UK's Cadbury to buy out Dr Pepper

UK's Cadbury to buy out Dr Pepper

UK's Cadbury to buy out Dr Pepper

Cadbury Schweppes is close to acquiring the Dr Pepper/Seven Up Bottling Group, the largest independent bottler in the US, from the Carlyle Group, a US private equity group.

The acquisition, expected to be announced shortly, will give Cadbury greater control over the distribution of its US soft drink brands, which include Dr Pepper and Snapple.

Cadbury has a 45 per cent equity stake in the bottling group, with most of the remainder held by Carlyle.

Cadbury and Carlyle bought the privately held group for $283m in cash and $408m in debt in 1999.

Analysts said that Cadbury – the third-biggest soft drinks manufacturer in the US behind Coca-Cola and Pepsi with a 17 per cent share of the fizzy drinks market – could pay close to £300m ($535m) for Carlyle's equity stake.

Cadbury declined to comment.

The purchase will add to growing signs of restructuring in the US beverage industry, as soft drink companies rethink their relationship with the bottlers that produce and distribute their products.

Beverage companies are seeking greater consolidation among bottlers in response to mounting pressure from powerful retail chains such as Wal-Mart for suppliers to become more efficient.

By gaining greater control of its distribution network, Cadbury could negotiate with retailers directly.

About 24 per cent of its fizzy drinks are distributed by the Dr Pepper bottling group, with much of the rest distributed through bottlers part-owned by Coke or Pepsi.

Some analysts say that combining its manufacturing and distribution operations may also make it easier for Cadbury to eventually spin off its US beverages armand use the cash to make acquisitions in confectionery.

Although the US beverages operations have been recording healthy growth over the past two years, and generate cash for Cadbury, the company has identified confectionery as its main growth business globally.

Cadbury's claims to be the world's biggest confectionery company, with a market share of about 10 per cent, putting it ahead of Mars, Nestlé and Hershey.

Cadbury has been diversifying away from chocolate confectionery in recent years and has been moving more heavily into sugar confectionery such as chewing gum.

Cadbury is keen to challenge Wrigley's dominance of the global gum market.