LONDON -- Cadbury Schweppes thinks Snapple still has plenty of room for growth.
The British confectionary and soft drinks group here bought the Snapple Beverage Group from Triarc Cos., Inc., for $1.45 billion, including debt. The acquisition adds the Snapple, Mistic, Stewart's and RC Cola brands to Cadbury Schweppes' existing soft drinks stable of Dr. Pepper, 7-Up, A&W Root Beer, Sunkist, Canada Dry, Schweppes, Squirt, Welch's and Hawaiian Punch.
The purchase of Snapple fits in with Cadbury's stated strategy of strengthening its position as the world's third-largest soft drinks company behind Coca-Cola and Pepsi.
"The acquisition of the Snapple Beverage Group will significantly expand Cadbury Schweppes' position in the U.S. soft drinks market," John Sunderland, the company's chief executive, said in a statement. "It meets our strategic criteria of building robust positions in existing markets and will be strongly value creating."
The purchase improves the company's position in the New Age drinks market, where Snapple remains the leader with a 28% share of the premium beverages sector. This includes a 38% share of the $1.5 billion ready-to-drink tea sector and a 13% share of the $2.2 billion fruit drinks area, David Kappler, Cadbury Schweppes' chief financial officer, said. However, Snapple remains under-developed internationally, with only about 2% of its sales outside North America.
Cadbury Schweppes believes there are significant synergies between its existing soft drinks brands and the Snapple stable, estimating total synergies of about $500 million -- starting with $10 million to $15 million in the first year and increasing to $50 million by 2003. Savings will come in information technology, manufacturing, packaging and administration, but a major synergy will be in the area of distribution.
"The Snapple brand has shown strong growth and outstanding product and marketing innovation," Sunderland said. "Cadbury Schweppes believes this progress can be further enhanced by exploiting the route to market strengths enjoyed by its other beverage interests in the U.S., allied to Snapple's own powerful direct-store delivery system, which primarily serves the key convenience channels."
The Snapple Beverage Group had earnings before tax, depreciation and amortization of $111 million on sales of $772 million in 1999. The Snapple brand accounted for about 70% of revenues. Cadbury Schweppes had profits before tax and disposals of $980.9 million on sales of $6.05 billion. Of this, its beverage operations had trading profits of $560.5 million on sales of $2.86 billion.