Cobega's great leap

BarcelonaThe former president of Planeta José Manuel Lara Bosch used to lament that Catalan companies often preferred to be "herring's head rather than hake's tail", that is, owning a small company rather than being part of a large corporation if they had to share control. But there are exceptions, and the Daurella family is one. In the last decade, the Cobega group (owned by this family) has gone from being a mere Spanish bottler of Coca-Cola to the largest shareholder of Coca-Cola European Partners (CCEP), the main bottler of this soft drink in the world. This expansion, moreover, is now experiencing a new leap forward with the more than likely purchase of Amatil, the company that bottles and distributes Coca-Cola in six countries, including Australia, New Zealand and, above all, an often ignored giant: Indonesia

The deal will allow CCEP to double its potential audience. Currently, the company has a monopoly on the marketing of the famous soft drink in European countries totalling 300 million inhabitants (including Spain, France, Germany and the United Kingdom) and Amatil reaches a similar population, especially thanks to Indonesia, which, with 268 million inhabitants, is the fourth most populous country in the world. But even so, today Amatil's turnover is a quarter of that of CCEP.

"Indonesia is the key," they repeat inside the company when asked about the operation. Despite its enormous size, the truth is that this country currently contributes only 23% of Amatil's turnover and only 15% of the profit. The group even makes more money in New Zealand, despite the fact that it has fewer inhabitants than Catalonia.

"Indonesia is very large and has an extraordinary path, ahead" insist CCEP sources who ask not to be identified. This growth potential will compensate for the slowness that is beginning to be perceived in Europe, with "very mature" markets and where the business can hardly grow much. In part, when CCEP was created five years ago by merging different European bottlers, the motive was already this: to combat the stagnation on the continent by gaining size and saving costs.

Alcohol, key to the operation

In addition to soft drinks, Amatil also distributes coffee and alcoholic products (such as American Coors beer or Jim Beam bourbon), a detail that Cobega considers very important. "For the first time we will deal with real alcohol," they say. Since the creation of CCEP, the company has a part of a brewing business in Belgium, "but it is a very small thing". At CCEP, they believe that once they learn how to distribute this product with Amatil (where alcohol and coffee contribute a tenth of the profit), perhaps they will be able to start doing the same in Europe. "Us buying Amatil is not good news for Heineken, and neither for Damm... we can be a potential competitor for them in the future," the sources claim.

When the purchase becomes effective, the new giant will be by far the most important Coca-Cola marketer in the world. Its first shareholder - with 35% of the shares - is Olive Partners, a company that brings together the former Spanish bottlers and is directly controlled by Cobega with a 56% stake.

This is the second attempt to buy the company: the first was a year and a half ago, but did not succeed because the size of the purchase "is huge," explain the voices with whom this newspaper has spoken. CCEP has offered €5.2bn for Amatil, which means valuing the company at 11 times its EBITDA (earnings before interest, taxes, depreciation and amortisation).

Despite the magnitude, CCEP is convinced that the digestion of the purchase will be assumable: "The debt will go from four times to almost six times EBITDA: it can be managed perfectly," they argue. However, Moody's has announced that it could downgrade CCEP's debt rating due to this purchase

In the hands of the third generation

The origins of Cobega date back to 1900, when Santiago Daurella founded a soft drink factory, but its official birth was in 1951, when Daurella reached an agreement with The Coca-Cola Company to bottle the soft drink and distribute it in Spain. Today Cobega is in the hands of the third generation, particularly Sol Daurella, who leads the company and at the same time is the president of CCEP.

The Coca-Cola Company, based in Atlanta, decided many years ago that it would disengage itself from the bottling and distribution of the soft drink: they only sell the syrup to the bottling companies and manage the brand all over the world. Even so, it retains a percentage of shares in all the bottling companies and uses this power to promote mergers between them. This time was no different. "They dangle the prize in front of you, but you have to want it, because it's a big move," they explain from CCEP. "For them it's a bargain," they add, since it is the bottler who assumes the risks. However, the company is still proud: "If Coca-Cola tells CCEP to buy Amatil, it is because we are the bottler with the best ratios"

In addition to these companies, Cobega also controls Coca-Cola Equatorial, which sells the soft drink to a dozen countries in North Africa. This division, however, is more a source of headaches for the group than of success. "The presence in Africa is explained by a political game [by Coca-Cola]," explain the sources consulted. These voices recall that in "rich Africa", in countries such as South Africa or Nigeria, the business is in the hands of other distributors. There are countries like Morocco or Algeria that are good for the business, but others like Sierra Leone or Gambia are much more problematic. But not everything could be perfect in the Coca-Cola empire.