Why Coca-Cola and Its Bottler Are Acquiring AdeS



AdeS acquisition

The Coca-Cola Company (KO) and its key bottler, Coca-Cola FEMSA (KOF), will acquire Unilever’s (UL) AdeS, a soy-based beverage business. According to an announcement on June 1, Coca-Cola and its bottler will acquire AdeS from Unilever for $575 million.

After the completion of the acquisition, the AdeS business will become part of the still, or non-carbonated, beverage platforms that Coca-Cola FEMSA shares with Coca-Cola in its franchise territories. In all other territories, Coca-Cola will work with its local bottling partners to develop AdeS in those markets.

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About AdeS

Argentina-based AdeS was founded in 1988 and is the leading soy-based beverage brand in Latin America. It has a presence in Brazil, Mexico, Argentina, Uruguay, Paraguay, Bolivia, Chile, and Colombia. In 2015, AdeS sold 56.2 million unit cases of beverages. The brand generated net revenues of $284 million in 2015. Unilever’s decision to sell AdeS is a part of the company’s efforts to reshape its portfolio in Latin America.

Rationale behind the acquisition

The acquisition of AdeS will further strengthen Coca-Cola’s presence in Latin America. Coca-Cola’s Latin America Operating Group accounted for 29% of the company’s total unit case volume in 2015 and about 9% of the overall revenue. Rivals PepsiCo (PEP) and Dr Pepper Snapple Group (DPS) derived 13% and 7.9% of their respective 2015 revenues from the Latin America region.

The AdeS acquisition will further strengthen Coca-Cola’s still beverage portfolio in the region. As indicated in the graph above, Coca-Cola’s sparkling, or carbonated, beverage unit case volumes in Latin America didn’t show any growth from 2013 to 2015. Still beverages are performing better than sparkling beverages as they are considered a healthier choice. In 2015, Coca-Cola’s still beverage volumes grew by 4% in Latin America, while the sparkling beverage volumes remained unchanged compared to the previous year. The SPDR S&P 500 ETF (SPY) has 1% exposure to Coca-Cola.

In the next part of this series, we’ll discuss why a focus on still beverages has become more important for Coca-Cola and its peers.


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