Glenboden M & A Originations

Refresco increasing capacity exposure with fourth acquisition in as many months

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Origination Status company acquisition announced, May 2007
Asset Nuits Saint-Georges Production SAS (France), domestic fruit drinks producer
Buyer Refresco Holding BV (ultimately Iceland), leading European unbranded soft drinks producer
Seller Orangina Schweppes (France), no.3 branded soft drinks producer in Europe
Buyer Rationale buy and build strategy in private label and A brand co-packing in EU markets
Seller Rationale production outsourcing, capacity reduction
NBs Refresco also acquired Histogram (UK), Sun (Belgium) and Kentpol (Poland) this year
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When we reviewed Refresco’s last acquisition, that of Sun Beverages in Belgium two months’ earlier, we suggested that maybe the company is making too many acquisitions, and thus taking on too much capacity, in its race to achieve its ambitious goal of €1 bln sales in 2007. Well, it seems that the time has not yet come for the deals to stop. We get the feeling, though, that in this case there’s as much ‘push’ from the seller, Orangina, as ‘pull’ from the buyer.

Nuits Saint Georges sounds like cold asceptic PET capacity that is ‘surplus to requirements’ for a branded player like Orangina. Notably, the deal with Refresco includes an agreement for the co-packing of Orangina’s Pampryl brand. So, Orangina is both off-loading capacity and outsourcing production, with this deal.

On the Refresco side, there appears to be some opportunism in this deal. Hitherto acquisitions had focused on spreading Refresco’s geographic footprint across the EU, with the company having facilities in eight countries so far. The Nuits Saint Georges acquisition goes against this grain somewhat, as it becomes Refresco’s second facility in France.

Over-capacity and opportunism aside, Refresco looks like becoming to soft drinks what Barry Callebaut is to confectionery. Callebaut provides co-packing and semi-products manufacture to the likes of Hershey, Nestle and Cadbury. Refresco likewise, serving Orangina and other majors. Maybe this will become an increasing trend, as the need for specialisation and scale economies grows at the upstream end of the branded food value chain.

On the other hand, you have to wonder whether it’s the private label part of Callebaut’s or Refresco’s business, not the co-packing side, that will be most important going forward. In that case these players will increasingly look like competitors to their supposed partners. Either way, there will surely come a time when Refresco will need to rationalise down their 17 facilities in Europe, to achieve greater efficiencies in the low-margin private label and co-packing businesses.

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