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. Last Updated: 07/27/2016

Coca-Cola Gulps Juice Maker

VedomostiMulton is Russia's No. 2 juice maker, controlling a quarter of the market.
Coca-Cola, the world's largest soft-drink maker, and its Greek bottling unit will buy Russia's second-largest juice company to boost market share outside the United States.

Russia's Multon produces Rich, Nico and Dobry juices and controls 25 percent of the juice business, Coke and Coca-Cola Hellenic Bottling Company said in a statement Thursday. Terms of the purchase were not disclosed.

Coca-Cola CEO E. Neville Isdell is moving into emerging markets to boost sales by buying beverage companies that make noncarbonated drinks, the industry's fastest-growing category. Russia is the fifth-largest juice market by volume and it grew an average of 30 percent in dollars from 1999 through 2004, United Financial Group said in a report.

"The acquisition is in line with Coke's strategy of expanding in noncarbonated beverages," Standard & Poor's analyst Benedetta Rospigliosi said Thursday in a report. HBC's profitable Russian operations "will make the integration of this new business less challenging," she said.

Multon had revenue last year of $336 million and focuses on sales in St. Petersburg, Moscow and the Urals, Coca-Cola and HBC said. The company may be worth $650 million, said Dmitry Vinogradov, an analyst at Brunswick UBS in Moscow.

HBC said the purchase will increase per-share earnings by about 6 cents. The company said last month that it expects profit to rise by as much as 11 percent this year to 1.21 euros ($1.56) per share.

The acquisition, expected to be completed next month, will "yield significant cost and revenue synergies" for Russian operations, HBC said. Coca-Cola owns 24 percent of the Athens-based company.

Since taking over as CEO in June, Isdell has vowed to boost revenue from markets such as China and India. The company gets about 70 percent of its sales outside North America.

Coca-Cola and its rivals have been buying juice makers and water companies and adding new products to reduce their dependence on sodas. Coca-Cola and HBC bought a Serbian mineral water company in February. Eastern Europe is one of Atlanta-based Coca-Cola's fastest-growing markets.

"The opportunities are more in the developing markets" for small acquisitions that can complement larger existing brands, Isdell told analysts at a conference in February.

Early last month, Coca-Cola reorganized its regional management, dividing Europe and Asia to create an emerging-markets group for the area including China, Russia and Eastern Europe.

Russia's food and beverage producers are benefiting from the country's longest stretch of expansion since the collapse of communism in 1991. Average salaries in dollar terms have tripled since 1999.

The nation now accounts for 4 percent of the world's juice market by volume, trailing only the United States, Germany, China and Japan, according to the UFG report.

In 2003, citizens in Russia, the world's seventh-largest nation by population, drank an average of 12 liters of juice per capita, about half the average of their counterparts in Poland, Hungary and the Czech Republic, UFG said.

Lebedyansky, Russia's largest juice producer, raised $151 million last month in an initial public offering, valuing it at about $760 million. Wimm-Bill-Dann, the nation's third-largest juice producer, raised about $210 million in an IPO in 2002. Wimm-Bill-Dann's shares trade in New York.

"This market is heating up," said Tim McCarthy, who manages $675 million in Russian assets including juice stocks at Troika Dialog.

Lebedyansky had about 30 percent of the nation's market share by volume, followed by Multon with 25 percent, and Wimm-Bill-Dann with 17 percent, according to UFG, which organized Lebedyansky's share sale.

Multon's mass brand juice, Dobry, which sells for about 30 rubles ($1.10) per liter in Moscow, had the best brand awareness in Russia, UFG said.

"Multon is comparable to Lebedyansky, and on that basis should be worth about $650 million," Brunswick UBS's Vinogradov said. "Coca-Cola missed its opportunity to come out to the Russian juice market earlier."

Multon said management will stay. "We may consider strengthening our team by bringing in Coca-Cola managers in the future, but it's not on the agenda right now," spokesman Sergei Lavrinenko said.