CCE’s third quarter report betrays tension, dangers

Coca-Cola Enterprises filed their third-quarter earnings report this week, and analysts say the report betrays increasing tension between the bottler and Coca-Cola and danger for the beverage sector as a whole.

Morgan Stanley Research Analyst Bill Pecoriello said Coca-Cola’s move to further increase CCE’s concentrate prices creates $100 million for the beverage marketer to use promoting the brand – which would lay down the gauntlet for Pepsi and the Dr Pepper Snapple Group to similarly boost their promotions in the fourth quarter just to maintain market share.

That move also widens the rift between Coca-Cola and its largest bottler, according to Deutsche Bank Equity Research Analyst Marc Greenberg.

“Coke matched CCE’s higher retail prices with higher concentrate prices,” he said in a note to investors Friday. “Nobody wins this kind of fight.”

He added that the best solution for the conflict would be for Coca-Cola to buy the bottler, but that appears unlikely.
Pecoriello outlined three possible scenarios: 1) Coke and the bottler continue to fight, 2) Coke buys CCE, or 3)Coke and CCE come to an agreement on strategy. He didn’t suggest which scenario was most likely, but did say that the strain between the beverage giant and its flagship bottler had frightened investors away from the beverage market as shares in Coke, Pepsi and Dr Pepper Snapple Group all fell during trading Friday.