COCA-COLA : GLACEAU
$4.1 billion for a business with latest full year sales of reportedly around $350 million. Hats off to Bikoff. This level of price multiple is scaling new heights. It's Coke's biggest ever deal with a drinks competitor. Coke certainly needs greater strength outside carbonates. But there has to be a question mark over whether such a premium can be made to pay its way. In its favour:
- Glacéau is the clear pioneer in US enhanced waters.
- Vitaminwater has phenomenal design, character and lifestyle appeal.
- It's currently enjoying more momentum than any other brand in the sector, most notably its rival Propel from PepsiCo.
- Darius Bikoff and his team have sweated their socks off in store-by-store sampling with courage and conviction.
- They've innovated with intelligence, most recently with vitaminenergy.
- There are still substantial new US distribution opportunities, particularly in mainstream retail, foodservice and fountain.
- The international potential is also huge, with few other serious contenders at the moment.
- Vitaminwater is not as low in calories as its water associations might suggest.
- Its functionality benefits may be challenged and it may take time for claims to be backed up by sufficient scientific evidence.
- It is largely unproven outside North America.
- There is little track record of successful internationalisation in flavoured or enhanced waters.
- The Coke system will have to show exceptional flexibility to adapt, especially in respecting the best of existing distribution partnerships.
- $4.1 billion must assume very high and long lasting growth.