bevblog.net

TRUST IN WHICH? MAGAZINE UNDERMINED

2008-07-23T15:42:00.009+01:00

Yes, bottled water again. The anti-bottled water bandwagon seems to be gathering steam. But I genuinely believe the criticisms will turn out to be just hot air.

Which? magazine has made it a front cover story for August. This is a magazine whose product surveys I’ve valued and whose consumer campaigns I’ve supported for some 40 years.

But I feel it has let down its standards and readers on this occasion. I have written quite a lengthy letter to the Editor and the text is set out below.

I earnestly hope his response will rebuild trust.

__________

Dear Mr Fowler

AUGUST ISSUE COVER STORY

I saw your August issue on my return home from work last night and I was shocked by your article on bottled water because of its numerous inaccuracies and unfounded conclusions.

My reason for writing is partly prompted by your use of my company’s statistics on your front cover and in your opening paragraph without consultation or attribution.

As a subscriber to Which? for 25 years, I have a high regard for your integrity, but on this occasion I feel you should acknowledge that your research was inaccurate and your commentary was seriously lacking in balance.

I would therefore appreciate an early opportunity for a meeting and request that you publish corrections in your next issue.

First, the front cover

On the front cover you make three statements.

Drink worth £1.68 billion. This is accurate but out of date. If you had checked with us, you could have had the information for 2007.
An unnecessary drink. In an increasingly obese world, I would argue that bottled water has a significant role to play because it improves our chances of choosing the best option of calorie free natural hydration.
Time to dispense with bottled water. Can you really justify this? It’s healthier than other beverages. It has a lighter carbon footprint than other packaged beverages. Surely this at least deserves debate? Where is the other side of the argument? Shouldn’t your readers be entitled to make an informed choice? If you did dispense with bottled water, the main choices would involve calories, fat, alcohol, chlorine or dehydration. And what would happen in emergencies like Northampton last month?

Second, the facts

There are so many inaccuracies to correct, but for the moment I shall highlight five.

Sales dropped by 9% last year. Your researchers chose the worst figure published, based on one part of the market. The actual figure was 4%, based on our comprehensive total market assessment, and this has been in public use for over three months.
Two gallons are wasted for every gallon. No water is wasted any more than it is wasted to make fruit juice, milk or meat. Some companies use less than half a litre more than is put in a litre bottle. This compares with 660 litres of embedded water for milk and 850 litres for orange juice. Tap water leaks more in half a day than the UK bottled water industry uses in an entire year.
Water purified to put into a bottle. 97% of UK bottled water is naturally sourced and not purified in any way. It doesn’t have to have safe levels of chlorine, because there is none. Many of your readers might appreciate the benefit of consuming a water whose source is known and naturally replenished, whose catchment area is protected, whose taste is consistent, and whose quality is so good it needs no treatment as well as being further guaranteed by only being released for sale after all tests are clear.
Tap water not recycled from sewage. Thames Water’s own website states the direct opposite. I quote: “80% of London’s tap water comes from the River Thames and the River Lee … it is true that some of the flow in the rivers gets there from sewage treatment works …”
0.5% of UK drinking water contains lead in unacceptable amounts, while 99.96% of water complies. These two statistics must be incompatible. Moreover, 0.5% failure would represent 35,000 million litres, 15 times total annual UK bottled water consumption.

Third, unfounded opinion

Your team’s analysis seems lazy and self evidently biased. You reference no industry sources. You insinuate rather than substantiate key points.

For example, the mention of Fiji and New Zealand is used to accentuate concern about food miles. But you know food miles alone are deceptive and anyway water from outside Europe is under 1% of the market.
June’s contamination scare in Northamptonshire cut off supplies to 250,000 people for 10 days and bottled water made a huge difference for residents there. Yet you gloss over the problem and provide no recognition of the solution.
You lash out at plastic water bottles, but plastic has huge advantages in cost and convenience as well as being 100% recyclable. Water represents a very small proportion and recycling improved 68% last year. An altogether better approach would be to show how families and local authorities could increase recycling dramatically by following best practice in this country and abroad.

My conclusion

Which? is renowned for its properly researched plain speaking to inform discerning consumers. I really do feel your team has failed in its research and objectivity in this instance and urge you to redress such damaging criticism of a quality conscious industry providing a healthy product that benefits consumers.

Yours sincerely

Richard Hall
Chairman

BBC PANORAMA: WAR AND WA(TE)R

2008-06-10T09:26:00.001+01:00

Last night’s BBC Panorama programme was one of the most confused compilations of unrelated stories ever broadcast. War was the main theme, with hospital superbugs and bottled water curiously interspersed.

One moment bottled water was evidently refreshing British troops in Afghanistan, then it was being criticised for its environmental impact. Afterwards, the BBC devoted an hour to the environmental impact of floods in Britain last summer, acknowledging how bottled water had made life bearable for hundreds of thousands whose tap water supplies had become contaminated or cut off.

The BBC had nothing really new to offer in the bottled water debate. Objectivity would have been improved if it had used the latest market statistics. It chose to use weak April figures because of colder weather, when May sales were much higher because of hotter weather. I guess that didn’t suit its argument.

It concluded with the cost savings of a local Council, my own in fact, from no longer buying bottled water. But most Councils and Government departments seem to be paying extra on expensive filters for their tap water. The Houses of Parliament decided to retain bottled water because water jugs and glasses cost far more to serve, replenish and clean.

War and water need more care.

SURPRISING FACT NO 187

2008-04-30T14:18:00.001+01:00

74 tonnes of yogurt is wasted every year in Sweden because consumers have difficulty reaching the bottom of the pot.

Yes, someone has actually worked this out. And, believe it or not, a local manufacturer is now introducing a flexible pack to overcome the problem.

I wouldn’t want to slip up on my facts.

US ENERGY DRINKS – MONSTER ROARS

2008-04-25T08:31:00.000+01:00

So it’s happened. As predicted. Monster is now the top US energy drink brand by volume, with a 2007 all channel share of 28%. Red Bull is still way ahead by value, but its volume share is down to 27%.

There’s more activity from others too. Pepsi’s AMP and SoBe are on 9%; Coke’s Full Throttle, Fuze NOS, Tab Energy and Glacéau Vitamin Energy are at 10%; and Coke partner Rockstar has jumped to 19%.

Overall, the market gained 29% to more than 5,000 million servings. I am indebted to Beverage Digest for the figures.

All brand leaders need real competition to keep consumers interested and markets alive. The United States is beginning to produce some serious new energy.

COTT TO BE KIDDING

2008-04-23T08:36:00.001+01:00

A year ago the media speculated about Cott merging with Cadbury Schweppes’ beverage operations. That never seemed workable to me.

Now, after more financial and managerial turbulence, Cott is reported to be seeking salvation in bottled water and premium soft drinks. This might buy some time with the financial markets, but is not a complete solution.

Cott’s core values are retailer partnerships, with high service and low costs. If these are the basis for new product development, then I accept. If not, then premium soft drinks and bottled water will raise risks and lower margins.

7 MAY – BIG DAY

2008-04-21T16:24:00.000+01:00

Not only is the newly demerged Dr Pepper Snapple Group due to become separately listed on the New York and London stock exchanges.

The huge dairy merger of Campina and Friesland is also due to be finalised.

A date to watch.

RED BULL SIMPLY PERPLEXING

2008-04-03T08:25:00.000+01:00

There are many reasons for Red Bull's success. One of them has been its unity of purpose in a single product, a single can, a single message. Its best extensions have stayed close to the core - a sugar free variant, a larger can, but still with the same design and the single message.

However generous one might be about the company's occasional forays into other market sectors, they certainly distracted management and probably dented energy drinks growth. Carpe Diem, Lunaqua and Sabai have not exactly been crowning glories.

So, what should we make of Red Bull Simply Cola ?

To me, there are just too many contradictions. I like the idea of "natural" cola, but this is not a word that springs to mind for Red Bull. Cola is a big gulp, unsuited to a small can.

In the United States, Monster Energy is closing fast on Red Bull. 20 years ago Pepsi gained momentum when the other guy supposedly blinked. Is Red Bull blinking ? I hope not.

FIZZ FACT YOU NEED TO KNOW

2008-04-01T15:40:00.000+01:00

Someone at Coca-Cola has kindly calculated that a can of Coke contains an average 18.9 million bubbles.

Well, maybe you didn't really need to know this, but I thought you might at least be intrigued.

GLOBAL DAIRY CONGRESS - PRIORITIES FOR FURTHER ACTION

2008-03-18T09:45:00.002Z

I had the privilege of chairing the annual Global Dairy Congress in Athens last week. 191 delegates, 37 countries, 24 presentations - a 48 hour world industry community. What did we learn ? What did it achieve ?

Lots, actually. Information, insights, contacts, deals of course. But also a focus on some unresolved priorities for further action. At least, this was my take on it:

Consumer education - Dairy has massive benefits to communicate, but needs to co-ordinate its resources and messages more effectively - a task that is beginning to be addressed by the Global Dairy Platform.
Nutrition labelling - There was no appetite for traffic lights and no enthusiasm for guideline daily amounts, but nor has a viable alternative been found.
Added value - There was a spring in the industry's step as a result of improved sales, and greater confidence as a result of innovation success, but also an awareness that many traditions remain to be updated.
Natural vs functional - This is a real dilemma for product developers, with so many natural attributes in the market mainstream and yet an expectation of gradual moves towards more sophistication and extra functionality on the fringes.
Face the fats - 0% fat was seen by some as the middle way to achieve all of the taste with none of the drawbacks.
Environment imperative - Numerous initiatives were in evidence from pack lightweighting to renewable energy, but dairy has a big footprint and will need support to improve recycling.
School milk - The chance of a UN School Milk Centre was raised and greeted. This merits confirmation with alacrity. To have a UN backed World School Milk Day is a material asset and a dedicated UN unit would be a genuine investment.

UK TOP 100 GROCERY BRANDS - LOTS TO DIGEST

2008-03-14T09:38:00.002Z

Nielsen's ranking of 2007 winners and losers offers many insights.

Soft drinks is the largest category in UK grocery.
Cold drinks account for 17 of the top 100 brands and 5 of the top 15, led as ever by Coke.
7 are carbonates including 2 energy drinks; 6 are fruit juices and drinks; 2 are waters; and 2 are dairy based.
Red Bull, Cravendale milk, Oasis and Capri-Sun sales all advanced by over 20% last year.
Innocent was the fastest growing, up 46% to £141 million, rising to no 33. It credits success to four key macro trends, well worth noting - health/wellbeing, indulgent/premium, convenience and ethical.

UK BOTTLED WATER - SILLY SEASON STARTS EARLY

2008-03-10T11:11:00.001Z

Seasonality affects the sales of most beverages, but my latest concern over climate change has been an exceptionally early start to the silly season. This normally comes in the late summer, when so many people are away that journalists make news out of almost anything.

Silly

Last week, no less than the Cabinet Secretary wrote to all UK government departments asking them to adopt tap water only policies, explaining "I have made this issue one of my key priorities." This was front page news for the Evening Standard, leaving no room for health or education, defence or crime, not even football.

This is because Whitehall reportedly uses 250,000 bottles of water a year. Which amounts to 0.02% of a market that is responsible for at most 0.1% of UK carbon emissions. Hardly a drop in the ocean.

Sillier

In mid February, the Environment Minister described bottled water as daft because tap water is so good. Yet Private Eye magazine found that his own department has installed special water filters at a cost of over £2,000 a tap.

I'm surprised the Minister didn't add "let them eat cake".

Silliest ?

This week beverages will have been higher than usual on the Chancellor's agenda, when considering his first Budget statement. He has been urged to raise taxes on alcopops and lower taxes on fruit juice. These are not silly ideas, because the government can easily do more to encourage better social behaviour and better health.

Important elements of public health policy are for us to eat 5 a day of fruit or vegetables and to drink 8 glasses a day of water. There is no VAT on fruit or vegetables or tap water. But we have to pay 17.5% tax for fruit juice and bottled water.

The silliest thing would be not to promote better hydration and health by ending these anomalies, because the change would cost so little and save so much.

JOE BEESTON - HIGHLAND SPRING STALWART

2008-02-26T12:44:00.000Z

Joe Beeston OBE sadly passed away yesterday, the first person to have been honoured by the Queen for services to the UK bottled water industry.

Joe's business contribution was remarkable. He kept the faith with a single minded approach to Highland Spring, building it into a greatly respected brand leader through massive market change. At the same time, he assembled a management team and workforce that became almost an extended family.

To the wider industry, and during his previous career in the world of spirits, he was always a chirpy friend full of great stories, even in his losing battle with cancer. Some of the funniest were about the 2005 G8 Summit held nearby at Gleneagles. When the security services needed to use Highland Spring land for logistics support, it didn't take them long to realise how important it was to him that the Summit should use Highland Spring water in order to be assured of his full co-operation.

Joe, we shall miss you as a mentor and friend.

BOTTLED WATER FOOD MILES - FACT AND FICTION

2008-02-18T15:00:00.000Z

Some UK politicians have accused bottled water of a massive environmental impact, condemning huge amounts that travel thousands of miles.

Doh ! For a start, I don't think anyone is suggesting that bottled water contributes more than 0.1% of total UK greenhouse gas emissions.

The Times newspaper has highlighted imports from the United States and Fiji. The Government's own trade figures show these were in fact as little as 0.03% and 0.04% of the UK bottled water market in 2006.

Fiji Water in The Grocer at the weekend said its water only comes by ship and a full year's UK imports created less carbon than a return flight from London to New York. Yet somehow BBC Panorama couldn't avoid its flight to Fiji to investigate.

If Fiji water is wrong, what about the £2 billion of wine imports from Australasia, South America and South Africa. And why not ban beer from Mexico or India, vodka from Russia, cut flowers from Kenya or computers from Japan ?

It's not wrong. It's not right. It's a choice.

Certainly, we'll all have to wise up environmentally about some of the choices we make and it's perfectly fair to have a debate about them. But let the debate be informed and proportionate … starting with once respected institutions like Parliament and the BBC.

UK BOTTLED WATER : SAINT OR SINNER ?

2008-02-15T16:54:00.003Z

4 x 4s, plastic bags, bottled water. Tonnes of oil, loads of waste, bottled water evil, drink from the tap.

This sounds great. Save money, salvage conscience. But there is a real danger that common sense could be turned upside down.

Water is as healthy as can be. It has almost no downsides, unlike any other product.

Stop bottled water in its tracks and people will become

less well hydrated and less healthy, because 50% of bottled water is drunk on the move and they will drink less liquid

fatter when obesity is already a major social concern, because most of bottled water's recent growth has been as a replacement of calorie containing drinks.

Ah, but switching from bottle to tap will save the environment. Well, no actually. Bottled water uses less water and packaging than any other ready to drink beverage. Only a tiny proportion comes from outside Europe.

Two action points would be good though.

Government should encourage local authorities to recycle more plastic. Levels could be doubled if all areas followed best practice.

Public water supply companies could do more to reduce leakage. At present leakage is over 1,000 times the level of bottled water consumption.

What about the 1 billion plus people around the world without proper access to water ? Well, bottled water companies are doing proportionately more than any other grocery sector.

But isn't all water the same ? Shouldn't we just go back to the tap ? I'm a fan of tap water. I drink it a lot. But in the office we have water coolers for chilled water and jug filters for hot drinks. Sometimes I prefer a water from a protected known source where the water has had no chemical treatment. In other instances, it's a matter of convenience or taste. Should I be made to feel guilty for these entirely reasonable and informed healthy choices ? I believe bottled water is much more on the side of the angels than a sinner.

So how should one respond to a Minister who says bottled water is morally unacceptable ? First, he should retract it because he is wrong. Second, he should concentrate more on real answers to public health, climate change and world poverty. Bottled water's carbon footprint is just 0.1% of the UK total. What about the other 99.9% ? If that's not tackled, then bottled water will be needed for more flood relief emergencies, not less.

US SOFT DRINKS - FIRST FIGURES FOR 2007

2008-02-04T14:18:00.000Z

As the biggest market for most beverages worldwide, US results are always worth watching. Although the Beverage Digest supermarket numbers represent well under 50% of total volume, they offer very strong indications.

Energy drinks were up most at 24% - Monster was just 1 share point behind Red Bull.
Teas rose 20% - with Lipton pulling away from the competition.
Bottled water gained 10% - Private label has jumped to a 22% share and Glaceau has overtaken Dasani in value.
Sports drinks increased just 3% - much weaker than in recent years, with Gatorade dipping below 80%.
Carbonates fell 8% - worse than the 5% decline of 2006. Coke was down 9%, Pepsi 8%, Cadbury 6% and private label 9%.

What should one make of this ? Well, these numbers certainly bear out the trends towards healthier and lighter beverages, with contrasting attractions in more natural or more functional propositions.

Carbonates undoubtedly have the most work to do, but it should be noted that both Coke and Pepsi did increase their prices by 6% in 2007.

Overall, it reinforces the scope for soft drinks to continue growing if they continue adapting and innovating.

NEW YEAR DETOX

2008-01-21T09:19:00.000Z

More evidence appears daily that improving our diet can improve our health. A new British Cabinet Office report has produced some startling findings:

69,400 premature UK deaths a year - a massive 1 in 9 - could be prevented by more balanced diets containing more vegetables and less fat, salt and sugar.
£10 billion a year is spent on diet related ill health in the United Kingdom.

Common sense and balance are so often the best solution. More sprouts please.

FOOD AND FUEL PRICE WARNING

2008-01-10T15:58:00.000Z

So the New Year has started with record highs in prices for oil and many agricultural commodities. Yes, indeed, choices will have to be made.

We are facing the confluence or rather conflict of four major trends:

1. Growing world population.

2. Rising prosperity in major emerging economies such as China and India.

3. Climate change disrupting agricultural supply patterns.

4. Governments disrupting market forces for fuel supply competitiveness.

One wish I have for 2008 is that biofuels should be developed on their own merit. Artificial subsidies will accentuate the overall problems and there are enough problems already.

SURPRISING FACT NO 243

2007-10-29T08:51:00.000Z

The Coca-Cola Company recently reported that it had installed 160,000 chilled drink display cabinets and reached 120,000 extra retail outlets.

This is more than most companies have in total from their entire history.

Yet Coke achieved it in just one quarter and one country - China.

US BOTTLED WATER BACKLASH

2007-10-19T15:29:00.000+01:00

The summer was sillier in the States than usual.

Restaurants and Mayors are perfectly entitled to prefer tap water to bottled water. Tap water is a great product.

But their antagonism towards bottled water is misdirected.

All water is healthier than most other beverages. Few of us drink enough of it. It helps our mind, our body, our work, our attention, our comfort, our ageing.
Water also fills us up without calories or caffeine or alcohol or fat and few other drinks do that. In an increasingly obese world, society should be encouraging water consumption wherever and whenever possible.
Bottled water uses less packaging than most other beverages. PET is 100% recyclable. Still water uses much less material than sparkling drinks. In the US, packaging weights have been reduced by as much as 40% in the past five years. Large 20 litre cooler bottles are often used 50 times before recycling.
Bottled water travels less distance than most other beverages. The majority of brands in the United States, Europe and other countries are local or regional, travelling less than 100 kilometres on average from their source to the shelf.
Then there are principles of consumer convenience and choice, lifestyle and taste.

Policy makers should be doing more about health and the environment, not penalising one good product amongst thousands that may have less to offer.

Water is and should be a human right, but in the modern world it is certainly not free. Tap water needs infrastructures that cost money and affect the environment too. When these break down, what does everyone turn to ?

Wouldn't it be better if the lobbyists gave just a little more weight to the other 99.7 per cent of waste produced in the United States ?

PS If silly isn't enough and you're looking for crazy, then go to Chicago where there's a proposal to tax bottled water by as much as 50%, compared with 3% for soda.

GLOBAL FOOD PRICE INFLATION

2007-08-03T09:09:00.000+01:00

I agree entirely with Nestlé's Chairman and a growing chorus of others about food prices rising again in the future.

The fundamentals have indeed shifted. Food prices had been falling for years, through greater industry efficiency and generally improved management of the world's economies.

Recently, there have been a series of developments that add up to a material reversal. Some of the key factors are:

Accelerating demand from emerging economies, most notably China and India.

Climate change putting pressure on fossil fuels and food production predictability.

A surge in the use of crops for biofuels, particularly in Brazil.

Biofuels are the biggest step change for a generation. Their consequences could be as far reaching for food as for energy. Their subsidies certainly need reviewing in the light of this impact and a better understanding of their full costs alongside their full benefits.

Even without biofuels, however, food prices would still be rising. The latest forecasts are for increases of 20-50% over the next ten years. I regret I concur. But much of this will go to production and distribution, while manufacturer and retail margins continue to be squeezed.

SAN MIGUEL : BEER VS POWER

2007-07-27T09:20:00.000+01:00

There are two items of business strategy news this year that I have been unable to reconcile in my own mind.

One was the linking of Canada's Cott Corporation to a bid for Cadbury Schweppes Americas Beverages. Retailer labels and brands do not normally mix, but here the geographic focus seemed to be in conflict as well.

The second is San Miguel's drive to relinquish its core strength of food and drink, to invest in the uncharted territory of power generation and other infrastructure sectors.

Most companies would seek to extend such influential national positions into broader related portfolios or regional expansion. Yet San Miguel has sold off its main soft drinks interests and now, despite accounting for a huge share of Philippine beer sales, it plans to bottle out of that too.

If there were a clear path to the power strategy, I might at least acknowledge a well thought out plan, but there doesn't seem to be one. A reported investment programme of US $780 million is modest enough for food and drink these days, let alone energy provision.

I'd be delighted if anyone could enlighten me.

UKRAINE : COUNTRY TO WATCH

2007-07-06T14:08:00.000+01:00

The smartest investors have been looking beyond the large population emerging BRIC economies of Brazil, Russia, India and China towards the lower profile second tier. Ukraine has been high on Zenith's list and is swiftly moving up other people's rankings too.

The fundamental reasons are :

Geography - between central Europe and Russia.
Population - 46 million, bigger than Spain and Poland.
Growth - over 7% a year increase in economic output since 2000.
Democracy, independence and opening outlook.

The dairy sector has seen two recent acquisitions:

September 2006 - Danone buys Rodich for $10 million.
April 2007 - Bel takes over Shostka cheese producer for estimated $60 million.

In beverages, activity has accelerated this year:

April 2007 - Russia's Wimm-Bill-Dann announces interest in Ukrainian juice market.
June 2007 - PepsiCo and PepsiAmericas acquire 80% of Sandora juice business for $542 million.
June 2007 - Orangina Group purchases Rosìnka mineral water producer with sales of 30 million euros.

Buy now, while stocks last ?

CADBURY SCHWEPPES : UNFINISHED BUSINESS

2007-07-04T16:29:00.000+01:00

However Americas Beverages is sold or demerged, it will be unfinished business.

Cadbury Schweppes will leave its American operations in stronger shape than before. But whoever takes them on will still be number three to Coke and Pepsi, with relative weakness in some of the higher margin and faster growth sectors. The gaps will need filling.

Moreover, the bigger brands cannot avoid the question of international potential. Schweppes is already owned by other companies in most countries, as is 7 UP. Snapple may have the widest opportunity. Dr Pepper and others could be good candidates for expansion too.

There will also be unfinished business for the new confectionery based Cadbury plc, mainly because its Australian beverage activities will remain a strategic anomaly.

All this is confusing and ironic. Growing brands at some point need to explore new territories. They tend to need larger companies to sustain them. Cadbury Schweppes was once just such a worldwide player, but it has progressively retrenched in beverages towards narrower country based priorities. This is most evidently demonstrated by the Schweppes brand itself, which will be divided between four geographies.

Cadbury - Australia
Americas Beverages - US, Canada, Mexico
Orangina Group - Benelux, France, Iberia, Italy
Coca-Cola - Rest of world

So success for the new Americas Beverages will mean taking some beverages beyond the Americas. And success for the Orangina Group will mean taking more beverages beyond Europe. But Coca-Cola has the widest interests and Australia cannot remain isolated forever. There are also relationship complications for other brands such as Oasis and Orangina.

So the outlook for these lemonades will become cloudier before it becomes clearer.

COCA-COLA : GLACEAU

2007-06-06T17:33:00.000+01:00

$4.1 billion for a business with latest full year sales of reportedly around $350 million. Hats off to Bikoff.

This level of price multiple is scaling new heights. It's Coke's biggest ever deal with a drinks competitor. Coke certainly needs greater strength outside carbonates. But there has to be a question mark over whether such a premium can be made to pay its way.

In its favour:

Glacéau is the clear pioneer in US enhanced waters.
Vitaminwater has phenomenal design, character and lifestyle appeal.
It's currently enjoying more momentum than any other brand in the sector, most notably its rival Propel from PepsiCo.
Darius Bikoff and his team have sweated their socks off in store-by-store sampling with courage and conviction.
They've innovated with intelligence, most recently with vitaminenergy.
There are still substantial new US distribution opportunities, particularly in mainstream retail, foodservice and fountain.
The international potential is also huge, with few other serious contenders at the moment.

Against this:

Vitaminwater is not as low in calories as its water associations might suggest.
Its functionality benefits may be challenged and it may take time for claims to be backed up by sufficient scientific evidence.
It is largely unproven outside North America.
There is little track record of successful internationalisation in flavoured or enhanced waters.
The Coke system will have to show exceptional flexibility to adapt, especially in respecting the best of existing distribution partnerships.
$4.1 billion must assume very high and long lasting growth.

In my opinion, the strategy is sound, but even the Tata price of $2.3 billion last August was steep.

Gatorade has always struggled to spread internationally. Snapple suffered at the hands of big company integration in the 1990s. Numerous other brands have lost momentum after losing their independence, some under the tutelage of Coca-Cola. With all its other priorities and pressures, Coke will need to tread with extreme care to sustain what's special about Glacéau and must be wished well in pulling it off. This is the start of a new chapter in the company's annals and success will move the whole industry forward.

PS If Glacéau is worth over $4 billion, where does that put Red Bull and Hansen ? Even Innocent could expect more than £1 billion, but I hope it will carry on to join the other angels in the firmament by sticking to the knitting for a few more years yet.

BRITVIC : C & C SOFT DRINKS

2007-05-18T15:03:00.000+01:00

This looks a smart deal at a fair price.

It would be difficult to find a better fit. The two companies have been long standing distribution partners. PepsiCo will gain a stronger unified franchisee for the whole United Kingdom and Republic of Ireland. Ballygowan will add a necessary boost to Britvic's water range.

The acquisition also gives Britvic a better chance to shape its own destiny and fulfil further expansion potential. It coincides with a radical repositioning of Tango as a more natural soft drink. Several of Britvic's brands are already sold internationally; the C & C portfolio and a revamped Tango provide further opportunities.