P&G Orders a Coke

A new multi-million-dollar venture between two consumer-products giants – Coca-Cola and Procter & Gamble – is likely to have an enormous effect on the point-of-purchase industry. The 50-50 venture will bring together as one company 40 of the two partners'stable of existing brands, including: Minute Maid, Hi-C, Fruitopia, Bacardi Real Fruit Mixers, Five-Alive and Bright & Early from Atlanta-based Coke; and Pringles, Sunny Delight, Eagle brand snacks, Punica (the leading nectar-based beverage in Germany) and some products currently under development by Cincinnati-based P&G. The existing brands in the mix currently generate $4.2 million in annual sales.

P&G will gain access to one of the largest food and beverage distribution networks in the world. For example, P&G sells Pringles in 150,000 outlets in the U.S., whereas Coke is sold in 1.5 million outlets. Also, while Pringles will be found, generally, in one or two locations inside most U.S. grocery stores – typically in snack aisles – Coke products are often found in as many as 10 in-store locations, including aisles, refrigerator cases, freestanding displays and near checkout lines.

Coke gains access to the enormous P&G research, technology and product-development apparatus. There are currently four new products in the P&G pipeline – NutriStar (a food nutrient), Eclipse (wellness beverages), Spire (energy drinks) and Jeckles (tortilla snacks) – that will become part of the new venture.

Both companies are now better-equipped to compete with PepsiCo (Purchase, N.Y.), a $20 billion company that has long trailed Coke in soft drink sales but has had great success in the juice and snacks area with products such as Frito-Lay's Lay's chips and Doritos, Tropicana Pure Premium juices and Slice.

P&G is a $39 billion conglomerate. It sells 300 brands to nearly five billion consumers in 140 countries and holds more patents on food and beverage technology than the three largest U.S. food companies combined. In addition to Pringles and Sunny Delight, its stable of food-related brand names includes Folgers, Millstone, Crisco and Jif. Other company brand names include Noxzema, Pampers, Cover Girl, Iams pet food, Tide, Charmin, Bounty, Tampax, Vick's and Olay. P&G was, until recently, the largest advertiser in the world. (It's now Number Two, behind Unilever — Ben & Jerry's, Lever 2000, Lipton, Q-Tips, Slim-Fast, Wisk, Hellmann's Mayonnaise, Skippy Peanut Butter).

The Coca-Cola Co. had sales of $20 billion in 2000. Among its other non-Coke brands are Barq's, Fruitopia, Minute Maid, PowerAde, Sprite and Dasani water.

The new venture is subject to regulatory approval and isn't expected to be up and running until late summer or early fall. P&G and Coke have not yet announced a name or a headquarters city. The ceo will be Donald Short, a 24-year veteran of Coca-Cola. In addition to its already-$4 billion in initial sales, the two companies expect growth to $5 billion in sales within two years, $200 million annually in pre-tax earnings from revenue enhancements and cost-savings by 2005, and doubling of Pringles'revenue by 2005.