BUSINESS WILL NOT BE THE SAME AGAIN FOR PNG'S GIANT BEER MONOPOLY AND SOFT DRINK

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PORT MORESBY, Papua New Guinea (February 26, 1999 - The Independent)---So business will not be the same again for SP Holdings Limited, the Papua New Guinea beer monopoly and producer of one of the South Pacific’s popular range of alcoholic beverages.

The company, a well-established long-term corporate citizen of PNG and easily by far the biggest manufacturing firm in the country in terms of products output, workforce and profit margin, now faces the grim prospect of losing a sizeable chunk of its business and hence its status as the industry leader.

That is official.

The company management has admitted that the firm faces the prosper of losing a major share of its profitable soft-drink business mid this year to rival soft-drink manufacturer Coca-Cola Amatil Limited in what is to be a compulsory acquisition resulting from a recent global corporate decision by the British-owned Cadbury Schweppes to grant all manufacturing and marketing rights for the Schweppes labels to the United States-based world industry leader, The Coca-Cola Company (Note: This is the correct name for the global giant. Don’t confuse it with Coca-Cola Amatil, which is an affiliate company of TCCC represented in PNG, Australia, New Zealand, etc.).

With Pepsi, Mirinda, 7up and a range of the Schweppes brand of carbonated soft-drinks and three non-carbonated beverages -- Orchy, Daisy Milk and No. 1 Juice in its stable -- SP Holding today is also PNG’s dominant producer of non-alcoholic beverages.

The two competing local soft-drink manufacturers, however, do not have any real say or influence over what is happening, despite the pending acquisition being a significant one, previously unseen in the local beverage industry. No value has yet been put on the new business to be inherited by CCA or an estimate given as to how much SP Holdings stands to lose as a result of this corporate global rearrangement.

The basis of Cadbury Schweppes’ decision is not immediately known, but it is understood that the company, which does not have a cola brand beverage in its stable, wanted to be associated with Coca-Cola, the world’s most popular soft-drink, in order to enhance the marketing strategy for its own brand of carbonated beverages worldwide.

The decision apparently will only affect The Coca-Cola Company’s affiliate operations outside the United States, Europe and Africa. The Company’s operating management structure divides the world into five distinct geographic groups.

PNG, like neighboring Australia and New Zealand, fall into the Middle and Far East Group, which ranges from the Middle East to India, China, Japan, South-East Asia and the South Pacific.

Responding to The Independent’s inquiry, the SP General Manager, Rick Linck, in a very brief statement in Port Moresby in relation to the acquisition, cautiously said: "This is a very complex transaction that requires regulatory approvals in some countries, as well as the due diligence process (that needs to be conducted) and (the acquisition) is not anticipated to be completed until mid 1999," the statement confirmed.

"Also Cadbury Schweppes has stated (that) it was still awaiting legal clearance in the various markets around the world," Mr. Linck’s statement went on to say. In the meantime, SP Holdings is doing business as usual and is awaiting further information from Cadbury Schweppes. Until that happens, we are not making any comments and consider the matter closed until the relevant information is available," the statement concluded.

The principal shareholder of SP Holdings Limited, which had a K 29.5 million (K 1 is 46 U.S. cents) after tax profit declared for the 1997 financial year, a hefty increase of 55 per cent on the results of the preceding financial year, is Asia Pacific Breweries Limited, and ultimately Fraser and Neave Limited and Heineken NV. A sizeable PNG interest in the company is maintained through the Public Officers Superannuation fund shareholding.

Coca-Cola Amatil Limited, on the other hand, is a wholly owned subsidiary of Coca-Cola Amatil in Australia, principally based in Sydney, in which the global giant, The Coca-Cola Company, in turn has about 30 per cent stake. The company in PNG employs about 650 people. Its General Manager for PNG, Paul Dobb, while confirming he is aware of the anticipated changes as a result of the Schweppes decision, said he is still awaiting direction and further details from Australia.

The forced acquisition is significant, not only just in terms of the volume of business and revenue potential it represents, but also because of the huge investment SP Holdings Limited, no doubt, would have expended in buildings, machinery and other capital assets and technical manpower, as well as the considerable effort and product promotional work that has gone into developing an extensive well-established marketing and distribution network nationwide since acquiring Schweppes’ manufacturing marketing rights for PNG a few years ago.

For many years SP Holdings and Coca-Cola Amatil have been viciously competing to push their respective cola brand products, the world famous Pepsi and Coca-Cola and their respective carbonate brands. With SP Holdings currently still retaining manufacturing and marketing rights for the three Pepsi brands, namely Pepsi, Mirinda and 7up, the shifting of camp of all Schweppes brand drinks to the Coca-Cola Amatil stable looks set to be the beginning of even a more fierce battle for the country’s non-alcoholic beverages market in the future.

The company employs a workforce of around 850 and, despite the management’s reluctance to discuss the issue, the SP Board of Directors is understood to have met at least once in the recent past specifically to deliberate on the implications of the Schweppes decision, and to take account of the inevitable losses in business, revenue and employment the company will incur as a result. It is understood that the changes in PNG, Australia and elsewhere in the region will not affect New Zealand, as Coca-Cola Amatil there has had the Schweppes brands in its stable for many years.

Both SP Holdings and Coca-Cola Amatil are among PNG’s well-established corporate citizens and the two companies take the lead in major sports sponsorships as part of promotion campaign strategies for their respective leading brands as well as subordinate products.

The Coca-Cola acquisition comes on the heels of a merger late last month of the country’s largest competing cigarette manufacturers -- Rothmans Pall Mall, the maker of Cambridge and Winfield brands, and British American Tobacco, which is represented in PNG by W.H.O. Wills Limited, the maker of the Benson & Hedges and other brands of cigarettes -- which will also see definite changes in the tobacco industry in PNG.

For additional reports from The Independent, go to PACIFIC ISLANDS REPORT News/Information Links: Newspapers/The Independent (Papua New Guinea).

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