Will Things Go Better with Coke? Acquisition of CCE North America Will Pose Challenges

In 2007, The Coca Cola Company (TCCC) introduced the slogan: Live on the Coke Side of Life.  Early this year, The Coca Cola Company turned this slogan into an invitation for the North American business of its largest bottler, Coca Cola Enterprises.  The deal was completed earlier this week.  The strategy is to control the supply chain and save money from synergies and efficiencies.  With the supply chain fully under its own control, Coca-Cola should be able to more quickly adjust to shifting consumer preferences.  This deal follows a similar move by PepsiCo Inc, which acquired its largest bottlers.

The challenge for Coca Cola is to integrate two very different cultures, including labor pools and information technologies.  This is no small challenge.  CCE has more union representation than TCCC, for example.  Closing plants and consolidating resources will require some skill.

The market seems, however, to be bullish on the deal, as yesterday’s trading raised a low Put/Call volume alert.  There were 75.37 calls traded for each put contract.  This is an indication that investors anticipate Coca Cola’s stock to rise in value.  Will things go better with Coke?  Apparently the market is banking on it.