Coke in Deal with Energy Drink Maker

The Coca-Cola Co. has agreed to buy New York-based Glaceau, maker of Vitaminwater, for $4.1 billion in a move aimed at jump-starting sales in North America.

The world's largest beverage maker said the agreement to acquire privately held Energy Brands Inc., known as Glaceau, provides Coca-Cola with a strong platform to increase its portfolio of "active lifestyle" beverages.

The acquision gives Coca-Cola a line of enhanced, non-carbonated drinks, including Smartwater, Vitaminwater, Fruitwater and Vitaminenergy. It will help the Atlanta-based company expand beyond traditional soft drinks, a part of its business that has been flat in recent months, especially in North America.

Glaceau's strong position in the enhanced-water and energy-drink sector reinforces Coca-Cola's bet that those categories will make up a large portion of the beverage industry's growth in North America through 2010.

The purchase will be financed with debt and is expected to add to Coca-Cola's earnings starting in 2008, company executives said. Glaceau will operate as a separate unit with Coca-Cola's North American segment.

Coca-Cola's Chief Financial Officer Gary Fayard said Coke will take full ownership of Glaceau, which is now 30 percent owned by holdings of India's Tata Group, a conglomerate with interests spanning steel, software services, hotels, chemicals and insurance. The Tata stake will be acquired later, Fayard said.

Coca-Cola saw a 14 percent increase in first-quarter profit on a double-digit rise in overall sales, but in North America, unit-case volume declined 3 percent in the quarter.

Health conscious consumers have been drinking more water and teas — and more often reaching for Pepsi products, including Lipton and SoBe.

Coke hopes to change that. It acquired the tea and juice maker Fuze beverages earlier this year. It expects to close on the Glaceau deal this summer.

From NPR reports and The Associated Press

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