ATLANTA -- Procter & Gamble and Coca-Cola will form a company to manufacture and market Pringles chips and the two companies' juice and fruit-flavored drinks, splitting the profits, the companies announced recently from their respective headquarters in Cincinnati and Atlanta.
ated growth promised by these companies should, by extension, mean accelerated growth for retail sales.
Procter & Gamble enters the deal hoping to capitalize on Coke's vast distribution network, while Coke intends to add P&G's nutritional supplements to its drinks.
However, the new company will compete in areas increasingly dominated by PepsiCo. Pepsi's Frito-Lay brand controls half the global snack market, while its Tropicana orange juice has about 35% of the market compared with 19% for Coke's Minute Maid.
Procter & Gamble officials hope the deal can expand the reach of Pringles and its Sunny Delight juice drink, both of which are sold mainly in supermarkets.
In another big deal, PepsiCo, Purchase, N.Y., acquiring Quaker Oats, Chicago, has been in the regulatory approval phase since the deal was announced Dec. 4, 2000. The transaction would give PepsiCo control of the Gatorade sports drink brand, which was also sought by Coca-Cola for a time last fall. Pepsi was the first to make an offer, of $14.8 billion, which Quaker rejected as too low. Then Coke put in a preliminary bid but rescinded it after Coke's board blocked the deal. Danone of France also was interested, during the monthlong struggle back in the fall. Pepsi emerged victorious with a $13.4 billion offer.
PepsiCo still expects to close the deal in the second quarter, according to spokesman Richard M. Detwiler Jr. The price fluctuates from day to day, he told SN, because it is tied to the market, but a stock swap of about $13.4 billion has been cited.
PepsiCo already owns a best-selling bottled water brand, Aquafina, as well as the leading iced tea, Lipton, and iced coffee, Frappaccino. By capturing Gatorade, PepsiCo leaps far ahead of the field, nearly doubling its share of the non-carbonated market, to 33% from 18%, compared with 21% for Coke, according to analysts.
The Federal Trade Commission requested some additional information from PepsiCo, in connection with its anti-trust review of the proposed merger, which is not uncommon in a deal of this size and scope, Detwiler said. "We are working to respond to that request."
Regarding the venture linking Coke and P&G, Detwiler said, "We've known for a long time that snacks and beverages can be a powerful combination. The trick is to bring together the products with appeal. Consumers will judge whether this new venture does that."