Coca-Cola/CCEP: roll-up of Asian bottlers clinks along
Philippines takeover primes the palate for more deals to bubble up
In a bid to keep costs down, US-listed Coca-Cola is divesting its bottling assets. It wants to focus on running and marketing its fizzy, syrupy drink brand.
That presents opportunities for Coca-Cola Europacific Partners. This month, the London-based bottler struck a deal to buy Coca-Cola Beverages Philippines for $1.8bn.
CCEP is one of a gaggle of independent bottlers worldwide. These make steady incomes from selling Coca-Cola and sometimes other beverages to boot.
CCEP started life as the main bottler for western Europe. It made the leap into Asia in 2021 with the acquisition of Amatil. It was already the largest Coke distributor by value of sales globally. With the Philippines added on it will become the largest by volume too. There is potential for further consolidation in the region.
The cyclical downturn that is sweeping Asia-Pacific is a cause for concern. CCEP’s second-quarter results showed that sales in its main Australian, Indonesian and New Zealand markets were 6.5 per cent lower over one year.
At least European consumers remain keen. Soft beverages are the best-performing staple category in the region. CCEP’s sales in Germany and the UK rose by high single digits. In France, they surged 20 per cent in the second quarter.
However, this could soon flip around. Indonesia and the Philippines are expected to be two of the faster-growing regional economies over the next decade.
CCEP is paying just over $1bn for a 60 per cent stake in Coca-Cola Beverages Philippines. Local partner Aboitiz Equity Ventures will take the rest. At 10 times forward ebitda, the valuation is broadly in line with CCEP’s own valuation.
Cost savings in the range of 2 per cent to 3 per cent of sales, the same proportion as in the Amatil deal, would equal $40mn to $60mn for the Philippines company. CCEP should hit its leverage target of net debts of 2.5 to 3 times ebitda by 2024. That is a year later than expected.
The Philippines takeover primes the palate for more deals to bubble up.