Schweppes to Buy Nabisco’s Sunkist, Canada Dry Units
In a move that further consolidates the highly concentrated soft-drink business, Cadbury Schweppes PLC--the venerable British purveyor of candy and soda--agreed Monday to acquire Canada Dry and Sunkist from RJR Nabisco for $230 million.
The long-expected deal, which is subject to approval by Schweppes’ stockholders and various government agencies, would catapult Schweppes from the 13th-largest soft-drink concern in the United States to No. 3--if two other proposed mergers in the $30-billion soft-drink industry are completed.
Cadbury Schweppes, which had net income of $133.4 million on sales of $2.7 billion in 1985, would receive from Nabisco the trademarks and licensing network of the Canada Dry and Sunkist brands as well as Canada Dry’s Canadian bottling operations.
Will Sell Canadian Operations
Schweppes said it has tentatively agreed to sell the Canadian bottling operations to Coca-Cola Co. for about $90 million in a separate transaction.
Canada Dry and Sunkist, which had net income of $19.7 million on sales of $240 million in 1985, are among the best-known names in the soft-drink industry. Canada Dry’s brands are licensed to bottlers in 76 markets, for instance, and the brand has a very strong presence in the United States, Canada, Japan and several Latin American countries.
With the addition of the two brands, Schweppes’ share of the U.S. soft-drink market would jump to a projected 5.3% from its current 0.7% share.
That would still fall far short of No. 1 Coca-Cola, which will hold 45.7% of the soda market if its recently announced purchase of No. 3 Dr Pepper is approved. Schweppes would also trail No. 2 Pepsico, which will have 33.7% of the soft-drink market if its Jan. 25 agreement to purchase No. 4 Seven-Up Co. is approved.
However, the proposed acquisitions by Coca-Cola and Pepsico are expected to receive close antitrust review by federal authorities because the purchases would give the two concerns combined more than an 80% share of the U.S. soft-drink market.
With its purchase, Schweppes would dominate the tonic, ginger ale, club soda and seltzer market--a market with mixed prospects. It would be going against the grain of current consumer drinking trends in the United States, where cola-flavored soft drinks account for 60% of all soda sales.
In its efforts to increase sales of mixers, it also faces a decline in the consumption of mixed alcoholic drinks--due partly to tougher drunk driving laws, analysts say. At the same time, however, mineral waters and seltzers have emerged as a fashionable substitute for alcohol.
In general, analysts applauded the Schweppes deal.
“I think it’s a good deal for Schweppes,” said Emanuel Goldman, beverage analyst for Montgomery Securities. “They will dominate the mixer market.” Goldman said Schweppes may take advantage of increased health consciousness by marketing ginger ales and tonics as healthy alternatives to mixed drinks and hard liquor.
Neither Schweppes nor Nabisco made available to The Times any company officials who would comment on the deals. However, Leo Ellery, Schweppes’ London-based director of investor relations, characterized the transaction as one that would produce “long-term growth.”
RJR Nabisco bought Canada Dry from Dr Pepper in April, 1984, for about $175 million. Later that year, Nabisco acquired the Sunkist soft-drink business from General Cinema Corp. for about $57 million.