When in doubt about what a major business move really means, it never can hurt to seek out someone with a deep background in the affected industry.
With Coke involved in the biggest acquisition of its 124-year history — a $12 billion deal for the North American operations of the world’s largest soft drink bottler, Coca-Cola Enterprises — I decided to talk with an expert I first met a decade ago while covering these two companies.
Clearly, this is the most significant local merger under way right now. Atlanta’s third largest public company is acquiring the bulk of its fifth biggest firm.
Marion Glover, 67, has 37 years of experience with the Coke system, first as a Big Red executive for a dozen years and then as a matchmaker in the soft-drink bottling industry.
As owner of Atlanta-based Glover Capital, he has been involved in about 100 acquisitions, primarily representing the sellers of bottling companies. (Plus, since he has an MBA from Harvard, he should know something, right?)
Before getting into what Glover thinks Coke is up to, here’s a little background. Traditionally, Coke makes syrup and then sells it to the bottlers. The bottlers produce the finished soft drink and then distribute and merchandise it in the stores.
But this deal changes all that in North America. Coke will be doing everything — at least temporarily — in CCE’s bottling territory. That comprises 75 percent of the U.S. market.
Glover says consumers and retailers are driving the change. With hundreds of non-alcoholic beverages available in a wide array of packaging options, the production and distribution systems — created decades ago — are no longer as rational as they need to be.
What’s more, big retailers are demanding lower and lower prices, especially in the current environment. That requires a more efficient supply chain system.
Given the need for change, will there be a lot of mergers among the remaining 70 Coke bottlers in the country?
“We’re like the Maytag service person,” Glover said. “We’re waiting for the phone to ring. … It will happen that we will get more calls. … But not all of the Maytag washers and dryers are going to break.”
How many will?
Glover thinks the number of Coke bottlers will likely drop to about 50 within five years, from 70 now. A decade ago, there were about 100 bottlers and 50 years ago there were more than 1,000.
But the future acquisitions, he said, are likely to be driven primarily by independent bottlers merging without Coke’s direct participation.
Coke officials “are not telling me, ‘please bring me bottlers to buy,’ ” Glover said.
What is the end game for Coke?
Glover thinks the company eventually will broaden the geographic reach of some larger bottlers throughout the country.
But, he added, it’s still a work in progress that’s hard to predict right now.
“The million-dollar question is will Coke split up CCE and allow some of the key independent bottlers to buy some of that territory,” Glover said.
Going forward, Glover’s phone is likely to be a lot busier than the Maytag repairman’s.
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