Coke, Pepsi, Cott and Major Bottler Executives:
New Packages, New Products, New Data, New Insights.

Senior executives from Coke, Pepsi, Cott, CCE, PBG and Pepsi Americas speak at recent investor conference in NYC hosted by Credit Suisse First Boston. Highlights: 1) PBG says brand Pepsi volume up in 1st quarter; will roll out 14-oz PET bottles for cold-channel priced under $1; is reducing some 20-oz pricing. 2) PepsiAmericas introducing four-packs of 1.5-liter bottles. 3) PepsiCo days Diet Pepsi will get 80% increase in ad spending this year. 4) Coca-Cola Enterprises will introduce 1.5-liter PET bottles in NYC with pricing/oz higher than 2-liter. 5) Cott predicts no major changes in price gap between private label (PL) and branded CSDs, meaning PL prices likely rise. 6) Coca-Cola Co says overall retail value in U.S. is up and improving.

Pepsi Bottling Group. Chairman/CEO John Cahill says company's U.S. 1st quarter volume up +6%, pricing up +2%. Suggests from 2004-2006, overall liquid refreshment beverage (LRB) business in U.S. will grow +3%, with: colas flat to down slightly; flavored CSDs up 2%-3%; and non-carbs up +10%. Notes in 1st quarter 2004, trademark Pepsi up +4%, with "brand Pepsi positive for first time in more than a year." Confirms test of Quaker H2OH! value-priced water. Not enough. Cahill says Pepsi system "has not had enough new packaging activity in last few years," but activity now ramping up. Shows several new packages including 18-packs of eight-oz cans. 14-oz bottle. PBG is introducing 14-oz bottle for cold-channels, priced at under $1. Cahill also notes 20-oz pricing in some markets got too high and is being adjusted downward. Mid-cal. Re Pepsi Edge mid-cal cola being introduced late summer, Cahill says: "Pepsi will put great effort behind it ... Whether it's a game-changer or a nice addition to our portfolio remains to be seen." And suggests "it will bring some people back into the cola category."

PepsiAmericas. President/COO Ken Keiser talks of new products from PepsiCo including SoBe Synergy "juice-added better-for-you product." [note: Synergy 50%-juice product is initially in cans.] Company also introducing 1.5-liter four-packs. Low-priced water. Keiser -- also citing Pepsi's test of Quaker H2OH! bottled water -- notes 63% of water volume in U.S. is "low-price" water, but that segment accounts for 84% of growth.

PepsiCo. President/CFO Indra Nooyi says trademark Pepsi was down -3% in 3rd quarter 2003, but it was up +3% for period 4th quarter 2003 to February 2004. Says Diet Pepsi will get 80% increase in advertising in 2004. Pepsi will launch new "Grip" bottle in multiple sizes in some international markets. Acquisitions. Asked about future acquisitions, Nooyi says: "We need to build up our offerings of protein (containing foods/beverages)." Mid-cal timing. With Coke said to be launching its mid-cal cola Coke C2 in U.S. in early summer, Nooyi was asked about timing for introduction of Pepsi Edge now set for August. She says: "When we launch a product, we need it to be right -- the product, the packaging, the system. The product has to be perfect."

Coca-Cola Enterprises. Chairman Lowry Kline says brand extensions are "essential to sustaining long-term growth of trademarks. Our goal is to provide a Coke trademark brand for every need and occasion." Predicts "more and more cola innovation." Says Powerade volume up +30% in 1st quarter. President/CEO John Alm says Coke will use 1-liter shrink-wrapped bottles in U.S. for special occasions/promotions. 1.5-liter in NYC. CCE will introduce 1.5-liter contour PET bottles in NYC market "very shortly." Says 1.5-liter will "reduce dependence on 2-liter." Pricing per-oz will be "higher than 2-liter, but package will be more convenient for consumers." Adds CCE has no plan now to take 1.5-liter national, but adds: "I'd be surprised if 1.5-liter doesn't play some national role. It could also be 1.25-liter or 1.75-liter." Cold-drink. Alm says cold drink performance in 1st quarter is "strongest we've seen in 2.5 years." Private label. Alm says private label's share has fluctuated in 9-to-13 share range for 40 years in U.S. Suggesting PL has legitimate role, Alm notes: "We recognize Wal-Mart's total portfolio of soft drinks, and we price relative to that." Dasani in U.K. Brand recently pulled from U.K. market (BD 3/26/04). Alm: "When and if we re-introduce it (in U.K.) -- hopefully sometime this year -- we'll do it right. We'll do our due-diligence."

Cott. Chairman/CEO Frank Weise lays out case for future growth of PL CSDs in U.S. Describes high correlation between grocery retailer consolidation and PL development. Notes top-five retailers in U.K. have 65 share of grocery market, and PL has 27 share. In contrast, top-five retailers in U.S. have just 42 share (with Wal-Mart accounting for 11 share points), and PL's market share is only 11. Weise claims PL is tool for retailers to develop consumer loyalty. Cott president/COO John Sheppard declares PL has "evolved from selling a flavor to selling a (retailer's) brand." Asked if rising CSD prices in U.S. offer share gain potential for Cott, Sheppard notes, "you're not going to see a major change in that price gap."

Coca-Cola Co. North America president Don Knauss says company "very confident" re North American business going forward. Acknowledges "last year was difficult" due to restructuring and layoff of 1000 people. Adds bottler alignment now "tighter than it's ever been."

'Positive revenue momentum.' Knauss paints picture of growing retail value of beverages in U.S. (table). In 2003, total dollar value of North American RTD beverage business was up +2.6% in measured channels; of that +2.6%, volume growth accounted for +1.5% and price/mix for +1.1%. In 1st quarter 2004, value growth strengthening. Total value is up +3.5%, with volume accounting for +0.9% and price/mix for +2.6%. For CSDs, 2003's +1.9% value increase was entirely from price/mix. This year's stronger increase in total value of +3.4% comes from +0.5% gain in volume and +2.9% from price/mix. Plus. Knauss also says, re fountain, restaurant traffic is "up after being down most of last year."