DR PEPPER DEAL SEEN AIDING RETAILERS

RICHARD TURCSIK

Retailers should gain a powerful bargaining chip for their dealings with soft drink giants Coca-Cola and Pepsi as a dividend from Cadbury Schweppes' proposed acquisition of Dr Pepper/Seven Up Co., said beverage industry consultants contacted by SN.

If the $1.7 billion deal, announced late last month, is approved, it would give the combined companies a 17% share of the soft drink market, behind Coke and Pepsi, and 49% of the noncola market in the United States. The effect would be a weakening of the grip the latter two companies now hold on the business.

"Retailers should look at this acquisition as a benefit," said Ken Harris, a partner in Cannondale Associates, a consulting group based in Evanston, Ill., and Wilton, Conn. "Anything that retailers have that they can use to offset the power of Coca-Cola and Pepsi, they should see as being in their best interest -- whether it be private label or a strong No. 3," he said.

Burt Flickinger III, a consultant with A.T. Kearney, New York, said the planned acquisition would be a victory win for retailers in two ways: "This merger is going to give Coke and Pepsi a legitimate run for the first time in many years. And any time you can consolidate DSD deliveries, opening the back door one less time and bringing in full truck loads rather than partial hand trucks, it is a major win." "Supermarkets are looking for new choices. They are sick and tired of being knocked around by Coke and Pepsi and I think the new kid on the block is going to be very appealing to them," said Brian Kardon, a director at strategy consulting firm Braxton Associates in Boston.

"The acquisition will also focus the consumer and the trade more on noncolas, which is the exciting part of the beverage business," Kardon said. "I think there is a lot of ego and denial going on [at Coke and Pepsi] and they are really going to be surprised at how agile this [new competitor] can be."

Jeff Hill, managing director of Meridian Consulting, Westport, Conn., said the challenge for Cadbury "becomes their ability to take full advantage of the leverage, through initiatives like category management programs, combined trade programs, integrated route programs and the other fundamentals."

Flickinger said the combined companies may work closely with retailers to develop lines of exclusive private-label products, including colas.