Coke covets Glaceau, will Tata cash out?

MUMBAI: Beverage giant Coca-Cola Co is said to be in serious talks to acquire all or part Energy Brands Inc, the maker of Glaceau ‘enhanced water’, less than a year after Tata Tea acquired a 30% stake in the company for about $620 million.

The development was reported in Beverage Digest, a US-based industry newsletter. The report on Tuesday said negotiations “are ongoing” and that “some points of the deal still needed resolving”.

Coke may want to announce a deal when its North American bottlers meet in Atlanta next month, or right before, Beverage Digest said.  Coke declined to comment and Glaceau could not immediately be reached, the newsletter said.

Senior officials from Bombay House including R K Krishna Kumar, vice-chairman, Tata Tea, and the man who piloted the acquisition for Tatas, were not available for comment.

Krishna Kumar, his office said, was travelling, while the Tata Group corporate communications officials told DNA Money: “The news is speculative and Tata Tea does not wish to comment.”

Tata Tea’s Glaceau acquisition was part of its strategy of “increasing the share of the bladder” as an integrated beverage company.

The New York-based Energy Brands, or Glaceau as it is commonly known, has three product lines — Vitaminwater, Fruitwater and Smartwater.

The enterprise was founded by J Darius Bikoff in 1996, and turned profitable two years ago.

When Krishna Kumar approached Glaceau, one of its private equity partners (TSC Consumer Partners) was in the process of shedding its 30% stake. The Tatas swiftly replaced TSC.

The Beverage Digest report led to an extraordinary outing for the Tata Tea share on Wednesday. The scrip rose Rs 99.65 to Rs 773.35 from its Tuesday close of Rs 673.70.

Clearly, the stockmarket expects Tata Tea to benefit from the Coke bid.  It premise: Either Tata Tea could make extraordinary gains by cashing out.

On the flip side, the group could also stretch itself trying to outbid coke for the balance stake from Bikoff.

For Tata Tea, Glaceau is not only a route to enter the North American markets - it also provides the company with a diversified range of products in the flavoured water segment, which is growing faster than aerated drinks in the advanced markets. For Tata Tea, the acquisition was an attempt to synergise its tea and coffee businesses in the US.

At the time of picking up the 30% stake, Tata Tea had alluded that the integration will not be restricted to cross-utilisation of distribution channels. Officials had then said it will also extend to areas such as product development and co-ordination of a growth agenda for the Tata Tea bouquet of offerings.

Tata Tea has been overactive on acquisitions in the US, first acquiring Good Earth Teas, a speciality herbal and green tea company, then Eight O' Clock Coffee through its arm Tata Coffee in June this year.

It also picked up Jemcas, a Czech tea firm, and bought minority stake in a South African tea company.