Cadbury Does Yet Another Deal.
Nantucket Nectars Will Be
Part of Snapple Beverage Group.

Continuing its string of acquisitions -- Snapple, Royal Crown, Yoo-Hoo, Orangina, Hawaiian Punch -- Cadbury Schweppes agrees to buy Nantucket Nectars (NN) from Ocean Spray. Several years ago, some industry analysts criticized Cadbury's dependence on CSDs in North America. But company now owns Snapple, Mistic, Yoo-Hoo, Mott's grocery brands and will own NN when deal completes. Only significant gap in Cadbury's North American portfolio is major bottled water brand; however, Cadbury's partly-owned bottler -- Jim Turner-run Dr Pepper/Seven Up Bottling Group -- owns Deja Blu.

NN deal speculated. Word of likely NN sale has circulated for some time, with Cadbury recently emerging as likely buyer (BD 3/8/02). Industry executives say along the way, Coke, PepsiCo, major bottlers plus others also kicked the tires. At one point, multiple sources suggested Coke North America and/or Minute Maid were interested; Coke does own Mad River, but does not own big new-age-ish brand like Snapple or SoBe. Arizona? With Cadbury owning Snapple, Mistic and Nantucket Nectars and with Pepsi owning SoBe, senior industry executive notes, "the last (independent) label out there is Arizona. It's a very interesting brand with a lot of legs."

Cadbury executive: 'Incredibly strong.' NN will become part of Cadbury's Snapple Beverage Group, headed by Jack Belsito. Belsito says Cadbury acquires NN because "it's a good fit and a complementary brand for the Snapple Beverage Group. It's an incredibly strong and well-recognized label (with) an image of health and wellness." NN also provides innovation potential, as "there appears to be a fair amount of stretch in the label on the premium juice end." Positioning. Belsito say Cadbury will position NN, "pretty much as it's positioned today, as a good-for-you line of premium juices and juice drinks with an incredible equity that's in the arena of health and wellness." Distributors. Belsito says "most of the current (NN) distribution system will stay in place." Founders' role? Belsito notes "the intention is for" NN founders Tom Scott and Tom First to play roles under Cadbury ownership. Adds, "we both hope that."

Backdrop. NN was founded in 1989 by First and Scott. Originally started company as "Nantucket Allserve" which functioned as floating convenience store for boat owners in Nantucket. Founders began selling blended juice and dubbed it, "Nantucket Nectars." Long-used company tagline: "We're juice guys." In 1997, Ocean Spray acquired stake in Nantucket Nectars; Ocean Spray's ownership now said to be about 80%. Distribution. Most NN volume on East Coast with Northeast concentration. Distribution is via network of small distributors plus several large bottlers, including Polar in Massachusetts and Honickman in mid-Atlantic; Big Geyser handles NN in NYC region. Industry executive notes under Cadbury ownership, "there's a real distribution (growth) play here." Reasons for sale. One possible reason for sale, say some industry executives, relates to Ocean Spray's recent challenges. Over past few years, cranberry prices have declined, squeezing growers; plus Ocean Spray lost Pepsi system distribution for single-serve line; volume of Ocean Spray's single serve line was down about -60% last year.

Size and price. NN's volume for shelf-stable products last year estimated at 13 mil 192-oz cases, up +2.5%. Cadbury says NN's "net sales" in 2001 were $59 mil. However, Wall Street analyst estimates total revenues closer to $80 mil. Under new accounting rules, says analyst, "net sales" excludes various retailer/distributor allowances. Cadbury provides no details on purchase price, but several industry executives said in recent months Ocean Spray sought price near $100 mil. Several analysts suggest price likely near or somewhat below that. Products. NN sells line of shelf-stable and refrigerated 100%-juices and juice drinks in glass, 16-oz plastic and 64-oz gable-top packages.

Views. Several NN distributors express approval of deal. One large distributor notes: "Cadbury is the perfect home for NN. They understand working with DSD (distributors) and new-age products." Adds, "They have the staying power and the ability to (build) national distribution." Plus. Morgan Stanley's Bill Pecoriello says: "It's a smart move for Cadbury to do this. The Nantucket Nectars brand has strong brand equity and is a good platform for further non-carb expansion." UK analyst: "Great portfolio expansion for Cadbury. It's toward the premium end, which is where they're going."