Coca-Cola makes Aussie beer buy for profit push

By Neil Merrett

- Last updated on GMT

Related tags Beer

Coca-Cola Amatil (CCA), a major soft drinks producer in Australia
and Asia, has acquired the country's Bluetongue brewery brand to
extend its premium beer focus in a bid to further diversify its
revenue stream.

The company said today that the purchase, made through its Pacific Beverages joint venture with SABMiller, was part of a push towards further offsetting increased operations costs in the lights of an improved profits forecast for the year.

Beverage producers are increasingly finding their margins under pressure from production costs, with CCA itself posting a six per cent increase in unit production costs during the second half of the 2007 financial year.

The purchase reflects moves by a number of companies to expand beyond their core brands, in an attempt to reduce the impacts of costs, with Japanese brewer Kirin last month revealing it was expanding into dairy processing over cost concerns.

CCA, which is a key bottler for Coca-Cola's branded beverages in the Asia-Pacific region, has played up its focus on tapping Australian beer demand, reflecting the beverage giant's wider focus on diversifying beyond carbonated soft drinks.

Bluetongue Brewery brands will therefore be added to Pacific Beverages' existing portfolio in the country, which include imported labels such as Peroni Nastro Azzurro, Miller Genuine Draft and Pilsner Urquell.

In addition to the Bluetongue Premium Lager and Bluetongue Premium brands, Pacific Beverages will also acquire the brewer's Light Ginger Beer, and Bondi Blonde products.

Bluetongue's combined portfolio posted a 70 per cent increase in sales during 2007 to date, according to CCA.

Company managing director Terry Davis said that through the Bluetongue brewery purchase, pacific beverages had added a fast growing local brand to its operations.

"[The acquisition] fits perfectly with our strategy of developing our presence in the Australian premium beer market," he said.


We have been looking for some time for a premium local beer brand and could not have found anything better positioned in the category than Bluetongue."

CCA was unable to reveal the cost of the acquisition, but said the amount would not significantly affect either its own or SABMiller's profit outlooks.

News of the acquisition followed CCA's announcement that it had increased its full year profit forecast to between 10 and 11 per cent, from the previous estimate of high single digit figures made in August.

The company said it was optimistic over the profitability of its operations during the coming year, with a possible three to four per cent reduction in the cost of good sold expected.

Forward commodity costs and the company's prevailing hedge book were attributed to the estimates.

On the back of the companies profitability review, CCA also said today that it had begun a $170m share buy-back scheme following the $520m sale of its South Korean bottler in October.

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