Beverage analysts responded with sharpened pencils to reports that enhanced water maker Glaceau might soon be partially or fully acquired by the Coca-Cola Co.
Glaceau, which only last year sold off a 30 percent stake to Indian conglomerate Tata Tea, is in the middle of intense negotiations, according to reports in both Beverage Digest and Beverage Business Insights.
The move would be a positive one for Coke, despite a rumored $3 billion valuation – up from a mere $2.2 billion just 8 months ago — for the privately-held maker of cleverly-marketed products like Vitaminwater, Smartwater, and a new line of Vitaminwater-derived energy drinks, according to analysts with banks Morgan Stanley and UBS.
The enhanced waters would “plug a key hole” for Coke, according to a report from Morgan Stanley’s Bill Pecoriello. Pecoriello reasoned that the purchase could have the added benefit of reduced operating costs for Glaceau, whose rapid growth is believed to be at least partly the result of high-cost merchandising, placement, and advertising campaigns. Meanwhile, Kaumil Gajrawala of UBS indicated that the acquisition would allow Coke to sell Glaceau products internationally, as well as boosting its sales through its domestic distribution network.
Followers of the industry believe that the deal needs to get done for the well-being of Coke, which has been feeling the heat from bottlers and shareholders over its relatively weak non-carbonated portfolio. The company has shown major interest in “bolt-on” acquisitions recently, acquiring the mid-sized New Age player Fuze Beverages and is believed to still be in deal-making mode.