Events after Coca-Cola's bid for Bionade validates its new frontier M&A strategy
- September 12, 2007
||target company announcement of acquisition bid, September 2007
||Bionade GmbH (Germany), pioneer ârefreshment drinkâ recipe and brand
||The Coca-Cola Company (USA), worldâs largest beverage company
||Privatbrauerei Peter KG (Germany), mid-sized brewer in Bavaria region
||expanding portfolio beyond CSDs, international commercialisation of Bionade
||long âterm intention to remain an independent, family âowned company
||Bionadeâs sales tripled in 2006 in volume terms, again in 2007
Bionadeâs CEO has said that the offer from Coke was worth âhundreds of millions of eurosâ. For a company that sold 70 mln bottles in the previous year, that suggests a multiple of several times sales revenue in 2006. On the other hand, the huge growth of sales volumes, to 200 mln bottles in 2007, suggests that the M&A strategy of Coke, that of targeting new frontier soft drinks brands, is vindicated; in that case it should have a long way to run, and valuations may remain high.
Coke and Pepsico are the main drivers of this trend. In recent Glenbodens weâve reviewed Cokeâs acquisition of Glaceau and Fuze in the USA, and Pepsicoâs acquisitions of Sandora in Ukraine and (potentially) Lebedyansky in Russia. All of them ânew frontiersâ (whether geographically or technologically), all of them at Sales multiples that might look like EBITDA multiples to some of us.
In recent Glenbodenâs weâve also mused that Coke and Pepsi must be keen to buy Germanyâs Eckes âGranini. Right country, wrong company. Eckes âGranini is an impressive, fast âgrowing juice business, meanwhile Bionade looks like something that might genuinely be the next Coca-Cola.
The provenance is certainly there. Invented in 1995 by master brewer at Peter, Dieter Leopold, Bionade is the child of Germanyâs ancient purity regulations for fermented drinks.
The inventor was motivated by a decline in consumption of regional German beer brands; Bionade now sells 20 times more volume than its mother âcompany does.
The recipe uses organic ingredients, and the company has supported local barley suppliers in their switch to organic farming.
Bionadeâs owners have rejected Cokeâs offer in that familiar, stoical, âmittelstandtâ way â âthe companyâs our baby, and babies are not soldâ, to quote one of its partners. Subsequent growth suggests that Bionade remains sustainable as a stand-alone business, but that might hit a ceiling one day.
Bionade is most likely to achieve its potential inside a group with global distribution and bottling clout. So far, most sales appear to be through foodservice channels, and sales outside Germany are very small so far. At the same time, the company is to launch Bionade in the US and Japan in 2008; how successful can they be on their own?