Coca-Cola Makes $715 Million Distribution Deal With Dr Pepper Snapple Group

This license agreement will replace the existing agreements between DPS and CCE upon the completion of The Coca-Cola Company's acquisition of CCE's North American bottling business.

8 Jun 2010 --- The Coca-Cola Company has entered into an agreement with Dr Pepper Snapple Group, Inc. to distribute certain DPS brands, subject to the completion of The Coca-Cola Company's acquisition of CCE's North American bottling business. In addition, Dr Pepper and Diet Dr Pepper will be made available on The Coca-Cola Company's new proprietary touch-screen Coca-Cola Freestyle fountain dispenser.

Under the terms of its new agreements with DPS, The Coca-Cola Company will make a one-time cash payment of $715 million to distribute Dr Pepper and certain other DPS brands in U.S. and Canada territories where they are currently distributed by CCE. The new license agreement will have an initial term of 20 years, with 20-year renewal periods. This license agreement will replace the existing agreements between DPS and CCE upon the completion of The Coca-Cola Company's acquisition of CCE's North American bottling business.

Under the new agreement, The Coca-Cola Company will distribute Dr Pepper trademark brands in the U.S., and Canada Dry in the Northeast U.S. where they are currently distributed by CCE. The Company will distribute Canada Dry, C'Plus and Schweppes in Canada.

In addition, the Company will offer Dr Pepper and Diet Dr Pepper in local fountain accounts currently serviced by CCE and will include Dr Pepper and Diet Dr Pepper on its Coca-Cola Freestyle fountain dispenser. The Coca-Cola Freestyle agreement has a term of 20 years and DPS's investment associated with the program is estimated at $115 million to $135 million.

"We are pleased to have reached a fair and mutually beneficial agreement with Dr Pepper Snapple Group to continue distributing their brands, marking yet another key milestone in our acquisition of the North American operations of Coca-Cola Enterprises," said Muhtar Kent, chairman and chief executive officer, The Coca-Cola Company. "Importantly, this agreement aligns with our 2020 Vision of more than doubling our system revenue while increasing our system margins by leveraging the world's most powerful distribution network."

Mr. Kent continued, "Through this new relationship, The Coca-Cola Company will become one of the largest Dr Pepper trademark bottlers in the United States and will provide CCE's current customers with uninterrupted distribution of Dr Pepper brands. Based on early pilot program results, we believe our Coca-Cola Freestyle customers will be excited about having an even greater choice of brands available to distribute in their outlets."

The closing of the CCE acquisition is expected to occur in the fourth quarter of this year and is subject to, among other things, regulatory and CCE shareholder approvals.

"These agreements build a strong foundation for the continued growth of Dr Pepper and our leading flavor brands," said Larry Young, president and CEO of DPS. "It solidifies Coke's support of the Dr Pepper trademark while enabling us to optimize our route-to-market by assuming distribution of several key brands.  Additionally, we're increasing our fountain presence, enabling millions of consumers to sample our brands each day – a great win for Dr Pepper."  

As part of these transactions, DPS will receive a one-time cash payment of $715 million before taxes, fees and other related expenses.  This upfront payment is net of the investment in the Freestyle fountain program, which is estimated at $115 million to $135 million.

These transactions are subject to KO completing its planned acquisition of CCE's North American bottling business.