in 2001 compared with the prior year, according to Information Resources Inc. (IRI), which tracks data in those outlets. While Minute Maid refrigerated drinks were also down, Minute Maid in non-refrigerated containers rose 39.4 percent in that period, IRI data show.

At the same time, the idea of distributing Pringles on Coca-Cola bottler trucks turned out to make less sense in practice than in theory and the bottlers balked, analysts said. Having drivers add Pringles to Coca-Cola trucks is more complicated than just dropping off another few cases at a store. In some cases, the driver would have to work with different retail buyers for each product, while the time it takes to put an additional product on store shelves can be significant.

"If you're a bottler delivering soft drinks, having another type of product, be it Pringles or something else, the placement of that product may as well be in the next county," Ken Harris, a partner at consumer products marketing and sales consulting firm Cannondale Associates, told Reuters.

P&G still stands behind Pringles and will look for other ways to grow distribution, said P&G spokeswoman Margaret Swallow. "This option was one option, but we believe there are others," she said, adding that Pringles fits with P&G's strategy of selling big brands in big markets.

For Coca-Cola, the venture would have provided access to P&G's vaunted research and development arm to help it develop more noncarbonated drinks, a fast-growing segment. Coca-Cola will now consider other options, which could include acquisitions or developing drinks internally, spokesman Robert Baskin said.
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