Coca-Cola Amatil (CCA) plans to sell almost a third of its Indonesian business to its US partner, The Coca-Cola Company, for $US500 million.
CCA's group managing director, Alison Watkins, who announced the plan as part of a strategic review of the bottling business, said the 29.4 per cent equity investment would accelerate growth in CCA Indonesia (CCAI) and would also help restore earnings growth for CCA.
The strategic review, which was announced at the company’s Annual General Meeting in May, was initiated in response to deteriorating market conditions across the group.
The investment will go toward the accelerated expansion of CCAI’s production, warehousing and cold drink infrastructure, and will enable the business to broaden its product offering, develop new consumption occasions and offer a greater range of affordable packages, according to Watkins.
“With a population of more than 240 million and a fast-growing emerging middle class, Indonesia is a key growth market for CCA. In partnership with The Coca-Cola Company, we have developed a plan to support upweighted infrastructure and capability development to enable us to strengthen our market position for the long-term and generate returns above the cost of capital for CCAI,” she said.
Under the agreement, CCA will retain management and operational control of CCAI.
Watkins also said that CCA aims to return to mid single-digit growth in earnings per share over the next few years with no further decline expected after 2014.
“We are confident that the combination of revenue and cost initiatives we have underway will restore the business to growth. The pace of recovery will, however, depend on the success of revenue initiatives in Australia and Indonesian economic factors,” she said.
CCA also announced a cost base restructure that aims to achieve savings of over $100 million over the next three years.
The company also described its strategy with regards to new products, which will include Coca-Cola Life, the first new Coke product to be launched in Australia in seven years.
Coca-Cola Life will be a 35 per cent less sugar and 35 per cent kilojoule reduced formulation compared to Coca-Cola, and it will use a combination of sugar and stevia.
Coca-Cola Life will be launched into Australia in April next year.
