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Coke Confirms Odwalla Buy

Soft drinks: Purchase would mean a bigger piece of 'good-for-you' beverage niche for industry giant.

October 31, 2001|ERIN McCLAM | ASSOCIATED PRESS

Coca-Cola Co., extending its reach into the growing market for noncarbonated drinks, said Tuesday that it is buying the premium juice maker Odwalla Inc. for $181million.

Half Moon Bay, Calif.-based Odwalla, which makes juice blends, smoothies and other fortified health drinks, will retain its current management and become part of Coca-Cola's Minute Maid juice division.

For Atlanta-based Coke, the world's largest soft-drink company, the deal means a bigger piece of the "good-for-you beverage area," said John Sicher, editor of Beverage Digest, an industry publication.

"It's a very smart deal for Coke," he said. "It's easier to take a small brand that already has some real consumer following and make it into a bigger brand than to start from scratch."

Odwalla generated revenue of nearly $98million for the first nine months of this year, up from $60.5million in the same period a year earlier.

Coke will pay $15.25 a share in cash for all of Odwalla's common stock outstanding. The boards of Coke and Odwalla approved the deal Tuesday.

Odwalla shares climbed 27.9%, or $3.30 a share, to close at $15.13 on Nasdaq. Coke shares fell 45 cents to $48.16 on the New York Stock Exchange.

Odwalla markets its drinks under the Odwalla and Samantha labels. Chief Executive Stephen Williamson said he felt "the entrepreneurial spirit of Odwalla will be nurtured by the opportunity for growth that this new relationship presents."

Don Short, chief executive of Minute Maid, said acquiring Odwalla strengthens Coke's opportunity for growth in new beverage categories.

"Odwalla's talented and proven people have built unique brands with loyal followings," he said in a prepared statement. "The innovation and expertise of the Odwalla team coupled with our innovation and logistics network are key to expanding the brands they have created and nurtured."

Coke recently scrapped a deal with Procter & Gamble Co. to market products such as Minute Maid juice and Pringles potato chips jointly.

Odwalla merged last year with Maine-based Fresh Samantha Inc. The companies offer more than 45 juices, smoothies, dairy-free milk and shakes, spring water and natural food bars.

Odwalla's image was tarnished in 1996 by a deadly E. coli outbreak linked to its juice. A Colorado girl died and others were sickened by the bacteria in the company's unpasteurized apple juice. The company recalled the juice, but sales plummeted.

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